Fire & Casualty Exam #3
Fire & Casualty Exam #3
150 questions
3 hour time limit
70% to pass
- 1.
What course of action does a party to a contract have if the other party is found to be in breach of that contract?
- A.
Nothing, unless the injured party can prove the damages are substantial.
- B.
Reasonable attorney fees and costs only
- C.
Damages for breach, reasonable attorney fees and costs
- D.
Damages caused by the breach only.
Correct Answer
C. Damages for breach, reasonable attorney fees and costsExplanation
If one party to a contract is found to be in breach, the other party has the right to seek damages for the breach. This means that they can claim financial compensation for any losses or harm caused by the breach. Additionally, they may also be entitled to reasonable attorney fees and costs associated with taking legal action to enforce the contract.Rate this question:
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- 2.
A representation in an insurance contract qualifies as which of the following?
- A.
An Amendment
- B.
An express warranty
- C.
A policy provision
- D.
An implied warranty
Correct Answer
D. An implied warrantyExplanation
An implied warranty is a representation in an insurance contract that is not explicitly stated but is understood to be part of the agreement. It is a guarantee that certain conditions or qualities are present in the insured item or situation. Unlike an express warranty, which is explicitly stated in the contract, an implied warranty is inferred from the circumstances and nature of the contract. Therefore, an implied warranty qualifies as a representation in an insurance contract.Rate this question:
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- 3.
What does if mean if an agent's license is inactive?
- A.
The agent can transact insurance business if it is done with another agents approval
- B.
The agent can transact any insurance business for which the agent is licensed
- C.
The agent can still transact insurance business in CA, but not in any ohter state until it is reactivated
- D.
The agent cannot transact any insurance business for which a valid, active license is required
Correct Answer
D. The agent cannot transact any insurance business for which a valid, active license is requiredExplanation
If an agent's license is inactive, it means that the agent is not authorized to conduct any insurance business that requires a valid and active license. In other words, the agent is not legally permitted to transact any insurance business that necessitates a valid license.Rate this question:
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- 4.
The ordinance and law exclusion/limitation found in property policies such as the commercial property coverage, and in the homeowner's policy have the following effect:
- A.
It warrants that an insured has not knowingly violated an ordinance or law
- B.
The insured may not remove or modify the effect of the exclusion
- C.
It reduces the coverage on any loss if the loss was caused by the insured violating the ordinance or law
- D.
It excludes that part of the loss resulting from the enforcement of a building ordinance or law
Correct Answer
D. It excludes that part of the loss resulting from the enforcement of a building ordinance or lawExplanation
The ordinance and law exclusion/limitation in property policies such as commercial property coverage and homeowner's policies excludes the part of the loss that occurs due to the enforcement of a building ordinance or law. This means that if a loss is incurred as a result of the insured violating an ordinance or law, the coverage for that loss will be reduced. The exclusion cannot be removed or modified by the insured, and it is warranted that the insured has not knowingly violated any ordinance or law.Rate this question:
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- 5.
Extra expense insurance covers:
- A.
Increased expense of repairing property to appreciated assets
- B.
The extra expense that a business incurs to continue a business while damage to the premises is being restored
- C.
The loss of profit a business incurs while it is shut down after a loss by a covered peril
- D.
Payroll and other overhead incurred when a business is shut down after a loss
Correct Answer
B. The extra expense that a business incurs to continue a business while damage to the premises is being restoredExplanation
Extra expense insurance covers the additional costs that a business incurs to continue its operations while the premises are being restored after damage. This can include expenses such as renting temporary space, purchasing equipment, or hiring additional staff. It is designed to help businesses minimize the financial impact of a loss and maintain continuity during the restoration process.Rate this question:
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- 6.
A plate glass/glass coverage form is needed by some insureds. Which of the following statements about the coverage for the peril of glass breakage in commercial property for a "building and personal property" basic, broad and special causes of loss forms is true?
- A.
There is limited glass breakage coverage in both of the broad and special forms
- B.
There is limited glass breakage coverage in the basic form
- C.
No policy limits apply to glass breakage coverage in the special form, all named perils
- D.
There is no glass breakage coverage in the broad or special forms
Correct Answer
A. There is limited glass breakage coverage in both of the broad and special formsExplanation
The correct answer is that there is limited glass breakage coverage in both the broad and special forms. This means that insureds who have either the broad or special causes of loss forms for their commercial property will have some coverage for glass breakage. However, the coverage is limited, meaning that there may be certain conditions or exclusions that apply to the coverage.Rate this question:
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- 7.
