Fire & Casualty Practice Exam 5

Professional liability insurance would protect the physician for misdiagnosing a patient for terminal cancer. This type of insurance is specifically designed to cover professionals, such as doctors, against claims of negligence or errors in their professional services. In this case, if the patient were to file a lawsuit claiming that the physician's misdiagnosis caused harm or financial loss, professional liability insurance would provide coverage for legal expenses, settlements, or judgments.

One of the principle rating factors under Proposition 103 allowed for personal auto policies is the safety driving record. This means that insurance companies consider an individual's history of safe driving, including factors such as accidents, traffic violations, and claims history, when determining the premium for their auto insurance policy. A good safety driving record indicates responsible and cautious driving behavior, which is seen as less risky by insurance companies and therefore may result in lower premiums.

Subrogation is the insurer's right to recover the claim payment made to an insured from a negligent third party. This means that the insurer can step into the insured's shoes and pursue legal action against the responsible party to recover the amount paid out for the claim. Subrogation allows the insurer to mitigate its losses and prevent the insured from benefiting from both the claim payment and any additional compensation received from the negligent party.

Tort law gives an insured party the right to seek compensation if it is proven that another person with negligence contributed to the injury. Tort law is a branch of civil law that deals with personal injuries and provides a legal framework for individuals to seek compensation for harm caused by the negligence or wrongdoing of others. It allows the injured party to file a lawsuit against the responsible party and seek damages for their injuries or losses.

Subrogation refers to the insurer's right to recover payment from a responsible third party. This means that if the insurer has paid out a claim to the insured, they have the right to seek reimbursement from any party that may be responsible for the loss or damages. This allows the insurer to recoup their expenses and helps prevent the insured from benefiting from both the insurance payout and any potential compensation from the responsible party.

A furniture store is eligible for a business owner's policy because it is a type of small business that typically requires coverage for property damage, liability, and business interruption. A business owner's policy combines these coverages into one package, making it convenient and cost-effective for small businesses to obtain comprehensive insurance protection.

Insurers with admitted status in California are not allowed to use race, color, religion, or national origin as a condition to use higher rates. This means that they cannot discriminate against individuals based on these factors when determining the rates for their policies. Admitted insurers must adhere to anti-discrimination laws and treat all policyholders fairly and equally.

A miscellaneous type vehicle endorsement can be added to the personal auto policy to insure the all-terrain vehicle (ATV). This endorsement provides coverage for vehicles that do not fit into the standard categories covered by the policy, such as motorcycles or motorhomes. By adding this endorsement, the insured can ensure that their ATV is protected in case of accidents, damage, or theft.

The named non-owner coverage endorsement provides coverage for liability, medical payments, and uninsured motorist. This means that if the insured person is driving a vehicle that they do not own and is involved in an accident, this endorsement will cover their liability for any damages or injuries caused to others, provide medical payments coverage for their own injuries, and also provide coverage for any damages or injuries caused by an uninsured or underinsured motorist.

The HO-5 homeowners form is the best for use on a brand-new single family dwelling. This form provides the most comprehensive coverage, including coverage for both the dwelling and personal property on an open perils basis. It offers higher coverage limits and includes additional coverage options such as replacement cost coverage for personal property. This form is typically recommended for homeowners who want the highest level of protection for their new home.

Surplus lines brokers are insurance intermediaries who specialize in placing coverage with non-admitted insurers. Non-admitted insurers are not licensed or regulated by the state and typically provide coverage for high-risk or unique risks that admitted insurers are unwilling or unable to cover. Surplus lines brokers have the expertise and connections to access these non-admitted insurers and find coverage solutions for clients that may not be available through traditional insurance channels. Therefore, they exclusively transact business with non-admitted insurers.

Every admitted insurer in the state of California is required to maintain a unit or division to investigate possible fraudulent claims made by insureds. This is because fraudulent claims can result in financial losses for the insurer and can also lead to higher premiums for other policyholders. By investigating possible fraudulent claims, insurers can ensure that only legitimate claims are paid out and deter individuals from making false claims. This helps to maintain the integrity of the insurance system and protect the interests of both insurers and policyholders.

