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Flashcards in IA Test 9 Deck (75)
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1

The insured has suffered a covered loss under his DP-3 form. He fails to protect the property from further loss. The additional loss that occurs as a result of this failure may be denied due to which of the following exclusions?

Intentional loss
Removal clause
Neglect
Fraud

Question 1 of 100

Your answer: Neglect is correct.

EXPLANATION:
The policy contains a "neglect" exclusion. When the insured fails to protect the property from further loss, the insurer may invoke this exclusion.


Question 1 of 100

2

How are household personal property claims settled under the farm policy?

Replacement cost
Market value
Replacement cost if insured 80% to value
Actual cash value

Question 2 of 100

Your answer: Actual cash value is correct.

EXPLANATION:
Claims under farm policies for household personal property will be settled on an actual cash value basis similar to the homeowner policy. An endorsement for replacement cost settlement is available for additional premium.


Question 2 of 100

3

Tea is applying for a new adjuster license in California. What is the fee she will need to submit with her license application?

$47
$56
$72
$29

Question 3 of 100

Your answer: $72 is correct.

EXPLANATION:
The application fee for an original license is: $72. (CIC 14097)


Question 3 of 100

4

Which of the following businesses would not be affected by the liquor liability exclusion?

A European wine distributor.
Triple-A Liquor Store.
An insurance company offering wine at an open-house for agents.
A grocery store that sells wine.

Question 4 of 100

Your answer: An insurance company offering wine at an open-house for agents. is correct.

EXPLANATION:
The policy only provides "host liquor liability" coverage and is not intended to cover any business involved in the manufacturing, sale, or distribution of alcohol.


Question 4 of 100

5

Which of the following statements is true regarding controlled forms?

These forms are very flexible and can be manuscripted to meet the needs of individual insured’s.
These forms are always issued by state insurance departments.
Conditions and rates for these forms are determined solely on the basis of underwriting judgment.
These forms are usually issued according to published rules and rates.

Question 5 of 100

Your answer: These forms are usually issued according to published rules and rates. is correct.

EXPLANATION:
Controlled forms and their rates are filed for approval with the state insurance departments. They are usually issued according to published rules and rates. A jewelers block policy is an example.


Question 5 of 100

6

All of the following are "advertisements" as defined by the California Code of Regulations (CCR), EXCEPT:

Any written or printed communication for the purpose of soliciting, describing, or promoting the licensed business of the licensee, including a brochure, letter, pamphlet, newspaper, periodical, publication, or other writing.
A directory listing caused or permitted by the licensee that also indicates his licensed activity.
Any printing or writing on buildings used as the licensee's place of business or branch office.
A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee.

Question 6 of 100

Your answer: A radio, television or similar airwaves transmission that solicits or promotes the licensed business of the licensee. is incorrect. The correct answer is: Any printing or writing on buildings used as the licensee's place of business or branch office..

EXPLANATION:
"Any printing or writing on buildings used as the licensee's place of business or branch office" is actually listed as NOT being included in the definition of "advertisement". All the other answer choices ARE considered "advertisements" according to the CCR. (CCR 2691.17)


Question 6 of 100

7

Which of the following amounts would be paid on a covered auto suffering a total loss? The retail value is $1,250 and the average trade in value is $1,000.

$1,000 plus applicable taxes
$1,500 plus applicable taxes
$1,250 plus applicable taxes
$2,995 plus applicable taxes

Question 7 of 100

Your answer: $1,250 plus applicable taxes is correct.

EXPLANATION:
In case of a total loss to a covered vehicle the insurer is required to pay the retail value of the vehicle plus any applicable sales taxes.


Question 7 of 100

8

A common carrier has signed a contract to deliver goods of the seller. The goods are to be shipped "Free on Board Destination". When does the responsibility of the seller end?

When they are picked up by the carrier.
When the goods to be shipped are placed on the loading dock of the seller.
Not until the goods are delivered to the buyer in accordance with the contract terms.
When the buyer confirms the purchase of transportation coverage.

Question 8 of 100

Your answer: Not until the goods are delivered to the buyer in accordance with the contract terms. is correct.

EXPLANATION:
The title to the property in transit remains with the shipper until it arrives at the buyer's destination point and has been accepted by the buyer. These clauses in the cargo policy will determine where the responsibility lies for damage to cargo in transit. These clauses are usually contained in the Bill of Lading which is the contract between the shipper (seller) and the buyer (purchaser) of the goods or the contract to transport the goods with the carrier.


Question 8 of 100

9

Which of the following would not be improvements or betterments?

Carpet
Furniture
Interior walls
Electrical wiring

Question 9 of 100

Your answer: Interior walls is incorrect. The correct answer is: Furniture .

EXPLANATION:
Improvements and betterments are items added to a tenant’s rented structure that are permanent in nature. The tenant has insurable interest in them during occupancy of the building, and therefore can insure them. Furniture is not an improvement or betterment; it is personal property.