In the state of California, no rate will remain in effect if it is considered to be any of the following, except:
- A.
Impartial
- B.
Unfairly discriminatory
- C.
Excessive
- D.
Inadequate
Correct Answer
A. ImpartialExplanation
In the state of California, rates that are considered unfair, excessive, or inadequate will not remain in effect. However, the term "impartial" is not mentioned in the question, so it is not clear whether it is an exception or not. Therefore, it cannot be determined from the given information whether impartial rates will remain in effect or not.Rate this question:
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- 8.
The amount paid for damage to property which is equal to the price for which it could have been sold is:
- A.
Actual Cash Value
- B.
Replacement Cost
- C.
Stated amount
- D.
Market Value
Correct Answer
D. Market ValueExplanation
Market value refers to the current value of a property in the open market. It represents the price at which a property could be sold. In the context of insurance, the amount paid for damage to property that is equal to the price for which it could have been sold is based on its market value. This means that the insurance company will reimburse the policyholder for the actual market value of the damaged property, rather than its original purchase price or replacement cost.Rate this question:
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- 9.
The limited Mexico endorsement applies to trips to Mexico with a duration of:
- A.
7 days or less
- B.
10 days or less
- C.
2 days or less
- D.
14 days or less
Correct Answer
B. 10 days or lessExplanation
The limited Mexico endorsement applies to trips to Mexico with a duration of 10 days or less. This means that if you have this endorsement, your insurance coverage will only be valid for trips to Mexico that are 10 days or shorter. If your trip exceeds 10 days, you may need to consider getting additional coverage or a different type of endorsement to ensure that you are adequately protected during your entire stay in Mexico.Rate this question:
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- 10.
Which of the following types of coverage would pay for losses which occurred during the policy period and are found for up to one year after policy termination?
- A.
Occurrence
- B.
Loss sustained
- C.
Claims made
- D.
Discovery
Correct Answer
B. Loss sustainedExplanation
Loss sustained coverage would pay for losses that occurred during the policy period and are discovered up to one year after the policy termination. This means that even if the policy has ended, if a loss is discovered within one year after termination, the loss sustained coverage will still provide compensation. This type of coverage is beneficial as it provides extended protection for losses that may take time to be discovered or reported.Rate this question:
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- 11.
Which coverage is needed to protect physicians, surgeons and dentists for their professional activities?
- A.
Commercial general liability
- B.
Malpractice coverage
- C.
Employer's liability
- D.
Errors and Omissions coverage
Correct Answer
B. Malpractice coverageExplanation
Malpractice coverage is needed to protect physicians, surgeons, and dentists for their professional activities. This type of coverage specifically addresses claims of negligence or errors made by healthcare professionals that result in harm to patients. It provides financial protection for legal expenses, settlements, and judgments that may arise from malpractice lawsuits. Commercial general liability coverage, employer's liability coverage, and errors and omissions coverage do not specifically address the unique risks and liabilities associated with medical professionals and their professional activities.Rate this question:
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- 12.
What must an insurer do who accepts an application from an agent who is not specifically appointed by that insurer, and then issues a policy from that application?
- A.
The agent must become an employee of the company within 30 days of receiving the application
- B.
Name the agent to the list of the company's approved agents
- C.
Send the agent an appointment approval notice within 30 days of policy issuance
- D.
Forward to the Commissioner a notice of appointment within 14 days of receipt of application
Correct Answer
D. Forward to the Commissioner a notice of appointment within 14 days of receipt of applicationExplanation
When an insurer accepts an application from an agent who is not specifically appointed by that insurer and issues a policy from that application, they must forward a notice of appointment to the Commissioner within 14 days of receiving the application. This is important to ensure that the agent is officially recognized and approved by the regulatory authority. By notifying the Commissioner, the insurer is fulfilling their obligation to inform the relevant authority about the appointment of the agent.Rate this question:
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- 13.
Under a major medical plan, coinsurance equals a percentage
- A.
The employee pays after the deductible is met
- B.
The plan pays after the deductible is met
- C.
The employer pays after the deductible
- D.
