IA Test 3 Flashcards Preview

IA > IA Test 3 > Flashcards

Flashcards in IA Test 3 Deck (100)
Loading flashcards...
1

The insured has a communication failure at his premises due to a lightning strike at the phone company. The insured's phone system is damaged and he is out of business for four days. Which endorsement is necessary to provide coverage for the loss of business income?

Answer Choices: Select the Correct Answer
Non owned and Hired Auto
Earthquake
Utility Services - Time Element
Utility Services - Direct Damage

Question 1 of 100

The correct answer is: Utility Services - Time Element.

EXPLANATION:
The Utility Services - Time Element endorsement would cover the loss of business income in this example if the phone system was listed on the endorsement and the cause of the loss was covered by the policy.


Question 1 of 100

2

All of the following are true regarding the "write your own" program under flood insurance, EXCEPT:

Answer Choices: Select the Correct Answer
Insurers are required to participate in the program.
Rates are determined by the NFIP.
The WYO Program operates as part of the NFIP, and is subject to its rules and regulations.
Participation in the program is voluntary.

Question 2 of 100

The correct answer is: Insurers are required to participate in the program..

EXPLANATION:
Insurers voluntarily participate in the program; they are not required to do so.


Question 2 of 100

3

Mr. Jones has a contracting business in his state. He has been the successful bidder on a construction job in another state. What should he do to properly provide worker compensation benefits for his employees while working outside his state?

Answer Choices: Select the Correct Answer
Maintain general liability coverage
Nothing
Add the other states to his workers compensation policy
Purchase an umbrella policy

Question 3 of 100

Your answer: Add the other states to his workers compensation policy is correct.

EXPLANATION:
The purpose of the other states coverage is to provide worker compensation coverage that complies with another states workers compensation benefits. The state must be listed on the policy for coverage to apply. Separate payroll records must be maintained for these employees for premium computation purposes.


Question 3 of 100

4


QUESTION:
St. Michael's Church is having their annual rigatoni dinner. Mary is volunteering to serve the guests. Which of the following situations would be covered by the CGL for the church?

Answer Choices: Select the Correct Answer
Mary spills hot coffee on another volunteer worker.
Mary spills hot coffee on a guest.
Mary damages the church coffee maker while cleaning it.
Mary damages her watch while cleaning the coffee maker.

Question 4 of 100

The correct answer is: Mary spills hot coffee on a guest..

EXPLANATION:
As a volunteer, Mary is considered to be an insured under the church CGL policy. Injury caused to a guest by her actions would be covered under the policy.


Question 4 of 100

5

QUESTION:
Under what circumstances may an adjuster contact a claimant who is represented by an attorney?

Answer Choices: Select the Correct Answer
If permission is granted by the attorney.
If permission is granted by the claimant.
If permission is granted by the insurance company.
If permission is granted by the court.

Question 5 of 100

Your answer: If permission is granted by the attorney. is correct.

EXPLANATION:
Permission to contact a claimant represented by an attorney must be granted by the attorney representing the claimant.


Question 5 of 100

6

UESTION:
A Commercial Package Policy (CPP) always includes:

I. A single Declarations page common to all coverages.
II. A single Conditions section common to all coverages.
III. A single Exclusions section common to all coverages.

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

Question 6 of 100

The correct answer is: I and II only.

EXPLANATION:
A Commercial Package Policy (CPP) always includes a common Declarations page and Conditions section. It does not include a common Exclusions section, as the items excluded would be specific to the coverage part.


Question 6 of 100

7


QUESTION:
Under the commercial property condominium association form, coverage is based on:

Answer Choices: Select the Correct Answer
The commercial property form
The association agreement and bylaws
The special cause of loss form
State and local ordinances

Question 7 of 100

Your answer: The association agreement and bylaws is correct.

EXPLANATION:
The coverage provided by the form will be based on the condominium association agreement and by laws.


Question 7 of 100

8


QUESTION:
What costs are paid under an Umbrella policy?

Answer Choices: Select the Correct Answer
The policy limit and any defense costs minus any applicable retained limit (deductible).
The policy limit that includes the defense costs.
The policy limit minus any retained limit (deductible).
Only the required underlying limits and the defense costs.

Question 8 of 100

Your answer: The policy limit and any defense costs minus any applicable retained limit (deductible). is correct.

EXPLANATION:
The Umbrella policy, like most liability policies, pays up to the limit of liability for covered claims. In addition, it pays defense costs incurred by the company in the defense of the insured. When the underlying coverage does not cover a claim and the Umbrella policy DOES cover the claim there is usually a retained limit, otherwise known as a deductible, that the insured must pay.


