Prac Quiz 1-5 (34?) Flashcards
(42 cards)
Martin’s Music Shoppe submitted a claim to the insurance company that provides insurance on its building. If the insurance company denies the claim, what is the peril that caused the loss?
Flood
The building that Perla owns and in which she operates a designer millinery shop was damaged by smoke from a fire in the building. Large quantities of veils, feathers, and silk flowers used to makes the hats were destroyed by the ash and odor from the smoke. Will smoke peril coverage cover the damage to the millinery materials?
No, smoke that accompanies a fire is covered under the fire cause of loss.
Explanation: Smoke that accompanies a fire would be covered under the fire cause of loss. Smoke that occurs in the absence of a fire is covered by the smoke peril. However, smoke from agricultural smudging (where smoke is used to prevent frost or insect damage to growing plants) or industrial operations is specifically excluded.
Genevieve’s Glamorous Garments was burglarized on August 1 last year. Although Genevieve prepared an inventory of the items stolen from her store, she did not realize a sapphire ring was also missing until a year later. The inception date of her policy was January 1 last year. She filed the initial claim on September 1 last year and a claim for the ring on August 15 this year. The claim for the ring will not be paid if she had
Discovery-based coverage.
Exp Discovery-based coverage applies to loss that is discovered during the policy period or within 60 days after the policy period ends (within one year for employee benefit plans), regardless of whether the loss occurs during the policy period. In this case, there is no coverage in the discovery basis policy because the claim was not filed within 60 days after the policy expired.
Sam is a seaman who is injured on a freighter when high winds and turbulent seas almost sink the ship. What federal workers compensation law might apply to pay for medical expenses incurred by Sam?
Jones Act. The Jones Act provides seamen with a remedy for an injury sustained on the job without having to overcome employer defenses of assumption of risk or fellow servant liability. An employee’s contributory negligence will not bar recovery, but it will reduce it.
The Gramm-Leach-Bliley Act, the Federal Trade Commission Act, and the Health Insurance Portability and Accountability Act were enacted to
protect the privacy of consumers’ information
Tim doesn’t need glass breakage coverage for a motorized, self-propelled camper he uses in his business because the windows are made of plastic. What type of coverage might be more appropriate for him?
Specified causes of loss coverage
Which covered auto symbol is used to designate owned autos on the business auto policy?
Symbol 2
Symbol 2 on the BAP covers all autos owned at the beginning of the policy period plus any owned autos acquired during that period. If symbol 2 is used for liability coverage, any nonowned trailer attached to an owned power unit is also a covered auto. This symbol often is used to designate medical payments, UM, UIM, and physical damage collision coverages.
Tuholski Real Estate submitted a vandalism claim under its BOP. If the insurer reduced its claim payment by 15 percent because the insured building was vacant at the time of loss, which of the following perils caused the loss?
Fire. If the building is vacant for more than 60 days at the time of loss, the BOP excludes coverage for the perils of vandalism, theft and attempted theft, building glass breakage, and sprinkler leakage. Recovery for losses caused by all other perils is reduced by 15 percent if the building is vacant at the time of loss.
Jane has an older car that is insured, although the policy does not cover physical damage. She buys a new car and wants to include collision and other than collision coverages on the new car. To have her insurer add these coverages, she must notify the insurer within
4 days
Proper notification to add collision and other than collision coverage to a personal auto policy is four days.
Which of the following perils insured against is not included on a DP-2 Broad Form?
Theft The peril of theft is not included on any of the dwelling forms; it can only be purchased by endorsement.
Milo’s Tavern has a commercial general liability policy. Alvin becomes intoxicated at the tavern before leaving in his car. He collides with a van carrying several passengers. The insured persons sue Alvin under his personal auto policy and sue Milo’s Tavern for failing to monitor Alvin’s drinking. Which statement is correct with respect to the claims against Milo’s Tavern?