The spouses' insurance company pays after the deductible
Correct Answer
A. The employee pays after the deductible is metExplanation
Under a major medical plan, coinsurance refers to the percentage of medical expenses that the insured individual is responsible for paying after the deductible has been met. This means that once the deductible amount has been paid by the employee, they will then be responsible for paying a percentage of the remaining medical costs, while the insurance plan will cover the rest.Rate this question:
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- 14.
If an insured borrows a neighbor's vehicle to run a personal errand, how do the policies respond in the event of an auto accident?
- A.
Both policies respond on a pro-rate basis
- B.
Only the neighbor's policy provides coverage: there is no coverage by the driver's policy
- C.
The driver's policy is primary and the neighbor's policy is excess
- D.
The neighbor's policy is primary and the driver's policy is excess
Correct Answer
D. The neighbor's policy is primary and the driver's policy is excessExplanation
When an insured borrows a neighbor's vehicle to run a personal errand and gets into an auto accident, the neighbor's policy is considered primary and provides coverage for the accident. The driver's policy is considered excess, meaning it only provides coverage if the neighbor's policy limits are exhausted. This means that the neighbor's policy will be the first to respond and provide coverage, and if the coverage is not sufficient, the driver's policy will then kick in as excess coverage.Rate this question:
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- 15.
The equipment dealer's coverage form covers all of the following types of property, except:
- A.
Dealer's used stock
- B.
Motor vehicles designed for highway use
- C.
Customer's equipment in for service
- D.
Dealer's new stock
Correct Answer
B. Motor vehicles designed for highway useExplanation
The equipment dealer's coverage form covers all types of property, except for motor vehicles designed for highway use. This means that the insurance policy will provide coverage for the dealer's used stock, customer's equipment in for service, and dealer's new stock. However, it specifically excludes motor vehicles designed for highway use from the coverage.Rate this question:
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- 16.
A self-insured group qualifies for stop-loss after claims:
- A.
Equal the anticipated loss per month
- B.
Meet the out-of-pocket expense during the policy period
- C.
Exceed a specified limit in a set period of time
- D.
Average the maximum amount stated on the master policy
Correct Answer
C. Exceed a specified limit in a set period of timeExplanation
The correct answer is "Exceed a specified limit in a set period of time." This means that in order for a self-insured group to qualify for stop-loss coverage, their claims must go beyond a predetermined threshold within a specific timeframe. This ensures that the group is protected from excessive financial losses by transferring the risk to the stop-loss insurer once the specified limit is surpassed. The other options mentioned in the question do not accurately describe the criteria for qualifying for stop-loss coverage.Rate this question:
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- 17.
A reporting form is used for property insurance
- A.
To maintain the correct limits of coverage without over or under insuring when the value or volume of the property varies during the policy term
- B.
To report losses and adjust insurance in force to conform
- C.
When the insured's premises are subjuect to periodic safety inspections
- D.
To establish a guaranteed amount of insurance based upon a report of values submitted before the beginning of the policy term
Correct Answer
A. To maintain the correct limits of coverage without over or under insuring when the value or volume of the property varies during the policy termExplanation
A reporting form is used for property insurance to ensure that the coverage limits accurately reflect the value or volume of the property throughout the policy term. This is important because the value of the property can change over time, and it is necessary to have the appropriate amount of insurance to avoid being underinsured or overinsured. By regularly reporting any changes in the property's value or volume, the insurance can be adjusted accordingly to maintain the correct coverage limits.Rate this question:
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- 18.
All of the following contribute to the rising cost of Worker's Compensation Insurance, except:
- A.
The growing population
- B.
Employers who fail to secure the payment of workers compensation as required by law
- C.
Under-reported payroll of employers
- D.
Fraudulent claims
Correct Answer
A. The growing populationExplanation
The growing population does not contribute to the rising cost of Worker's Compensation Insurance. The cost of insurance is determined by factors such as the number of claims, the severity of the claims, and the cost of medical treatment. While a growing population may lead to an increase in the number of workers, it does not directly impact the cost of insurance. The other options listed - employers who fail to secure payment, under-reported payroll, and fraudulent claims - can all contribute to increased costs by reducing the funds available for compensation or by inflating the number of claims.Rate this question:
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- 19.
Which type of exposure can be best defined as a condition or sitution where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness or unemployment?
- A.
Personnel loss exposure
- B.
Personal loss exposure
- C.
Personal property loss exposure
- D.