Question 9 of 100

10

David has damaged his vehicle by striking a tree. He can:

I. Take the car to a repair garage recommended by the insurer.
II. Take the car to a garage of his choice.
III. Accept payment based on the adjuster's estimate.
I, II and III
I and II only
I and III only
I only

Question 10 of 100

our answer: I, II and III is correct.

EXPLANATION:
The choice belongs to the David, the insured.


Question 10 of 100

11

What is a Reporting Form policy?

The form that must be filled out to report a loss of personal property to the insurer
A policy that requires the insured to report the value of the property insured at certain time intervals
The same as a personal articles floater in that it specifically lists each jewelry item
None of the responses are correct

Question 11 of 100

Your answer: A policy that requires the insured to report the value of the property insured at certain time intervals is correct.

EXPLANATION:
A "Reporting Form" policy is one in which the policyholder is required to report the values of insured property to the company at certain intervals. A provisional (deposit) premium is charged initially and the final premium is determined by applying the rate to the average of the values reported. The insured is required to insure the property 100% to value. The insured is also required to report 100% of the value of the insured property.


Question 11 of 100

12

A change in the Qualified Manager of a California independent adjusting business must be reported to the Department of Insurance within ____ days of such change.

30
20
15
10

Question 12 of 100

Your answer: 30 is correct.

EXPLANATION:
The change must be reported within 30 days.


Question 12 of 100

13

It is essential that operations at some businesses be continued regardless of circumstances. In the event of property damage to the main facilities, arrangements could be made for use of other facilities. What type of coverage would be most appropriate to protect this business against consequential losses?

Extra Expense Coverage
Contingent Business Interruption Coverage
Leasehold Interest Coverage
Extended Business Income Coverage

Question 13 of 100

Your answer: Extra Expense Coverage is correct.

EXPLANATION:
Some businesses cannot shut down. Hospitals, dairies and banks are a few examples. This coverage will pay for expenses needed to decrease the amount of time the insured's business is interrupted.


Question 13 of 100

14

Under the Additional Coverages of the Businessowners Property forms, property removed to protect it from loss will be covered at another location for up to:

5 days.
10 days.
30 days.
20 days.

Question 14 of 100

Your answer: 30 days. is correct.

EXPLANATION:
The policy specifies open peril coverage for 30 days. This is the standard time period for coverage at another location.


Question 14 of 100

15

The general property flood coverage form for commercial property will settle claims on the basis of:

replacement cost.
replacement cost if the building is insured for at least 80% of the cost to rebuild.
actual cash value.
functional replacement cost.

Question 15 of 100

Your answer: actual cash value. is correct.

EXPLANATION:
The general property flood form is for commercial buildings, co-ops, residential condos in the emergency program and timeshare buildings not in a condo style. But in each case, losses are settled on an actual cash value (ACV) basis only.


Question 15 of 100

16

Which statement is true concerning auto Physical Damage coverage in a Personal Auto Policy?

Can be endorsed to pay on a replacement cost basis.
It can cover owned and nonowned automobiles.
Applies only when the insured is at fault in an accident.
Excludes physical damage to cars over 10 years old.

Question 16 of 100

Your answer: It can cover owned and nonowned automobiles. is correct.

EXPLANATION:
The PAP covers both owned and nonowned vehicles driven by the “insured’s” under the policy. The policy will defend even if the insured is not at fault in an accident. The other three choices are all false statements.


Question 16 of 100

17

Which of the following would be considered a “collision” peril under auto physical damage coverage?

Riot
Striking an animal
Missiles or falling objects
Hitting a pot hole

Question 17 of 100

Your answer: Striking an animal is incorrect. The correct answer is: Hitting a pot hole .

EXPLANATION:
Hitting a pot hole and causing damage to the vehicle (other than the tires) would be a collision peril. The other perils are covered under “other than collision” coverage.


Question 17 of 100

18

Jerry's car is involved in an accident that has left him without a vehicle to drive. How much, if any, can he collect for his transportation expenses from the policy?

Nothing as it was not stolen.
$20 per day after a 48 hour waiting period.
$20 per day after a 24 hour waiting period.
$30 per day after a 48 hour waiting period.

Question 18 of 100

Your answer: $20 per day after a 24 hour waiting period. is correct.

EXPLANATION:
Transportation expenses are an additional coverage if the insured has purchased collision and/or other than collision coverage. $20 per day up to $600 is available. Coverage begins 48 hours after a theft loss and 24 hours for any other covered loss.


Question 18 of 100

19

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 19 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 19 of 100

20

A commercial umbrella liability policy would usually cover which of the following situations?