The correct answer is that there is coverage, but only for the damage caused by the fire and explosion. This is because the HO-3 form typically provides coverage for named perils, and in this case, the fire and explosion are considered insured perils. However, earthquake damage is not typically covered under the HO-3 form unless the homeowner has specifically added an earthquake coverage endorsement to their policy. Therefore, the damage caused by the earthquake itself would not be covered.

An organization will cease to exist as an entity eligible to hold a license for all of the given reasons except the termination of a key employee. While the termination of a key employee may have an impact on the organization's operations and success, it does not directly result in the organization losing its eligibility to hold a license. On the other hand, the dissolution of a co-partnership, dissolution of a corporation, or termination of an association can lead to the organization ceasing to exist as a legal entity and therefore losing its eligibility for a license.

The named non-owned coverage endorsement is the correct answer because it provides coverage for individuals who do not own a car or have regular use of a car. This endorsement extends liability coverage to the individual when they are driving a non-owned vehicle, such as a rental car or a friend's car. It is a way to ensure that the individual is properly protected in case of an accident or damage while driving a vehicle that they do not own.

The insurer must give 10 days notice before canceling the policy for non-payment. This allows the insured enough time to pay the outstanding premium and prevent the cancellation of their policy.

The correct answer is $20. Under an unendorsed personal auto policy, the limit per day for transportation expenses is $20. This means that if your vehicle is in the shop for repairs due to a covered loss, your policy will cover up to $20 per day for alternate transportation such as renting a car or using public transportation. This limit helps to ensure that you have access to transportation while your vehicle is being repaired.

Special damages refer to the specific financial losses that a person incurs as a result of an injury or harm caused by someone else. Lost wages, mentioned in the answer, are a clear example of special damages. When a person is unable to work due to an injury, they may lose income and wages, which can be quantified and claimed as special damages in a legal case. Scarring and loss of an index finger can be considered as general damages, while pain and suffering are non-economic damages.

Special damages refer to the specific financial losses or expenses incurred as a direct result of an injury or harm. Compensation for time away from work falls under special damages because it refers to the wages or income that an individual has lost due to their injury. This type of compensation is quantifiable and can be calculated based on the individual's salary or earnings. On the other hand, compensation for emotional suffering, loss of a foot, or a scar may fall under general damages, as they are more subjective and not easily quantifiable in monetary terms.

After a collision loss, the insured is required to allow the insurance company to inspect the damaged property before it is repaired. This is important because the insurance company needs to assess the extent of the damage and determine the cost of repairs. By inspecting the damaged property, the company can ensure that the repairs are necessary and reasonable. It also helps prevent fraudulent claims and ensures that the insured receives proper compensation for the loss. Promptly notifying the police of the accident and submitting a written notice of the loss are also important steps, but they are not specifically mentioned in the question as requirements of the personal auto policy. Pressing charges against the other party is not a requirement in this situation.

Market regulation covers various aspects of the market to ensure fair and efficient practices. Employee training is not typically considered an area of market regulation as it pertains more to internal operations and human resources. Market regulation usually focuses on areas such as underwriting, sales, and rate-making, which directly impact the functioning and fairness of the market.

Unauthorized release of confidential information is considered an intentional tort because it involves the deliberate disclosure of sensitive or private information without consent. This action is done intentionally and can cause harm or damage to the person or entity whose information is released. It is a violation of privacy rights and can lead to legal consequences for the person responsible for the unauthorized release.

A personal auto policy requires the insured to notify the police for hit and run accidents and thefts. This is because in these situations, a police report is necessary to document the incident and provide evidence for insurance claims. Notifying the police helps in investigating the incident, identifying the responsible party, and ensuring that proper legal procedures are followed. Additionally, it helps in preventing fraudulent claims and ensures that the insurance company has accurate information about the incident.

The extended non-owned liability coverage provides coverage for liability, medical payments, and uninsured motorist. This means that if the insured person causes an accident while driving a non-owned vehicle, this coverage will pay for any damages or injuries caused to others involved in the accident, as well as any medical expenses for the insured person and any passengers in the vehicle. Additionally, it will provide coverage if the other driver involved in the accident is uninsured or underinsured.

When an agent's appointment to an insurance company is terminated and the agent has no other appointments with any other insurance company, their permanent license becomes inactive. This means that they will no longer be authorized to sell insurance or perform any activities related to their license. The agent will need to either become reappointed or receive a new appointment letter from another insurer in order to activate their license again.