Liability loss exposure
Correct Answer
B. Personal loss exposureExplanation
Personal loss exposure can be best defined as a condition or situation where the exposure to financial loss is presented to an individual or family from causes such as injury, disability, death, sickness, or unemployment. This type of exposure refers to the potential financial consequences that individuals or families may face due to personal circumstances or events that can result in financial loss. It encompasses various risks related to personal well-being and financial security, highlighting the importance of having appropriate insurance coverage or risk management strategies in place to mitigate these potential losses.Rate this question:
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- 20.
All of the following would be considered benefits of insurance, except:
- A.
The can be a source of investment funds
- B.
Retention of the loss by the insured
- C.
Redemption of the financial uncertainty of the insured
- D.
Payment for the cost of covered losses
Correct Answer
B. Retention of the loss by the insuredExplanation
Insurance is designed to protect individuals or businesses from financial loss by transferring the risk to an insurance company. The benefits of insurance include payment for the cost of covered losses, redemption of financial uncertainty, and providing a source of investment funds. However, retention of the loss by the insured is not a benefit of insurance. This means that insurance does not require the insured to bear the full financial burden of a loss, but instead provides financial support to cover the losses.Rate this question:
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- 21.
Which of the following is also known as a human loss exposure?
- A.
Personnel loss exposure
- B.
Personal loss exposure
- C.
Indirect loss exposure
- D.
Liability loss exposure
Correct Answer
B. Personal loss exposureExplanation
Personal loss exposure refers to the risk or potential for individuals to experience harm, injury, or loss due to various events or circumstances. This can include physical injuries, emotional distress, or financial loss suffered by individuals as a result of accidents, disasters, or other unfortunate incidents. It is called personal loss exposure because it directly affects individuals and their well-being.Rate this question:
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- 22.
If a tenant is insured under a building personal property coverage form, when is the property considered vacant?
- A.
When the structure is being renovated as the result of a fire
- B.
When the insured's operation is halted dui to a strike
- C.
When there is insufficient business personal property present to conduct customary operations
- D.
When less than 31% of the total building space is rented to others or in use by the insured.
Correct Answer
C. When there is insufficient business personal property present to conduct customary operations -
- 23.
A commercial property policy can provide coverage for all of the following, except:
- A.
Tangible losses
- B.
Indirect losses
- C.
Intangible losses
- D.
Direct losses
Correct Answer
C. Intangible lossesExplanation
A commercial property policy provides coverage for tangible losses, indirect losses, and direct losses. However, it does not provide coverage for intangible losses. Intangible losses refer to losses that are not physical or tangible in nature, such as loss of reputation, loss of business opportunities, or loss of intellectual property. These types of losses are typically not covered by property insurance policies, as they are not directly related to physical damage or loss of property.Rate this question:
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- 24.
Which of the following types of coverage would be needed to cover a contractor's bulldozers which are used in the contractor's business but are not held for sale?
- A.
Older truck cargo floater
- B.
Contractor's equipment floater
- C.
Annual transit policy
- D.
Installment sales floater
Correct Answer
B. Contractor's equipment floaterExplanation
A contractor's equipment floater would be needed to cover a contractor's bulldozers which are used in the contractor's business but are not held for sale. This type of coverage is specifically designed to protect equipment that is used in a contractor's business operations. It provides coverage for damage or loss to the equipment, whether it is on the contractor's premises or being transported to and from job sites. It is a specialized form of insurance that is tailored to the unique risks and needs of contractors and their equipment.Rate this question:
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- 25.
It is a violation of the CA Insurance Code to act as a producer for a non-admitted carrier unless:
- A.
The producer is an insurance solicitor
- B.
It is always a violation, no matter what type of producer
- C.
The producer is dually licensed in at least two states
- D.
The producer is a surplus lines broker
Correct Answer
D. The producer is a surplus lines brokerExplanation
The correct answer is that the producer is a surplus lines broker. This means that it is only permissible to act as a producer for a non-admitted carrier if the producer is specifically licensed as a surplus lines broker. This indicates that there are specific requirements and qualifications that need to be met in order to legally act as a producer for a non-admitted carrier.Rate this question:
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- 26.
In California, excess and surplus lines coverage needs to be placed through:
- A.
An admitted insurer
- B.
An excess and surplus lines solicitor
- C.
Lloyds of London
- D.
