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Flashcards in IA Test 19 Deck (100)
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1

In California, which of the following is an untrue statement regarding the adjustment of a total auto physical damage loss?

Answer Choices: Select the Correct Answer
The insurer may elect a cash settlement that is based upon the actual cost of a "comparable automobile" less any deductible provided in the policy.
A cash settlement does not include sales taxes.
The cash settlement includes one-time fees incident to transfer of evidence of ownership of a comparable automobile.
The cash settlement must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration.

Question 1 of 100

Your answer: A cash settlement does not include sales taxes. is correct.

EXPLANATION:
The cash settlement amount must include all applicable taxes, license fees and other one-time fees incident to transfer of evidence of ownership of a comparable automobile. This amount must also include the license fee and other annual fees to be computed based upon the remaining term of the loss vehicle’s current registration.


Question 1 of 100

2

Under Section II of the Homeowner Policy which of the following is TRUE regarding Medical Payments Coverage?

Answer Choices: Select the Correct Answer
Pays without regard to negligence
Covers injuries sustained by the insured
Covers injuries sustained by tenants in the insured's residence
Does not cover invitees

Question 2 of 100

Your answer: Pays without regard to negligence is correct.

EXPLANATION:
Medical Payments Coverage pays without regard to legal liability on the part of the insured. Coverage does not apply to any resident of the insured's household or a tenant.


Question 2 of 100

3

The insured is a large super market and maintains a large checking account balance. An employee has a friend who was told in confidence the "transfer account" contained $200,000. The friend, without the employee’s knowledge, pretends that he is the employee with the authority to conduct transactions on behalf of the insured and sends a fraudulent electronic request to the bank to transfer the funds with the intent of stealing them. What coverage would the insured need to cover this claim?

Answer Choices: Select the Correct Answer
Insuring Agreement 3 “Inside the Premises Theft of Money and Securities."
Employee dishonesty
Insuring Agreement 7 "Funds Transfer Fraud"
Insuring Agreement 5 “Outside the Premises” Coverage

Question 3 of 100

Your answer: Insuring Agreement 7 "Funds Transfer Fraud" is correct.

EXPLANATION:
Insuring Agreement 7 is a new agreement that provides additional coverage that was previously available as an endorsement. Coverage is provided for a loss of funds as a result of a fraudulent instruction upon which an institution relied in order to transfer funds from the transfer account. A transfer account is an account kept at a financial institution for the purpose of being able to transfer funds as needed based on various forms of instructions from the named insured. Funds are defined as money and securities. A fraudulent instruction is a newly defined term in this policy. It is defined as an instruction supposedly transmitted by the named insured but was in fact transmitted by someone else without the named insured’s consent or knowledge. The instruction can be electronic, telegraphic, cable, telefascimile (fax), telephone or teletype. A forged written instruction is also considered fraudulent instruction, as is an instruction supposedly transmitted by an employee but which was fraudulently transmitted without the named insured’s or employee’s knowledge or consent.


Question 3 of 100

4

Your insurance company pays for the damages to your auto and for your bodily injury after your car is struck by a hit and run driver. The accident is witnessed by several individuals who can describe the car and its driver but who failed to get a license number. A year after the accident, the owner of the hit and run vehicle turns himself in. It is determined that he was fully insured at the time of the accident but fled because he had been drinking. Pursuant to the California Insurance Regulations, your insurance company can:

Answer Choices: Select the Correct Answer
Do nothing as a full year has passed since the accident occurred
Subrogate against the other insurance company to recover only for the damages to your vehicle
Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury
File a lawsuit to waive the statute of limitations then proceed with subrogation

Question 4 of 100

Your answer: Subrogate against the other driver to recover all sums paid for your vehicle repair and your bodily injury is correct.

EXPLANATION:
Payments made under both your Uninsured Motorist Bodily Injury and Uninsured Motorist Property Damage coverages can be recovered from the responsible party by subrogation if his/her identity is later confirmed.


Question 4 of 100

5

Which of the following is a true statement regarding subrogation in California?

Answer Choices: Select the Correct Answer
An insurer must conduct a full investigation before it pursues subrogation
An insurer does not have to conduct an investigation after it has paid a claim before it pursues subrogation against another party
An insurer is not required to determine as to whether subrogation is appropriate
Subrogation is a judgment call on the part of the insurer/adjuster without regard to regulations

Question 5 of 100

Your answer: An insurer must conduct a full investigation before it pursues subrogation is correct.

EXPLANATION:
California law requires that an insurer notify a first-party claimant if it intends to pursue subrogation of a claim. Regulations also require every insurer that makes a subrogation demand to include the first-party claimant's deductible. Furthermore, no insurer may pursue a claim for subrogation unless it has first conducted a thorough, fair, and objective investigation as to whether subrogation is appropriate.