Question 8 of 100

9


QUESTION:
Which of the following Commercial Inland Marine coverage forms covers payments that are due to the insured from customers when these payments cannot be collected due to loss or damage of records?

Answer Choices: Select the Correct Answer
Accounts Receivable
Equipment Dealers
Electronic Data Processing
Valuable Papers and Records

Question 9 of 100

The correct answer is: Accounts Receivable.

EXPLANATION:
The purpose of accounts receivable coverage is to protect the insured when their records have been destroyed or damaged by a peril insured against. It pays to reconstruct the records and it also pays for the losses sustained by the insured due to the destruction of the accounts receivable records.


Question 9 of 100

10

The CGL policy contains coverage for:

Answer Choices: Select the Correct Answer
Directors and Officers Liability.
Errors and Omissions Liability.
Completed Operations Liability.
Liquor Liability.

Question 10 of 100

The correct answer is: Completed Operations Liability..

EXPLANATION:
The Products and Completed Operations hazard is covered under Coverage A- Bodily Injury and Property Damage Liability of the CGL. The other three choices are all excluded.


Question 10 of 100

11

QUESTION:
With Commercial Property Insurance, replacement cost coverage may be written for:

Answer Choices: Select the Correct Answer
Buildings and personal property of the insured.
Buildings only.
Buildings, personal property of the insured, and property of others.
Any property which may be insured.

Question 11 of 100

The correct answer is: Buildings, personal property of the insured, and property of others..

EXPLANATION:
Replacement cost coverage for building, contents and personal property of others is optional. However, if the insured chooses this option, coverage equal to at least 80% of the replacement cost value must be carried.


Question 11 of 100

12


QUESTION:
Two customers are injured when a fire sweeps through a hardware store. Medical expense costs were $3,000 for Customer A and $8,000 for Customer B. A lawsuit against the hardware store results in an award of $40,000 damages to one customer and $25,000 the other. The hardware store's CGL policy has a per occurrence limit of $50,000, medical payments of $5,000 each person, and a general aggregate of $100,000. How much will the insurer pay?

Answer Choices: Select the Correct Answer
$50,000
$76,000
$73,000
$65,000

Question 12 of 100

The correct answer is: $50,000.

EXPLANATION:
The per occurrence limit for liability is only $50,000. This is all the insurer can pay in the lawsuit. This amount will then be subtracted from the aggregate limit of $100,000 and leave the insured only $50,000 left to pay future claims during the policy period. The "medical payments" coverage will pay for the $3,000 in medical bills for Customer A, but will pay only $5,000 of the medical bills for Customer B, because the medical payments limit "per person" is $5,000. The fact that Customer B's medical bills amounted to $8,000, does not change the amount that will be paid under the policy, because the policy can only pay up to its limit of liability.


Question 12 of 100

13

QUESTION:
Which of the following watercraft would be covered under the liability section (Section II) of the HO form?

Answer Choices: Select the Correct Answer
Watercraft with a 40 horsepower outboard motor
A 28 foot sailboat
A kayak
Watercraft with a 100 horsepower inboard motor

Question 13 of 100

The correct answer is: A kayak.

EXPLANATION:
A kayak would be covered with no endorsement or additional premium under Section II of a homeowner policy.


Question 13 of 100

14


QUESTION:
What insurers must participate in accepting business under the California FAIR Plan?

Answer Choices: Select the Correct Answer
All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies.
Companies who specialize in difficult or hard to place property insurance.
Only those property insurers holding a certificate of authority for 5 years or less in California.
Only those insurers wanting to enter California and have received approval from their board of directors.

Question 14 of 100

Your answer: All insurers licensed to write basic property insurance or any component of property insurance in multi-peril policies. is correct.

EXPLANATION:
The purpose of the FAIR Plan is designed to provide a market for those property owners who are unable to obtain insurance through the normal market. Therefore, the California legislature enacted legislation requiring the participation of admitted insurers licensed to write property insurance to participate.


Question 14 of 100

15


QUESTION:
The loss settlement provision of the California Special Provisions Homeowners form requires that payment be made within _______ after settlement is reached.

Answer Choices: Select the Correct Answer
30 days.
45 days.
60 days.
90 days.

Question 15 of 100

The correct answer is: 30 days..

EXPLANATION:
The standardized Homeowners forms require payment be made within 60 days after settlement is reached. The California Special Provisions forms amend this to require payment be made within 30 days after settlement is reached.


