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Flashcards in IA Test 4 Deck (100)
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1

Commercial Glass Coverage is suspended if, at the time of loss, the building has been vacant for more than:

60 consecutive days.
90 consecutive days.
30 consecutive days.
20 consecutive days.

Question 1 of 100

Your answer: 30 consecutive days. is incorrect. The correct answer is: 60 consecutive days. .

EXPLANATION:
60 days is somewhat the standard for vacancy in commercial insurance.


Question 1 of 100

2

The verdict in a personal injury liability suit was higher than the insured’s underlying liability policy’s limit of insurance. In this situation:

The insured, the insurance company providing the insured’s underlying policy and the company providing the insured’s umbrella policy must agree on an appeal and share the expenses of that appeal.
Neither the insured’s underlying insurer nor the umbrella insurer may appeal without the insured’s agreement.
The insurance company providing the insured’s umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal.
The case cannot be appealed by any of the parties.

Question 2 of 100

Your answer: The case cannot be appealed by any of the parties. is incorrect. The correct answer is: The insurance company providing the insured’s umbrella liability policy can appeal the case at its own expense even if the insured and the company providing the underlying policy do not appeal..

EXPLANATION:
The umbrella insurer has the option to appeal even though the underlying insurer and the insured chooses not to appeal.


Question 2 of 100

3

Which of the following would be eligible to purchase a BOP?

Movie Theater
Automobile repair shop
A six unit apartment building
A credit union

Question 3 of 100

Your answer: A six unit apartment building is correct.

EXPLANATION:
Only the six-unit apartment building would be eligible for the BOP.


Question 3 of 100

4

Which of the following would be considered "economic" losses?

Disfigurement
Loss of consortium
Pain and suffering
Medical expense and lost wages

Question 4 of 100

Your answer: Loss of consortium is incorrect. The correct answer is: Medical expense and lost wages.

EXPLANATION:
Economic losses are those that include out-of-pocket damages, such as incurred medical expenses or lost wages. It does not include disfigurement, pain and suffering or loss of consortium.


Question 4 of 100

5

Each of the following people would be an insured for auto medical payments coverage under Bob Miller's business auto policy, EXCEPT:

Bob Miller (the named insured), struck by an auto while walking across the street. The auto was not a covered auto.
Mel Carpenter, Bob’s neighbor, occupying a covered auto.
Frank Thomas, Bob’s 17-year-old son, occupying an auto that is not a covered auto. Frank lives with his mother, who is divorced from Bob.
Mary Thomas, Bob’s ex-wife, occupying a covered auto.

Question 5 of 100

Your answer: Bob Miller (the named insured), struck by an auto while walking across the street. The auto was not a covered auto. is incorrect. The correct answer is: Frank Thomas, Bob’s 17-year-old son, occupying an auto that is not a covered auto. Frank lives with his mother, who is divorced from Bob..

EXPLANATION:
The son is not covered. He does not live with the named insured and is injured by an auto that is not a covered auto owned by Bob Miller.


Question 5 of 100

6

Which of the following is not a true statement regarding workers compensation coverage in California?

First aid treatment is not covered under workers compensation coverage.
If an employee is under 16 years of age at the time of injury, disability benefits that the employee becomes eligible for are to be paid at a rate 50% higher than normal.
The waiting period for disability benefits is three days.
Medical benefits provide unlimited coverage with no dollar limitation.

Question 6 of 100

Your answer: Medical benefits provide unlimited coverage with no dollar limitation. is incorrect. The correct answer is: First aid treatment is not covered under workers compensation coverage..

EXPLANATION:
First aid treatment is covered under workers compensation coverage; it is not excluded.


Question 6 of 100

7

The Main Street Department store carries a bond covering all of its employees. The bond limit is $10,000. Three employees acting in collusion steal $30,000. How much will be paid under the policy?

$30,000
$15,000
$10,000
$20,000

Question 7 of 100

Your answer: $10,000 is correct.

EXPLANATION:
The bond limit is the most that will be paid regardless of the number of employees acting in collusion. If they were covered under a named schedule basis the limit would apply per employee.


Question 7 of 100

8

All of the following items have a built in limit (maximum) of coverage if the cause of loss is theft, EXCEPT:

Patterns
Furs
Jewelry
Computers

Question 8 of 100

Your answer: Patterns is incorrect. The correct answer is: Computers.

EXPLANATION:
Although computers may have limitations of coverage if the cause of loss is electrical, viruses or hacking, there is no built in THEFT limit for these items. The other three have a built in $2,500 limit for theft losses.


Question 8 of 100

9

A farmer has unintentionally libeled a neighboring farmer by stating that the neighbor's dairy products are inferior to his. This is an example of:

Advertising/personal injury.
Bodily injury.
Contractual liability.
Vicarious liability.

Question 9 of 100

Your answer: Vicarious liability. is incorrect. The correct answer is: Advertising/personal injury. .

EXPLANATION:
This is an example of personal/advertising injury. No bodily injury or property damage occurred.


Question 9 of 100

10

An applicant for an independent adjuster license must file with the Commissioner a surety bond in the amount of:

$10,000.
$5,000.
$2,500.
$2,000.