Question 5 of 100

6

Which of the following is NOT a claim settlement option for liability claims?

Answer Choices: Select the Correct Answer
Excessive amounts claimed.
Lost wages claimed.
Loss of Use.
Disfigurement.

Question 6 of 100

Your answer: Excessive amounts claimed. is correct.

EXPLANATION:
Excessive amounts claimed are always contested by the insurer. Liability losses are categorized as "special damages"or "general damages." Special damages include medical expenses and loss of wages or the costs of other known expenses. General damages would include pain and suffering, punitive damages, loss of consortium, disfigurement and disability claims.


Question 6 of 100

7

Which of the following does not have to be included in the inspection report required to participate in the California Fair Access to Insurance Requirements (FAIR) Plan?

Answer Choices: Select the Correct Answer
Structural inspection
Condition of surrounding structures
Occupancy features
Photographs of the occupants

Question 7 of 100

Your answer: Photographs of the occupants is correct.

EXPLANATION:
According to the California Insurance Code (CIC 10093(b)), the inspection must include, but need not be limited to, pertinent structural and occupancy features as well as the general condition of the building and surrounding structures. A representative photograph of the property may be taken as part of the inspection.


Question 7 of 100

8

What is the grace period in which an expired California independent adjuster license may be renewed?

Answer Choices: Select the Correct Answer
Five years
Four years
Three years
One year

Question 8 of 100

Your answer: One year is correct.

EXPLANATION:
An expired license or branch office certificate may be renewed at any time within one year after its expiration on the filing of an application for renewal. The licensee, as a condition precedent to renewal, must also pay any required delinquency fee.


Question 8 of 100

9

Which of the following is NOT a method of determining causation of injuries under a Workers Compensation claim?

Answer Choices: Select the Correct Answer
Determining if the injury or illness arose in the course of the employment.
Determining if the injury or illness arose out of the employment.
Determining the proximate cause of the injury or illness.
Determining if the injured workers was performing duties that he or she was authorized to perform.

Question 9 of 100

Your answer: Determining if the injured workers was performing duties that he or she was authorized to perform. is incorrect. The correct answer is: Determining the proximate cause of the injury or illness..

EXPLANATION:
The tort law concept of proximate cause is beneficial in proving "fault" in relationship to an accident or injury. Workers compensation is "no-fault" coverage, therefore "proximate cause" is not a concern under a Workers' Compensation claim.


Question 9 of 100

10

All the following are cause for nonrenewal or cancellation of an automobile policy in California, EXCEPT:

Answer Choices: Select the Correct Answer
a subtantial increase in the hazard insured against.
nonpayment of premium.
the insured declaring bankruptcy.
fraud or material misrepresentation.

Question 10 of 100

Your answer: a subtantial increase in the hazard insured against. is incorrect. The correct answer is: the insured declaring bankruptcy..

EXPLANATION:
According to the California Insurance Code (CIC 661), an insured declaring bankruptcy is not a cause for cancellation or nonrenewal of an auto policy.


Question 10 of 100

11

Which of the following types of carriers must assume the broadest liability under common law?

Answer Choices: Select the Correct Answer
Contract carriers
Common carriers
Private carriers
Owner-operator carriers

Question 11 of 100

Your answer: Private carriers is incorrect. The correct answer is: Common carriers.

EXPLANATION:
Common carriers must assume the broadest liability under common law. They are not responsible for acts of God such as floods, hurricanes or for the negligence of the shipper (poor packing).


Question 11 of 100

12

What symbol or symbols are used to cover hired and non-owned vehicles under the commercial auto policy?

Answer Choices: Select the Correct Answer
Symbols 4 and 5
Symbols 3 and 4
Symbols 8 and 9
Symbol 19

Question 12 of 100

Your answer: Symbols 3 and 4 is incorrect. The correct answer is: Symbols 8 and 9.

EXPLANATION:
Symbols #8 and #9 is used in these instances. Symbol #8 represents hired autos only and symbol #9 represents non-owned autos only.


Question 12 of 100

13

Which of the following is true regarding the dealers' physical damage coverage under the Garage policy?

Answer Choices: Select the Correct Answer
The coverage is provided by a blanket limit for covered autos.
The coverage extends to customers’ autos.
The coverage provides an annual maximum limit for comprehensive and collision losses.
The coverage sets a maximum limit per auto.

Question 13 of 100

Your answer: The coverage extends to customers’ autos. is incorrect. The correct answer is: The coverage is provided by a blanket limit for covered autos. .

EXPLANATION:
The dealers' physical damage limit would be set up on a blanket limit basis. This would apply to comprehensive and collision losses to the auto inventory of the dealership. A blanket limit is used because it is simply not practical to schedule each dealer-owned vehicle for physical damage coverage. Additionally, the amount of the coverage is adjusted by the use of a monthly reporting form.