The tavern needs liquor liability insurance to cover the claims.Persons who are injured by intoxicated bar patrons may bring a dram shop claim against the establishments that served the alcohol. The CGL policy has a liquor liability exclusion for establishments that sell, manufacture, or distribute liquor. These establishments must buy liquor liability insurance to be covered for such claims.
Which of the following coverages or provisions is not included in a businessowners policy?
Property
Liability
Umbrella coverage
IncorrectCommon policy conditions
Umbrella coverage
Umbrella liability coverage is a separate policy and not included in a businessowners policy.
The Morgans rent a dwelling and buy standard flood insurance on their personal property. They improve the home by installing new cabinets and flooring in the kitchen. Their personal property coverage limit is $50,000. How much coverage would they have if the improvements they made were damaged by a covered peril?
$5,000
If the insured is a tenant, improvements to the building made or acquired at the insured’s expense are covered by their personal property coverage. However, this coverage is subject to a limit of 10 percent of the personal property coverage limit.
Ted, the insurance representative for Malone Company, does not understand the difference between insurance written on a stated amount basis or on an agreed value basis. How would you explain the difference to Ted?
With stated amount, Ted will recover no more than the stated amount, and may recover less if actual cash value is less. With agreed value, Ted recovers the listed value.
With stated amount, an item’s value is listed in the policy. If the item is stolen or destroyed, the insured will not get that amount if the item’s actual cash value is less than the stated amount. With agreed value, the insurer and the insured agree on the value of the item when the policy is written. If a loss occurs, the insurer agrees to pay that amount.
Amy insures her insurance agency on a BOP. The agency is incorporated and, in addition to Amy, four people work at the agency: Pam, Kristy, Bob, and Scott. Which of the following persons is not an ‘insured’ on the BOP?
Carl, Amy’s husband. When the named insured on a BOP is an organization other than an individual or a partnership, the named insured’s spouse is not an insured unless he or she is employee of the insured.
How many declarations pages are contained in a commercial general liability policy?
The two declarations pages contained in a CGL policy consist of the common policy declarations and the CGL declarations.
Bridget purchased a liability policy to protect her against catastrophic liability claims for which she might be legally responsible. What type of policy did she buy?
Personal umbrella liability. An umbrella liability policy provides high limits of liability coverage to protect an insured against a catastrophic liability loss.
You are reviewing the eligibility guidelines for your insurer’s Business Owners Policy (BOP). Which of the following businesses is not eligible for coverage on the BOP?
A manufacturer leasing 10,000 square feet of spaces
Most manufacturing concerns are not eligible for coverage on the BOP.
Which of the following is not covered equipment in an Equipment Breakdown policy?
Any type of equipment used to run the insured’s business operation
Covered equipment on an Equipment Breakdown policy includes equipment built to operate under internal pressure or vacuum, electrical or mechanical equipment used to generate, transmit, or use energy, and communication and computer equipment. Certain equipment owned by a utility and solely by the insured premises may also be covered.
In most states, medical payments coverage is
Optional. Medical payments coverage is optional in most states, and may be offered in addition to, or replaced by, personal injury protection (PIP) coverage in states with no-fault laws.
What is the difference between a mortgage clause and a loss payable clause in a property insurance policy covering real property?
A loss payable clause usually is not as broad as the mortgage clause and does not give the loss payee any rights other than a right to share in a claim settlement.
Alice is an insurance agent who telephones her underwriter and asks to discuss a particular piece of property she’d like to insure. What term does Alice use to refer to the subject of insurance?
Risk The term, risk, is used to refer to the person, property, or activity that is insured.
Todd’s home is insured by a dwelling policy on a DP-3 Special Form. When a tree falls on the roof of his house, what valuation method does the insurance company use to settle the loss to the dwelling?
Replacement value. The DP-3 Special Form settles losses to the dwelling and other structures on a replacement value basis.
Which of the following is not a class of legal wrong?
Punitive damages Punitive damages are not a class of legal wrong; they are amounts a party is required to pay as punishment for committing a civil wrong.