A light pole is covered by a building and personal property coverage form (BPP) because it is considered a part of the building structure. BPP provides coverage for physical damage to the building and its contents, including fixtures such as light poles.

Protection and indemnity insurance is a type of insurance that provides coverage to ship owners against vicarious liability claims arising from the operation of the insured vessel. This insurance protects the ship owner from financial losses resulting from third-party claims, such as claims for bodily injury, property damage, or pollution caused by the vessel. It also covers legal expenses incurred in defending against such claims. Hull insurance, on the other hand, covers physical damage to the vessel itself. A voyage policy is a type of marine insurance that provides coverage for a specific voyage or journey. The sue and labor laws refer to the legal principle that requires ship owners to take necessary measures to minimize damage to the vessel and its cargo in the event of an accident or peril.

The correct answer is Insurance Services Office. The Insurance Services Office (ISO) is responsible for developing forms for the standard market. The National Association of Insurance Commissioners (NAIC) is a regulatory organization that sets standards and provides guidance for insurance companies, but they do not develop forms for the standard market. The American Association of Insurance Services (AAIS) and the American Association of Managing General Agents (AAMGA) are not directly involved in developing forms for the standard market.

If the named insured is not the owner of the building, improvements and betterments are covered under the category of business personal property. Business personal property refers to movable items owned by the business, including furniture, equipment, inventory, and any improvements made to the property that are not permanent fixtures. Since the named insured is not the owner of the building, any improvements or betterments they make to the property would be considered part of their business personal property and would be covered under this category.

The insured must have a supplemental standard reporting period endorsement in order for the loss to be covered. This endorsement provides an extended reporting period after the expiration of the policy, allowing the insured to report occurrences that happened during the policy period but were discovered after the policy expired. Without this endorsement, the loss would not be covered because it was not reported during the policy period.

An agent who diverts premium dollars for their own use is guilty of theft. This means that the agent is unlawfully taking the money intended for insurance premiums and using it for personal gain without the policyholder's knowledge or consent. This action is considered theft because it involves the unauthorized appropriation of someone else's property, in this case, the premium dollars.

The insurance Commissioner uses whether the rate mathematically reflects the insurance company's investment income as one of the main factors to determine whether a rate is excessive or unfairly discriminatory. This means that the Commissioner assesses whether the rate takes into account the company's investment income and if it is reasonable in relation to the risks and costs associated with providing insurance coverage. By considering this factor, the Commissioner can ensure that insurance rates are fair and not excessively high or discriminatory.

The causes of loss - basic form provides coverage for riot or civil commotion. This means that if there is damage to the insured property as a result of a riot or civil commotion, the insurance policy will cover the cost of repairing or replacing the damaged property. This coverage is important as it protects the insured against any potential financial losses that may occur due to such perils.

The requirement that notice must be sent with return receipt required means that the insured must sign and return a receipt acknowledging that they have received the notice. This ensures proof of delivery and helps to protect both the insurer and the insured. However, this is not a requirement for a notice by mail to an insured by an insurer. Therefore, the correct answer is that notice does not need to be sent with return receipt required.

Installing a pool in the backyard can increase the risk of accidents and potential liabilities for the homeowner. Therefore, by deciding not to install a pool, the homeowner is taking a preventive measure to avoid potential losses associated with accidents, injuries, and legal issues that could arise from having a pool on their property.

Earth movement is not typically excluded in an inland marine policy. Inland marine policies usually cover property that is in transit or temporarily located away from the insured's premises. Exclusions such as insects or vermin, wear and tear, and electrical breakdown are commonly included in these policies to limit coverage for specific risks. However, earth movement, which refers to events like earthquakes or landslides, is not typically excluded and may be covered under an inland marine policy.

The HO-3 insurance policy typically covers losses related to the weight of contents. This means that if any damage or loss occurs due to the weight of the contents in the insured property, such as heavy furniture or appliances, it would be covered under the policy. However, it is important to note that this coverage may have certain limitations and exclusions, so it is always recommended to carefully review the policy terms and conditions.

A health insurance deductible is the amount of covered expense that the insured pays before the insurer pays. This means that the insured must first pay a certain amount out of pocket for their medical expenses before the insurance company starts covering the costs. Once the deductible is met, the insurer will then begin to pay for the covered expenses according to the terms of the insurance policy.