Question 13 of 100

14

An insured has a vacation home covered under a Dwelling policy and he would like to add coverage to his policy for Personal Liability and Medical Payments. The insured purchased a Personal Liability Supplement with the minimum limits for Coverage M - Medical Payments. How much coverage for medical payments will the insured have for each person?

Answer Choices: Select the Correct Answer
$1,000.
$1,500.
$2,000.
$2,500.

Question 14 of 100

Your answer: $2,500. is incorrect. The correct answer is: $1,000..

EXPLANATION:
The coverage limit for Coverage M of the Personal Liability Supplement is $1,000 per person.


Question 14 of 100

15

The business personal property limits will be increased by what amount in order to cover seasonal variations in stock in the BOP?

Answer Choices: Select the Correct Answer
25%
The current rate of inflation
8%
15% unless a different percentage amount is shown on the declarations page.

Question 15 of 100

Your answer: 15% unless a different percentage amount is shown on the declarations page. is incorrect. The correct answer is: 25%.

EXPLANATION:
The business personal property will increase by 25% to provide coverage for seasonal variations in stock but only if the insured had insured the property for at least 100% of its monthly average over the last 12 months.


Question 15 of 100

16

Which one of the following situations may be considered “advertising injury”?

Answer Choices: Select the Correct Answer
A printer’s accidental misprinting of the price of an item in a store’s advertising flyer.
Libel of an organization.
An overcharge by a newspaper for placement of an ad by an individual.
Misspelling of a product’s name.

Question 16 of 100

Your answer: A printer’s accidental misprinting of the price of an item in a store’s advertising flyer. is incorrect. The correct answer is: Libel of an organization..

EXPLANATION:
Only the libel of an organization would be covered under “advertising injury”.


Question 16 of 100

17

The ABC Office Supply Co. carries $100,000 insurance on a storage building held under a $50,000 mortgage acknowledged in the policy. ABC stores dynamite in the building without informing the insurance company. An explosion destroys the building. What is the maximum the mortgagee can recover?

Answer Choices: Select the Correct Answer
$50,000
$0
$25,000
$100,000

Question 17 of 100

Your answer: $0 is incorrect. The correct answer is: $50,000.

EXPLANATION:
Even though the insured concealed the fact that the hazard was increased, the mortgagee will still be able to recover the $50,000.


Question 17 of 100

18

An unendorsed blanket fidelity bond:

Answer Choices: Select the Correct Answer
Names each covered employee specifically.
Names the positions to be covered.
Does not list the names of the employees.
Covers specified employees by job description and position.

Question 18 of 100

Your answer: Does not list the names of the employees. is correct.

EXPLANATION:
A blanket fidelity bond is a type of fidelity bond covering an employer for dishonest acts by employees. The bond grants blanket coverage to all employees in the service of the employer during the term of the bond. Employee names do not need to be listed on the bond.


Question 18 of 100

19

The California Special Provisions Homeowners form amends the standard Homeowners forms to allow the insured _______ from the date of the loss to bring a lawsuit against the insurer.

Answer Choices: Select the Correct Answer
18 months.
3 years.
1 year.
2 years.

Question 19 of 100

Your answer: 3 years. is incorrect. The correct answer is: 1 year..

EXPLANATION:
The standardized Homeowners forms allow 2 years from the date of the loss for the insured to bring a lawsuit against the insurance company. However, the California mandatory special provisions form amends this time frame to 1 year.


Question 19 of 100

20

For which of the following would an employee receive no workers compensation benefits in California?

Answer Choices: Select the Correct Answer
An employee whose injury was caused by his or her own intoxication
An employee who voluntarily participates in any off-duty recreational, social, or athletic activity not constituting part of the employee’s work-related duties.
An employee who was injured during a fight in which she was the initial aggressor
All responses listed are correct

Question 20 of 100

Your answer: An employee whose injury was caused by his or her own intoxication is incorrect. The correct answer is: All responses listed are correct.

EXPLANATION:
While employees who are injured at work are normally provided with workers compensation benefits (without regard to fault), there are exceptions. Workers who are injured because of their own serious and willful conduct receive only 50% of normal benefits. However, there are no benefits payable if the employee is the initial aggressor in a fight that causes injury to him/herself, is injured while intoxicated, or voluntarily participates in any off-duty recreational, social, or athletic activity not constituting part of the employee's work-related duties. This would mean that all of the answers listed are correct.


Question 20 of 100

21

The manager of an independent adjusting company in California leaves the business. The Department of Insurance requires notification of the manager's departure within:

Answer Choices: Select the Correct Answer
10 days
30 days
60 days
At license renewal

Question 21 of 100

Your answer: 30 days is correct.

EXPLANATION:
The Insurance Department must be advised within 30 days.