The insured claimed in a TV ad that the company’s product will allow dieters to lose five pounds per week for four weeks without changing their eating habits. Several dissatisfied customers sued the insured when the product did not cause weight loss.
The insured was sued for knowingly allowing its advertising agency to make untrue statements about a competitor in an advertisement for the insured’s product.
The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry.
The insured borrowed a bulldozer from a friend and damaged it while using the machine.

Question 20 of 100

Your answer: The insured borrowed a bulldozer from a friend and damaged it while using the machine. is incorrect. The correct answer is: The insured owns and rents out a number of subsidized housing units. Feeling justified that he has the right to know what goes on in the rented units, he regularly uses a passkey to let himself in and look around the units. One day he did this while a tenant was sleeping. The tenant woke up, saw the insured and ordered him to leave. The insured refused. Later, the tenant sued the insured for wrongful entry..

EXPLANATION:
The owner of the housing unit committed an act covered under personal injury liability coverage.


Question 20 of 100

21

In insurance terms, the party who has been wronged is known as the _____ party, and the person causing the injury is the _____ party.

third / first
first / third
second / first
first / second

Question 21 of 100

Your answer: third / first is correct.

EXPLANATION:
The third party would be the claimant and the person committing the wrongful act would be the first party. The second party is the insurance company.


Question 21 of 100

22

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

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 22 of 100

Your answer: Liability that is caused by the operation of a business auto 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 22 of 100

23

An insured is covered under a DP-2 broad form dwelling policy. A water pipe has burst and the insured has suffered floor and ceiling damage in his two-story home. The cost to remove and replace the walls to get to the pipe is $300.00. The cost to repair the floor is $400.00. The pipe that burst must now be replaced with a more expensive option to meet newer building codes. The cost to replace the pipe is $200.00. How much will the insurer pay?

The policy will pay $300.00
The policy will pay $400.00
The policy will pay $700.00
The policy will pay $900.00

Question 23 of 100

Your answer: The policy will pay $900.00 is incorrect. The correct answer is: The policy will pay $700.00.

EXPLANATION:
The company is not responsible for the pipe that burst but is responsible for the other damages. Even though all the dwelling forms, except the DP-1, provide 10% of the Coverage A limit for ordinance and law as a result of changes in building codes, the policy will not respond to the part that failed, the pipe.


Question 23 of 100

24


QUESTION:
The insured's diamond ring valued at $10,000 has been destroyed in a fire. She is insured by a HO-3 policy. What is the responsibility of the insurance company with respect to this loss?

Pay the ACV of the ring
Deny the claim because of the jewelry limitation
Pay the loss and waive the deductible
Pay only the replacement value of the ring and waive any deductible

Question 24 of 100

Your answer: Pay only the replacement value of the ring and waive any deductible is incorrect. The correct answer is: Pay the ACV of the ring.

EXPLANATION:
The policy contains a limitation for the theft of the jewelry. Since the ring was destroyed in the fire the insurer is responsible for the actual cash value of the ring unless the insured purchased replacement cost coverage.


Question 24 of 100

25

Under the workers compensation guidelines, permanent total disability is rated at what percent?

50%
60%
90%
100%

Question 25 of 100

Your answer: 100% is correct.

EXPLANATION:
Permanent total disability is rated at 100%.


Question 25 of 100

26

Which of the following are covered under the Homeowners "Additional Residence Rented to Others" endorsement?

I. Personal Liability (Injury)
II. Medical Payment to Others
III. Dwelling
IV. Personal Property

I and II only.
I, II, III and IV.
I and IV only.
III and IV only.

Question 26 of 100

Your answer: I and II only. is correct.

EXPLANATION:
The "Additional Residence Rented to Others" endorsement provides personal liability (injury) and medical payments to others coverage to cover the insured's liability arising out of the ownership of a residence regularly rented to others.


Question 26 of 100

27

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 27 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 27 of 100

28

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?

$50,000
$0
$25,000
$100,000

Question 28 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 28 of 100

29

Which of the following is an obligation of the insured involving a covered property insurance loss?

Protect the property from further loss
Pay the renewal premium
Settle the claim as soon as possible
Review the coverages of the policy to confirm coverage

Question 29 of 100

Your answer: Protect the property from further loss is correct.

EXPLANATION:
The insured is obligated to protect the property from further loss or damage.


Question 29 of 100

30

A customer has consumed contaminated food manufactured by the U-Eat company. It is discovered that the manufacturer failed to properly clean some of the equipment and as a result the food was spoiled. This is an example of:

Strict liability.
Absolute liability.
Operations liability.
Personal injury.

Question 30 of 100

Your answer: Personal injury. is incorrect. The correct answer is: Strict liability. .

EXPLANATION:
This is an example of strict liability and is most commonly applied in Products Liability claims. Certain parties are held liable without regard to fault or negligence. If the claimant can prove that a product was defective and that the defect caused the injury, the manufacturer can be held strictly liable.


Question 30 of 100