Question 10 of 100

Your answer: $5,000. is incorrect. The correct answer is: $2,000..

EXPLANATION:
No license will be issued unless the applicant files with the Commissioner a surety bond executed by a surety company authorized to do business in the state in the sum of $2,000 conditioned for the faithful and honest conduct of business by the applicant. Such bond as to its form, execution, and sufficiency of the sureties must be approved by the Commissioner.


Question 10 of 100

11

Which of the following is NOT covered by liability coverage under a Homeowner policy?

A snowmobile in a park.
A golf cart on a golf course.
A runaway lawnmower.
Motorized wheelchair.

Question 11 of 100

Your answer: A snowmobile in a park. is correct.

EXPLANATION:
The only owned recreational vehicle that is covered while off the insured's covered location, is a golf cart while playing golf. Vehicles pertaining to the service of the premises, or for use by the handicapped (such as a wheelchair) are covered.


Question 11 of 100

12

Which of the following is true about "open peril" coverage?

It provides coverage for all perils, unless that peril is specifically excluded.
It provides coverage for scheduled risks.
It provides coverage for the named perils.
It does not exclude any perils from coverage.

Question 12 of 100

Your answer: It provides coverage for all perils, unless that peril is specifically excluded. is correct.

EXPLANATION:
On a "named peril" cause of loss form, the covered perils are named or specified. If the peril is not listed, then coverage does not apply. Conversely, on an "open peril" cause of loss form, ALL perils are covered unless the peril(s) is/are specifically excluded. "Open peril" cause of loss forms contain more exclusions than named peril forms for obvious reasons.


Question 12 of 100

13

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

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 13 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 13 of 100

14

A claims-made form of commercial umbrella liability policy is “triggered”:

By injury that occurs only before the policy period.
At the time the injury or damage occurs.
At the time the claim is first made against the insured during the policy period.
By injury that occurs only after the policy period.

Question 14 of 100

Your answer: At the time the injury or damage occurs. is incorrect. The correct answer is: At the time the claim is first made against the insured during the policy period..

EXPLANATION:
Coverage is “triggered” at the time the claim is first made against the insured during the policy period.


Question 14 of 100

15

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

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 15 of 100

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

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 15 of 100

16

What does the term "comparative negligence" refer to?

The percentage of fault is shared by each driver in an accident in which both contribute to causing the accident.
The one who is most negligent receives no payment when the claim is settled.
The one who is the least negligent receives no payment when the claim is settled.
If both parties have contributed to causing the accident, neither party receives any payment when the claim is settled.

Question 16 of 100

Your answer: The percentage of fault is shared by each driver in an accident in which both contribute to causing the accident. is correct.

EXPLANATION:
Comparative negligence establishes the percentage of fault shared by each driver in an accident in which both contribute to causing the accident. Comparative negligence laws vary by state.


Question 16 of 100

17

The insured carries a personal auto policy providing a bodily injury limit of $50,000 each person with a per accident injury limit of $100,000. He injures two occupants in another vehicle. Their injuries total $60,000 for Mr. Jones and $50,000 for Mrs. Jones. The insurance company spent $40,000 in defense and investigation costs. How much will the insured's policy pay?

$50,000
$100,000
$140,000
$110,000

Question 17 of 100

Your answer: $100,000 is incorrect. The correct answer is: $140,000.

EXPLANATION:
The per person limit is $50,000. The most that can be paid for this claim is the $100,000 per accident injury limit plus the $40,000 to defend and investigate the claim. The costs to defend and investigate are supplementary coverages and are in addition to the policy limits.


Question 17 of 100

18

You own an independent adjusting company in California. In order to open a second office in a different location you must obtain:

Written permission from the Department of Insurance.
A branch manager's license.
A fidelity bond.
A branch office certificate.

Question 18 of 100

Your answer: A branch office certificate. is correct.

EXPLANATION:
According to the California Insurance Code, "If the licensee intends to conduct business from any location in California other than the principal place of business, a Branch Office Certificate must be obtained by submitting an Application for Branch Office Certificate along with the appropriate fee."


Question 18 of 100

19

Bridges and tunnels may be insured under:

Inland Marine Forms
Business floater forms.
Transportation forms.
Equipment dealer’s forms.

Question 19 of 100

Your answer: Transportation forms. is incorrect. The correct answer is: Inland Marine Forms.

EXPLANATION:
These are instrumentalities of transportation and can be covered under inland marine forms.


Question 19 of 100

20

Workers compensation insurance is a contract between:

Employer and employee.
State and employer.
Insurance company and the employee.
Insurance company and the employer.

Question 20 of 100

Your answer: State and employer. is incorrect. The correct answer is: Insurance company and the employer..

EXPLANATION:
Workers compensation coverage is a contract between the insurance company and the employer. It is the employer that contracts with the insurance company to provide the statutorily required workers compensation benefits for the injured employee.


Question 20 of 100

21

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.

I or II
I only
II only
III only

Question 21 of 100

Your answer: I or II is incorrect. The correct answer is: II only.