Question 15 of 100

16


QUESTION:
When a liability policy is contested, which of the following entities ultimately determines legal liability?

I. The insurance company.
II. A court of law.
III. The claimant.

Answer Choices: Select the Correct Answer
I or II
I only
II only
III only

Question 16 of 100

he correct answer is: II only.

EXPLANATION:
In cases of litigation it is the court/jury/judge that determines legal liability.


Question 16 of 100

17


QUESTION:
Which of the following is the first duty of the insured after suffering a property loss?

Answer Choices: Select the Correct Answer
Take steps to protect the property from further loss.
Have the damaged property appraised.
Hire an outside claims adjuster.
Increase his coverage.

Question 17 of 100

Your answer: Take steps to protect the property from further loss. is correct.

EXPLANATION:
The insured is required to protect the property from further loss. The insurance company will pay all reasonable costs involved in protecting the property from further loss or damage.


Question 17 of 100

18


QUESTION:
Standards for determining eligibility of applicants for insurance under the California Automobile Assigned Risk Plan include all the following, EXCEPT:

Answer Choices: Select the Correct Answer
Driving record of the applicant.
Mental, physical and moral characteristics which pertain to the applicant's ability to safely and lawfully operate an automobile.
Education of the applicant.
The condition or use of the automobile.

Question 18 of 100

Submit

Your answer: Education of the applicant. is correct.

EXPLANATION:
According to the California Insurance Code (CIC 11624), the education of the applicant is not an eligibility requirement under the California Automobile Assigned Risk Plan.


Question 18 of 100

19


QUESTION:
The "additional coverage" section of the HO-3 form pays for all of the following expenses, EXCEPT:

Answer Choices: Select the Correct Answer
The cost to remove volcanic ash from a building
Loss resulting from the unauthorized use of a credit card
Sudden cracking of a hot water heating system
Damage to glass that is part of a covered building

Question 19 of 100

The correct answer is: Sudden cracking of a hot water heating system .

EXPLANATION:
The loss to the hot water heating system is not an "additional coverage". This type of damage is covered elsewhere in the cause of loss forms under the peril of "sudden and accidental tearing apart, cracking, burning or bulging." Additional coverages include debris removal from covered perils, reasonable repairs, trees, shrubs and other plants, fire department service charges, property removed, credit card coverage, loss assessment, collapse and a few others.


Question 19 of 100

20


QUESTION:
An insured has purchased a Businessowners Policy. He insures both the real and personal property. Assuming no endorsements apply, will property losses be adjusted on an actual cash value basis or on a replacement cost basis?

Answer Choices: Select the Correct Answer
Replacement Cost Basis
Actual Cash Value Basis
Market Value
Functional Replacement Cost Basis

Question 20 of 100

Your answer: Replacement Cost Basis is correct.

EXPLANATION:
Unless endorsed to the contrary the BOP adjusts property losses on a replacement cost basis.


Question 20 of 100

21


QUESTION:
Which of the following is not an "insured" under a Homeowners policy?

Answer Choices: Select the Correct Answer
A neighbor moves into the named insured's house with all of his belongings.
A neighbor who has custody of the named insured's dog while the named insured is on vacation.
The named insured's sister moves into the named insured's house.
The new spouse of the named insured who moves all of her furniture into the husband's house.

Question 21 of 100-

The correct answer is: A neighbor moves into the named insured's house with all of his belongings. .

EXPLANATION:
Insureds under a Homeowners policy include any person responsible for the named insured's domestic animals as well as the named insured's relatives and spouses who reside with the named insured.


Question 21 of 100

22


QUESTION:
Which of the following best describes the reason for using various work classifications in the calculation of Workers Compensation premiums?

Answer Choices: Select the Correct Answer
To prevent discrimination by employers
To assure a proper profit margin for insurers
To accurately reflect the risks of each employer
To encourage safety in the workplace

Question 22 of 100

Your answer: To accurately reflect the risks of each employer is correct.

EXPLANATION:
There are hundreds of different work classifications which are used in the calculation of Workers Compensation premiums, with a different rate for each one. By classifying an employer's payroll according to work classification, the premiums charged more accurately reflect the actual risk of loss for each employer.


Question 22 of 100

23


QUESTION:
Which statement is correct under the Commercial General Liability policy?

Answer Choices: Select the Correct Answer
The insured generally has the right to settle a claim for damages.
The insurer generally has the right to settle a claim for damages.
Both the insured and the company must agree before a claim for damages can be settled.
The insurer and the third-party claimant must agree before a claim for damages can be settled.