A surplus lines broker
Correct Answer
D. A surplus lines brokerExplanation
In California, excess and surplus lines coverage needs to be placed through a surplus lines broker. A surplus lines broker is a licensed professional who specializes in placing insurance coverage with non-admitted insurers, which are not licensed in the state but can provide coverage for unique or high-risk situations. These brokers have the expertise and knowledge to navigate the surplus lines market and find the best coverage options for clients. Admitted insurers, excess and surplus lines solicitors, and Lloyds of London are not specifically required for placing excess and surplus lines coverage in California.Rate this question:
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- 27.
Under a scheduled personal property endorsement, loss to stamps are excluded when they are:
- A.
Located in Canada
- B.
Being shipped by a freight company
- C.
Being shipped by registered mail
- D.
While the insured is temporarily in Japan
Correct Answer
B. Being shipped by a freight companyExplanation
Loss to stamps is excluded when they are being shipped by a freight company. This means that if the stamps are damaged or lost during the shipping process, the policy does not cover the loss. This exclusion is likely because shipping stamps can be risky, as they are small and valuable items that can easily be misplaced or damaged during transportation. Therefore, it is important for stamp collectors or sellers to take extra precautions when shipping stamps to ensure their protection.Rate this question:
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- 28.
Which of the following is most likely to be eligible for the CA Fair Plan?
- A.
An Insured with a very bad driving record
- B.
A poorly maintained dwelling with faulty wiring
- C.
An insured who has had a drivers license for less than two years
- D.
A well-maintained dwelling located in a hazardous brush area
Correct Answer
D. A well-maintained dwelling located in a hazardous brush areaExplanation
A well-maintained dwelling located in a hazardous brush area is most likely to be eligible for the CA Fair Plan. The CA Fair Plan is a program that provides insurance coverage for properties that are unable to obtain coverage through traditional insurance companies. Properties located in hazardous areas, such as brush areas, are often considered high-risk and may have difficulty obtaining insurance. However, if the dwelling is well-maintained, it may meet the eligibility criteria for the CA Fair Plan, which aims to provide coverage for properties in high-risk areas.Rate this question:
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- 29.
What items of personal property are included in Coverage A under a HO-3 policy?
- A.
Detached fences
- B.
Lawnmower used to maintain the exterior premises
- C.
Paint of the premises to be applied to the interior
- D.
Decorative fountains
Correct Answer
C. Paint of the premises to be applied to the interiorExplanation
Coverage A under a HO-3 policy includes personal property that is permanently attached to the dwelling, such as built-in appliances, carpeting, and fixtures. The paint of the premises to be applied to the interior is considered personal property that is permanently attached to the dwelling, as it is intended to be used to improve the interior of the home. Therefore, it would be included in Coverage A under a HO-3 policy.Rate this question:
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- 30.
Mitchell's (unendorsed) personal auto policy liability coverage would pay for:
- A.
Mitchell's broken windshield caused by a rock thrown by the tire of a passing car
- B.
Mitchell's rental car expense, when his car is unusable due to a collision that was not his fault.
- C.
The cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car
- D.
Damage or injury caused intentionally by Mitchell
Correct Answer
C. The cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his carExplanation
Mitchell's personal auto policy liability coverage would pay for the cost of repairing the neighbor's fence that Mitchell damaged due to the negligent operation of his car. This is because liability coverage typically covers damages that the insured person is legally responsible for, including property damage caused by their negligence. In this case, Mitchell's negligence in operating his car led to the damage of his neighbor's fence, making him liable for the repair costs.Rate this question:
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- 31.
All Workers Compensation policies provide
- A.
Major medical coverage with 20% co-payment; co-payment has an annual stop-loss of $1,500
- B.
Compensation for worker related injuries without regard to fault
- C.
Adequate retirement benefits
- D.
24-hour on and off the job coverage for workers
Correct Answer
B. Compensation for worker related injuries without regard to faultExplanation
Workers Compensation policies provide compensation for worker related injuries without regard to fault. This means that regardless of who is at fault for the injury, the policy will provide coverage and compensation to the injured worker. This is an important feature of Workers Compensation policies as it ensures that workers are protected and supported in case of any work-related injuries or accidents.Rate this question:
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- 32.
All of the following are principal rating factors under Proposition 103 for personal auto policies, except:
- A.
Years of driving experience
- B.
Annual miles driven
- C.
Driver's safety record
- D.