Question 21 of 100

22

Coverage for all reasonable expenses incurred by an insured in order to continue as nearly as practicable the normal operation of his/her business after a loss is:

Answer Choices: Select the Correct Answer
Operations Expense Coverage
Extra Expense Coverage
Additional Expense Coverage
Loss of Use Coverage

Question 22 of 100

Your answer: Extra Expense Coverage is correct.

EXPLANATION:
Extra expenses include those incurred as a result of a covered loss that is required in order to continue the normal operation of the business. Example: Temporary re-location expenses, overtime expenses etc.


Question 22 of 100

23

Robbery involves all of the following, EXCEPT:

Answer Choices: Select the Correct Answer
Burglary.
The presence of the insured or employee.
Threat of violence.
Criminal intent.

Question 23 of 100

Your answer: Burglary. is correct.

EXPLANATION:
Robbery is generally theft or attempted theft from an individual, while burglary is theft from premises with signs of forcible entry or exit. But under the commercial crime form, theft from a watchman on premises (or a janitor by endorsement) is considered burglary. Robbery always involves the threat of violence or injury otherwise it would fit more aptly in the definition of burglary or theft.


Question 23 of 100

24

Which of the following are are essential if a salvage award is to be made?

I. The property involved must be in peril from some hazard.
II. The salvage service must be voluntary.
III. The effort must be successful.

Answer Choices: Select the Correct Answer
I and III only
I and II only
I, II and III
II and III only

Question 24 of 100

Your answer: I, II and III is correct.

EXPLANATION:
All of these are essential if a salvage award is to be made.


Question 24 of 100

25

All of the following types of signs can be covered by the Sign Coverage Form, except:

Answer Choices: Select the Correct Answer
Neon
Fluorescent
Electrical, not attached to a building
Signs carved in stone or brick

Question 25 of 100

Your answer: Electrical, not attached to a building is incorrect. The correct answer is: Signs carved in stone or brick.

EXPLANATION:
The sign carved into stone or brick would not qualify for the form.


Question 25 of 100

26

Bill's business employs Meg to clean offices at night, and recently Meg slipped and fell at work, hurting her back. Bill understands that his Workers' Compensation insurance will provide Meg with:

Answer Choices: Select the Correct Answer
Medical benefits and lost wages.
Psychological counseling.
A representative to help her get benefits from her union.
A lawyer to present her case in court.

Question 26 of 100

Your answer: Medical benefits and lost wages. is correct.

EXPLANATION:
Workers' Compensation insurance provides medical benefits and lost wages. The other choices are all incorrect regarding the benefits of Workers' Compensation insurance.


Question 26 of 100

27

Dwelling forms provide what amount of coverage for grave markers and mausoleums?

Answer Choices: Select the Correct Answer
Nothing
$5,000
$1,000
$2,000

Question 27 of 100

Your answer: Nothing is correct.

EXPLANATION:
The dwelling forms do not provide any coverage for these items. The homeowners forms provide a limit of $5,000.


Question 27 of 100

28

Coverage for earthquakes and volcanic eruptions may be attached to Commercial Property Insurance. When the Earthquake Cause of Loss Form is attached, a series of earthquakes or volcanic eruptions will be treated as a single event whenever the series of shocks or eruptions occurs within a:

Answer Choices: Select the Correct Answer
168-hour period.
24-hour period.
48-hour period.
96-hour period.

Question 28 of 100

Your answer: 96-hour period. is incorrect. The correct answer is: 168-hour period. .

EXPLANATION:
Even though all the Commercial Cause of Loss Forms cover volcanic action, the earth movement is not covered. Earthquake insurance must be purchased as a separate endorsement. The form defines an earthquake as a single event for a 168-hour limit.


Question 28 of 100

29

The liability coverage on the BOP would provide coverage for which of the following?

Answer Choices: Select the Correct Answer
Injury or damage caused by the operation of mobile equipment
An injury that is also covered by Workers Compensation Law
Liability that is caused by the operation of a business auto
Liability resulting from the accidental escape of pollutants

Question 29 of 100

Your answer: An injury that is also covered by Workers Compensation Law is incorrect. The correct answer is: Injury or damage caused by the operation of mobile equipment.

EXPLANATION:
Injury or property damage to others caused by the operation of mobile equipment on the insured's premises such as a forklift would be covered by the BOP policy. The other three answers are all specifically excluded.


Question 29 of 100

30

Under the California Insurance Frauds Prevention Act (IFPA), facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called:

Answer Choices: Select the Correct Answer
A suspected fraud occurrence.
A red flag event.
A reasonable belief occurrence.
A willful event.

Question 30 of 100

Your answer: A red flag event. is correct.

EXPLANATION:
Facts, circumstances or events which singly, or in combination, support(s) an inference that insurance fraud may be been committed is called a "red flag" or a "red flag event" in California.


Question 30 of 100