Question 23 of 100

The correct answer is: The insurer generally has the right to settle a claim for damages..

EXPLANATION:
Generally, only the insurer has the right to settle a claim under the CGL policy.


Question 23 of 100

24


QUESTION:
What is the definition of "custom farming"?

Answer Choices: Select the Correct Answer
Sharecropping.
Raising genetically modified crops.
Farming for others.
Placing farm equipment for hire by other farms.

Question 24 of 100

Your answer: Farming for others. is correct.

EXPLANATION:
Custom farming is a "neighborly exchange of services". A special endorsement is required to cover "custom farming" if the receipts are in excess of $5,000 per year.


Question 24 of 100

25


QUESTION:
An independent adjuster must complete ___ hours of continuing education during each license renewal cycle.

Answer Choices: Select the Correct Answer
12
20
24
36

Question 25 of 100

Your answer: 24 is correct.

EXPLANATION:
An individual who holds an insurance adjuster license and who is not exempt must satisfactorily complete a minimum of 24 hours, of which three hours are to be in ethics, of continuing education courses pertinent to the duties and responsibilities of an insurance adjuster license reported to the Insurance Commissioner on a biennial basis in conjunction with his or her license renewal cycle.


Question 25 of 100

26


QUESTION:
According to the commercial auto policy definitions, an "accident:"

Answer Choices: Select the Correct Answer
Includes continuous or repeated exposure to the same conditions.
Must be sudden and unexpected.
Must be unexpected and unpreventable.
Is any event that causes injury or damage.

Question 26 of 100

The correct answer is: Includes continuous or repeated exposure to the same conditions. .

EXPLANATION:
The auto forms of the past used to simply cover the term "accident." It did not include continuous or repeated exposure to the same conditions. Many claims were denied because of this restriction. The current forms now include the broader definition and provide better coverage.


Question 26 of 100

27


QUESTION:
The Ordinance or Law Endorsement can be added to a Homeowners form to increase the amount of coverage in ______ increments, up to ______ coverage.

Answer Choices: Select the Correct Answer
20% increments, up to 80% coverage.
25% increments, up to 100% coverage.
30% increments, up to 70% coverage.
15% increments, up to 95% coverage.

Question 27 of 100

he correct answer is: 25% increments, up to 100% coverage. .

EXPLANATION:
Coverage for Ordinance or Law is already included on all Homeowners forms except the HO-8. The Ordinance or Law Endorsement can be attached to the form, increasing the coverage in 25% increments, up to 100% coverage.


Question 27 of 100

28


QUESTION:
As an independent adjuster in California, your investigation of a two-car traffic accident indicates that both drivers are equally at fault. After speaking with the claimant's adjuster the two of you agree that both drivers are equally to blame. Your subrogation demand would be for:

Answer Choices: Select the Correct Answer
100% of your insured's damages as your analysis does not affect what is owed by the other party.
75% of your insured's damages as each side's 25% totals 50%.
50% of your insured's damage, because the insured and the other driver were both 50% at fault.
Nothing. Because both drivers were 50% at fault, each insurance company will pay 100% of the claim on their own insured's damages.

Question 28 of 100

Your answer: 50% of your insured's damage, because the insured and the other driver were both 50% at fault. is correct.

EXPLANATION:
California is a "comparative negligence" state. In California the person most at fault is deemed to be the primary cause of the accident. If investigation either by law enforcement or the insurance adjuster determines that there was "comparative negligence" on the part of the other driver(s), all damages owed are subject to apportionment.


Question 28 of 100

29


QUESTION:
What type of injury is usually not covered by commercial umbrella liability policies if the insured’s business is advertising, publishing, broadcasting or telecasting?

Answer Choices: Select the Correct Answer
Slander or libel only
Advertising injury only
Personal injury only
Violation of right of privacy only

Question 29 of 100

The correct answer is: Advertising injury only.

EXPLANATION:
Coverage for advertising injury is not covered if the insured is in the business of advertising, publishing or telecasting.


Question 29 of 100

30


QUESTION:
Which of the following coverage endorsements under commercial crime and bonding would cover an ATM machine?

Answer Choices: Select the Correct Answer
Automated Teller Machine Coverage
On premises burglary and robbery
Off Premises Money and Securities Coverage
Employee Fidelity ATM Coverage

Question 30 of 100

The correct answer is: Automated Teller Machine Coverage.

EXPLANATION:
The automated teller machine endorsement provides coverage for the loss of money except by employees.


Question 30 of 100