Number of listed drivers
Correct Answer
D. Number of listed driversExplanation
The number of listed drivers is not a principal rating factor under Proposition 103 for personal auto policies. Proposition 103 in California requires insurance companies to base their rates on three main factors: years of driving experience, annual miles driven, and the driver's safety record. The number of listed drivers does not directly impact the insurance rates.Rate this question:
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- 33.
Under a builders risk form, how much insurance is required to pay any loss without a penalty for underinsurance?
- A.
100% of the completed value
- B.
100% of the value at the time of the loss
- C.
80% of the value at the time of the loss
- D.
80% of the completed value
Correct Answer
A. 100% of the completed valueExplanation
Under a builders risk form, the insurance is required to pay any loss without a penalty for underinsurance at 100% of the completed value. This means that the insurance coverage should be equal to the total value of the project once it is completed. This ensures that in the event of a loss, the policyholder will receive full compensation for the damages without any deduction or penalty for being underinsured.Rate this question:
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- 34.
Which of the following persons is not an insured under Section I of a homeowner's policy?
- A.
The named insured
- B.
The named insured's (resident) spouse
- C.
The named insured's (resident) 25 year old nephew
- D.
The named insured's (non-resident) spouse
Correct Answer
D. The named insured's (non-resident) spouseExplanation
The named insured's (non-resident) spouse is not an insured under Section I of a homeowner's policy because Section I typically covers the named insured, their resident spouse, and resident relatives, but not non-resident spouses.Rate this question:
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- 35.
An umbrella policy
- A.
Provides coverage for outdoor fairs and exhibitions in case of bad weather
- B.
Provides excess physical damage coverage
- C.
Provides broad primary coverage for most personal or commercial loss exposure
- D.
Provides broad excess liability coverage over one or more primary policies
Correct Answer
D. Provides broad excess liability coverage over one or more primary policiesExplanation
An umbrella policy provides broad excess liability coverage over one or more primary policies. This means that it offers additional coverage beyond the limits of the primary policies, such as homeowners or auto insurance. It helps protect individuals or businesses from large liability claims or lawsuits that exceed the limits of their primary policies. The umbrella policy kicks in once the limits of the primary policies are exhausted, providing an extra layer of protection.Rate this question:
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- 36.
All of the following expenses are covered in addition to the limits of liability under Coverage A of personal auto policy, except:
- A.
Pre-judgment interest
- B.
Premium for appeal bonds
- C.
Loss of earnings to attend trials at the company's request
- D.
Cost of bail bonds related to a covered accident
Correct Answer
A. Pre-judgment interestExplanation
Pre-judgment interest is not covered in addition to the limits of liability under Coverage A of a personal auto policy. This refers to the interest that accrues on a judgment against the insured before the judgment is officially entered. While the other options, such as the premium for appeal bonds, loss of earnings to attend trials at the company's request, and cost of bail bonds related to a covered accident, are covered expenses under Coverage A.Rate this question:
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- 37.
Under a commercial property coverage form, all of the following properties are included in the definition of "building," except:
- A.
Patio
- B.
Outdoor fixtures
- C.
Permanently installed fixtures
- D.
Personal property used to maintain the premises
Correct Answer
A. PatioExplanation
Under a commercial property coverage form, the definition of "building" typically includes outdoor fixtures, permanently installed fixtures, and personal property used to maintain the premises. However, a patio is not typically considered part of the building itself, but rather an outdoor space or structure adjacent to the building. Therefore, a patio would not be included in the definition of "building" under a commercial property coverage form.Rate this question:
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- 38.
Carmen is driving her own car on behalf of her employer. Carmen's negligent operation of her car injures a member of the public. The employer may be held liable because of what is called:
- A.
Vicarious liability
- B.
Gross negligence
- C.
Absolute Liability
- D.
Contributory negligence
Correct Answer
A. Vicarious liabilityExplanation
Vicarious liability is a legal principle that holds employers responsible for the actions of their employees while they are acting within the scope of their employment. In this scenario, Carmen was driving her own car on behalf of her employer, which implies that she was performing work-related duties. Therefore, if Carmen's negligent operation of her car caused harm to a member of the public, the employer may be held liable under the principle of vicarious liability. This is because the employer has a legal duty to ensure that their employees act responsibly and safely while carrying out their job responsibilities.Rate this question:
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- 39.
Which of the following perils is insured against in the Special form not in the Basic Form?
- A.
Fire
- B.