The correct answer is "An estimate of the amount the insurer will pay." This is because a loss reserve is a provision made by the insurer to cover the estimated cost of settling a claim. It represents the amount of money that the insurer expects to pay out in order to close the claim. It is not necessarily the exact amount that will be paid, as the final amount may vary based on factors such as negotiations, legal proceedings, or additional information that may arise during the claims process.

The examination of books and records condition is important in a commercial policy to ensure that the proper amount of premium is charged. By reviewing the books and records of the insured, the insurer can accurately assess the risk and determine the appropriate premium to be charged. This helps to prevent undercharging or overcharging of premiums, ensuring that the insurance business remains fair and sustainable.

A DP-2 insurance policy provides additional coverage for additional living expenses compared to a DP-1 policy. This means that if the insured property becomes uninhabitable due to a covered loss, the policy will cover the cost of temporary living arrangements, such as hotel or rental expenses, until the property is repaired or replaced. This coverage is not included in a DP-1 policy, which only provides coverage for the actual cash value of the property and does not cover additional living expenses.

When making a loss settlement with the insured under a personal auto policy, an insurer's option can be to return stolen property to the address shown in the policy. This means that if the insured's vehicle is stolen and later recovered, the insurer may choose to return the stolen vehicle to the insured's address as stated in the policy. This option allows the insured to regain possession of their stolen property.

A competitive state fund refers to a situation where an employer has the option to purchase workers compensation insurance from either a state fund or a private carrier. In this case, the state fund is considered competitive because it is competing with private carriers in the market to provide insurance coverage. This means that employers have the freedom to choose between the state fund and private carriers, creating a competitive environment in which the state fund operates.

Under an unendorsed personal auto policy, there is no coverage available for personal effects. This means that if any personal belongings such as luggage or clothing are damaged or stolen while in the vehicle, the policy will not provide any compensation or reimbursement for those items. It is important for individuals to be aware of this limitation and consider obtaining additional coverage if they want their personal effects to be protected while in their vehicle.

The commercial general liability declarations page lists various limits and coverages related to the liability insurance policy. It provides a summary of the policy's key details. The medical expense limit, rent it to you limit, and personal advertising injury limit are commonly included on this page. However, the pollution liability limit is not typically listed on a commercial general liability declarations page. This limit is specific to pollution-related claims and is often found in a separate pollution liability policy.

Inspections and surveys are a common policy condition for a commercial package policy. This condition requires the insured to allow the insurance company to conduct inspections and surveys of the insured property. These inspections and surveys help the insurance company assess the risk associated with the property and determine the appropriate coverage and premiums. By conducting inspections and surveys, the insurance company can identify any potential hazards or risks that may affect the insured property and take necessary measures to mitigate them. This condition ensures that the insurance company has accurate information about the insured property and can provide adequate coverage.

The purpose of the inspections and surveys condition of the commercial package policy is to determine the rate to be charged. This means that the insurance company will conduct inspections and surveys of the premises to assess the risk associated with the property and calculate the appropriate premium to be charged for the policy. The inspections and surveys help the insurance company evaluate factors such as the condition of the building, safety measures in place, and any potential hazards that may affect the rate.

The HO-2, HO-4, and HO-6 are similar in that they all provide coverage for perils insured against under coverage C. This means that all three types of insurance policies offer protection against specific risks or hazards that are listed under coverage C. The limits provided for under coverage C may vary depending on the specific policy, but the fact that they all include coverage for these perils is a similarity among these three types of insurance.

A person can base their claim for legal liability on the basis of absolute liability, intentional tort, and negligence. However, breach of contract is not a basis for legal liability. Breach of contract refers to the failure to fulfill the terms of a contract, which typically results in a breach of contract claim rather than a claim for legal liability. Legal liability is usually based on actions or omissions that cause harm or injury to another person, such as in cases of absolute liability, intentional torts, or negligence.

Under the commercial building and personal property coverage extensions, property off-premises is covered while the property is located in a building the named insured has leased for five years. This means that if the named insured has leased a building for a period of five years, any property that is located in that building will be covered under the insurance policy. This coverage extension ensures that the named insured's property is protected even when it is not on their own premises.