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


Question 21 of 100

22

Byron has submitted his application for a California Adjuster license, and then begins studying a course that will allow him to take the state licensing exam. Byron is working 40 hours a week, so he feels satisfied that he finished the course and passed the state licensing exam only 14 months after submitting his application. Which of the following is the response Byron will receive from the California Department of Insurance?

He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application.
He will receive his license from the Department because he fulfilled all the requirements for licensing.
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 6 months of submitting his application.
He will receive notice that his license application has been approved and he will receive it within 60 days.

Question 22 of 100

Your answer: He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application. is correct.

EXPLANATION:
He will receive notice that his license application is denied because he was required to fulfill all licensing requirements within 12 months of submitting his application. (CCR 2691.9)


Question 22 of 100

23

Dan parks his car on a hill in front of his house. His 7-year-old daughter gets into the car and releases the parking brake. The car rolls down a hill and does $2,000 damage to the property of others. What part of his policy might respond to pay the claim?

Property Damage
Other Than Collision
Not covered since the daughter is not licensed and too young to obtain one.
Collision Coverage

Question 23 of 100

Your answer: Property Damage is correct.

EXPLANATION:
The loss is covered under property damage. The fact that the daughter is underage and not licensed is not a factor.


Question 23 of 100

24

Which of the following is NOT a claim settlement option in a property loss?

Replace the property with like kind and quality.
Replace the property with new.
Repair the property.
Pay market value only.

Question 24 of 100

Your answer: Pay market value only. is correct.

EXPLANATION:
Offering market value only is not a claim settlement option. If the insured carries replacement cost coverage then the adjuster needs to address the payment of the claim accordingly.


Question 24 of 100

25

A licensed independent adjuster has received a written or oral request from the California Department of Insurance concerning a claim. How many days does this adjuster have to respond to the inquiry?

30 days
15 working days
21 calendar days
10 calendar days

Question 25 of 100

Your answer: 21 calendar days is correct.

EXPLANATION:
This adjuster must respond immediately, but no later than 21 calendar days from the date of the request.


Question 25 of 100

26

The Main Street Gazette is interested in protecting against the additional costs of continuing to print the newspaper, at a temporary location in the event its building was destroyed. Which of the following coverages should the Main Street Gazette purchase for this purpose?

Extra Expense
Open Perils
Loss of Rents
Contingent Gross Earnings

Question 26 of 100

Your answer: Open Perils is incorrect. The correct answer is: Extra Expense.

EXPLANATION:
The purpose of Extra Expense coverage is to cover any increase in expenses incurred by the insured (after a direct property loss which interrupts the business) to decrease the amount of time the business is idle or interrupted, and keep it operating, even at another location.


Question 26 of 100

27

Which of the following is true if an employer hires an employee who is under 16 years of age and that employee is injured on the job?

The employee will be 50% lower than the normal rate.
No benefits will be paid to the employee.
The employee will be 50% higher than the normal rate.
Benefits will be the same as that paid to any other employee, regardless of age.

Question 27 of 100

Your answer: Benefits will be the same as that paid to any other employee, regardless of age. is incorrect. The correct answer is: The employee will be 50% higher than the normal rate..

EXPLANATION:
It is incumbent upon the employer to confirm the age of his/her employees. If an employee is under 16 years of age, any workers compensation injury will be paid at a 50% higher rate than normal.


Question 27 of 100

28

How is a combined deductible applied in an Equipment Breakdown policy?

It applies per piece of covered equipment damaged as a result of a breakdown
It is first deducted from the aggregate amount of any loss to which it applies
The insurer will not be liable for any loss that occurs during the specified time period immediately following a breakdown
It is based on a percentage of the breakdown loss

Question 28 of 100

Your answer: The insurer will not be liable for any loss that occurs during the specified time period immediately following a breakdown is incorrect. The correct answer is: It is first deducted from the aggregate amount of any loss to which it applies.

EXPLANATION:
If a combined deductible applies to two or more coverages provided, it is first deducted from the aggregate amount of any loss to which it applies.


Question 28 of 100

29

Under the "Emergency Program" in all states except Alaska and Hawaii, the National Flood Insurance Program will insure a single-family residence for up to:

$35,000.
$100,000.
$150,000.
$250,000.

Question 29 of 100

Your answer: $250,000. is incorrect. The correct answer is: $35,000. .

EXPLANATION:
The maximum coverage under the Emergency Program for a dwelling is $35,000. After the community becomes a designated flood zone, coverage is available under the "Regular Program" and the limit can be up to $500,000. The NFIP will insure a single-family residence in Alaska, Hawaii, Guam and the Virgin Islands for up to $150,000 under the Emergency Program.


Question 29 of 100

30

What is the meaning of "diminution of value?"

The value of a vehicle decreases each year.
A reduction in the value of a vehicle even after repairs have been made.
Removing parts of a vehicle decreases its value.
A loss that affects only a total loss to a vehicle.

Question 30 of 100

Your answer: A loss that affects only a total loss to a vehicle. is incorrect. The correct answer is: A reduction in the value of a vehicle even after repairs have been made..

EXPLANATION:
The damage to a vehicle results in a reduction or "diminution" in the market value of the vehicle, even after competent repairs have been completed.


Question 30 of 100