Lightning
- C.
Internal explosion
- D.
Collapse
Correct Answer
D. CollapseExplanation
In the Special form, collapse is insured against, whereas in the Basic form it is not. Collapse refers to the sudden falling down or caving in of a building or structure. This coverage is important as it protects against the financial losses that can occur due to structural failures. Fire, lightning, and internal explosion are perils that are covered in both the Special and Basic forms of insurance.Rate this question:
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- 40.
Which of the following types of policies pays for bodily injury or property damage which occurs or is discovered during the policy period?
- A.
Pollution liability policy
- B.
Claims made commercial liability policy
- C.
Auto Liability policy
- D.
Occurrence general liability policy
Correct Answer
B. Claims made commercial liability policyExplanation
A claims made commercial liability policy pays for bodily injury or property damage that occurs or is discovered during the policy period. This means that the policy will cover any claims made against the insured during the policy period, regardless of when the actual incident causing the injury or damage took place. This type of policy is commonly used in professional liability insurance, where claims may be made long after the alleged incident occurred.Rate this question:
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- 41.
If an armored car carrying an insured's bank deposit is robbed, what insurance would the insured need to be covered?
- A.
Money orders and counterfeit money
- B.
Funds transfer fraud
- C.
Outside the premises-theft of money and securities
- D.
Employee theft
Correct Answer
C. Outside the premises-theft of money and securitiesExplanation
The insured would need the insurance coverage for "Outside the premises-theft of money and securities" in order to be covered in the event of a robbery of an armored car carrying their bank deposit. This coverage would protect the insured against theft that occurs outside of their premises, such as during transportation of the deposit. It would cover the loss of both money and securities, providing financial protection for the insured in case of such an incident.Rate this question:
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- 42.
Under the liability portion of an unendorsed personal auto policy, what coverage is available if the named insured is operating a company car on a regular basis?
- A.
The coverage of the vehicle primarily operated by the named insured
- B.
The financial responsibility coverage limitations
- C.
The broadest coverage of any of the autos listed in the declarations
- D.
The policy excludes this usage
Correct Answer
D. The policy excludes this usageExplanation
The correct answer is that the policy excludes this usage. This means that if the named insured is operating a company car on a regular basis, the liability coverage provided by the personal auto policy does not apply. The policy is not designed to provide coverage for vehicles that are used for business purposes.Rate this question:
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- 43.
A possibility of financial loss resulting from the ownership of property is known as:
- A.
Insurable interest
- B.
Valuation
- C.
Indemnity
- D.
Legal Liability
Correct Answer
A. Insurable interestExplanation
Insurable interest refers to the potential financial loss that an individual may incur due to the ownership of a property. This concept is important in insurance, as it determines whether an individual has a valid reason to insure a property. Having an insurable interest means that the individual would suffer a financial loss if the property was damaged or destroyed. It ensures that only those with a legitimate stake in the property are eligible for insurance coverage, preventing fraud and ensuring fair compensation in case of loss.Rate this question:
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- 44.
If the vacancy permit endorsement is added to a building and personal property coverage form, the vacancy conditions under the basic policy is:
- A.
Waived only for designated perils during the permit period
- B.
Waived during the permit period
- C.
Waived during the policy period
- D.
Waived only for designated perils during the policy period
Correct Answer
A. Waived only for designated perils during the permit periodExplanation
The correct answer is "Waived only for designated perils during the permit period." This means that the vacancy conditions under the basic policy are only waived for specific perils during the period when the vacancy permit endorsement is in effect. This indicates that the coverage for the building and personal property is only extended for certain risks during the permit period, rather than being completely waived for all perils or for the entire policy period.Rate this question:
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- 45.
You are to meet with a small furniture manufacturer and make property and liability insurance recommendations. You have insured many risks of this type in the past and have a good idea of what their needs may be. There are several popular ways of determining business loss exposures. Which of the following ways are the least professional and the least likely to correclty identify the loss exposure? You:
- A.
Take a walk through the business to observe operation and work flow, and ask their key people about the company and its operations.
- B.
Meet with key people and complete a loss exposure questionnaire developed for their general type of risk
- C.
Get a copy of all current policies and determine what coverage they have been carrying and how much they have been paying
Correct Answer
C. Get a copy of all current policies and determine what coverage they have been carrying and how much they have been payingExplanation
Getting a copy of all current policies and determining what coverage they have been carrying and how much they have been paying is the least professional and least likely to correctly identify the loss exposure. This approach only focuses on the existing coverage and does not consider the specific needs and risks of the small furniture manufacturer. It does not provide a comprehensive understanding of the company's operations and potential vulnerabilities. The other options, such as taking a walk through the business to observe operation and work flow, and completing a loss exposure questionnaire, are more thorough and effective methods for identifying the company's loss exposures.Rate this question:
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- 46.
Where would an insured who is in the business of importing exotic animals form Africa most likely go to obtain insurance coverage?
- A.
State Competitive Fund
- B.
Foreign Insurer
- C.
Alien Insurer
- D.
Excess and surplus lines insurer
Correct Answer
D. Excess and surplus lines insurerExplanation
An insured who is in the business of importing exotic animals from Africa would most likely go to an excess and surplus lines insurer to obtain insurance coverage. This type of insurer specializes in providing coverage for unique or high-risk risks that are not typically covered by standard insurance companies. Importing exotic animals would be considered a high-risk activity, and therefore, an excess and surplus lines insurer would be the best option for the insured to obtain the necessary coverage.Rate this question:
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- 47.
A commercial building and a personal property coverage form covers three kinds of property, one which has "your business personal property." "Your" refers to:
- A.
Only the first named insured shown in the declaration.
- B.
Any party who has an insurable interest in the property located at the insured address
- C.
The named insured and others whose property is in the care, custody or control of the insured
- D.
Only the named insured(s) shown in the declarations
Correct Answer
D. Only the named insured(s) shown in the declarationsExplanation
The term "your" in the context of the commercial building and personal property coverage form refers to the named insured(s) shown in the declarations. This means that only the individuals or entities listed as the named insured(s) on the policy are covered under the "your business personal property" provision. Other parties who may have an insurable interest in the property or have their property in the care, custody, or control of the insured would not be covered under this specific provision.Rate this question:
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- 48.
Which of the following losses is not covered by either the personal auto policy collision or other than collision coverage?
- A.
Sean's car is severely damaged by a storm when i sign is blown off the roof of a building and hits his car
- B.
Sean's car is washed away during a flood
- C.
Sean's car is stolen when he leaves the keys in the ignition, and the doors and windows are unlocked while he runs into the grocery store
- D.
Sean leaves his personal (non-business) laptop computer is his car overnight. His car is parked in the driveway in front of his house. The computer is stolen from his car.
Correct Answer
D. Sean leaves his personal (non-business) laptop computer is his car overnight. His car is parked in the driveway in front of his house. The computer is stolen from his car.Explanation
The loss of Sean's personal laptop computer from his car is not covered by either the personal auto policy collision or other than collision coverage. This is because the personal auto policy typically covers physical damage to the vehicle itself, but does not cover personal belongings or items left inside the car. Therefore, the theft of Sean's laptop would not be covered under the auto policy.Rate this question:
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- 49.
Self-funding of employee benefit plans cannot be used for:
- A.
Short-term disability benefits
- B.
Death benefits
- C.
Hospital benefits
- D.
Health benefits
Correct Answer
B. Death benefitsExplanation
Self-funding of employee benefit plans cannot be used for death benefits because death benefits are typically provided through life insurance policies. Self-funding refers to the practice of an employer directly paying for employees' benefit claims, rather than purchasing insurance coverage. While self-funding can be used for short-term disability benefits, hospital benefits, and health benefits, it does not cover death benefits as these are usually covered by life insurance policies.Rate this question:
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- 50.
Ordinance or law coverage provides protection for which of the following losses?
- A.
The residual property value of a home that must be demolished to comply with building code requirements.
- B.
The cost of demolition and debris removal of undamaged property
- C.
The increased expense incurred for the insurer to repair or rebuild property according to buidling code specifications
- D.
All of the above are correct
Correct Answer
D. All of the above are correctExplanation
Ordinance or law coverage provides protection for all of the mentioned losses. It covers the residual property value of a home that needs to be demolished to comply with building code requirements, the cost of demolition and debris removal of undamaged property, and the increased expenses incurred by the insurer to repair or rebuild the property according to building code specifications. This coverage ensures that policyholders are protected from the financial burden of complying with building codes and regulations.Rate this question:
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Current Version
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Mar 20, 2023Quiz Edited by
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Jun 01, 2010Quiz Created by
Petsya
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