Property & Casualty

Question 1

Johanna purchased a National Flood Insurance Policy 10 days after her community entered an emergency program. When her coverage be effective?

Answer 1

12:01 am the day after the application and premium payment are mailed.

Question 2

Which statements regarding insurable risks is not correct?
A. Insurance cannot be mandatory
B. The insurable risk needs to be statistically predictable
C. An insurable risk must involve a loss that is definite as to time, cause, place, and amount.
D. Insureds cannot be randomly selected

Answer 2

D. Insureds cannot be randomly selected

Getting insurance must not be mandatory, selecting insureds randomly will help the insurer to have a fair proportion of good risks to poor risks. All other statements are true.

Question 3

Producer A is prosecuted for a crime. He must notify the director within what time frame after the initial pretrial hearing date?

Answer 3

No later than 30 days

Question 4

The personal injury liability endorsement to a HO policy to all the following EXCEPT:
A. Slander
B. Invasion of privacy
C. False Arrest
D. A third party breaks a leg when the insured knocks him down

Answer 4

D. A third party breaks a leg when the insured knocks him down

The broken leg is covered by personal liability coverage.

Question 5

In the event of a claim under a commercial general liability policy, the insured has all of the following duties to the insurer EXCEPT:
A. Furnishing the insurer with copies of any demands, notices, or other legal papers received in connection with a claim or suit
B. Assisting the insurer upon request in the enforcement of any right against any person or organization that may be liable to the insured
C. Submitting to a medical exam when requested
D. Providing prompt written notice of any claim or suit actually filed against the insured

Answer 5

C. Submitting to a medical exam when requested

Under medical payments, the insured third party has to submit to an exam upon request, not the insured.

Question 6

Adverse selection is a concept best described as:

Answer 6

Risks with higher probability of loss seeking insurance more often than other risks.

Question 7

An insured has legal liability coverage with a $50,000 limit on tenant’s property. After a loss, the tenant sues for $75,000 because the property loss was more than $50,000. The defense costs were $10,000 and the other investigative expenses were $5,000. What will the insurer pay?

Answer 7

$65,000

The insurance company is responsible for all defense costs and expenses, in addition to the policy limit.

Question 8

In insurance, an offer is usually made when:

Answer 8

The application is submitted.

Question 9

This state provides for a temporary license for all of the following EXCEPT
A. A producer’s disability
B. A producer’s time in the military service
C. A producer’s retirement
D. The death of a producer

Answer 9

C. A producer’s retirement

Question 10

A producer became subject to an administrative action by a governmental agency (not the state Department of Insurance). What is considered an appropriate action?

Answer 10

The producer must notify the director within 30 days of the final disposition of the matter.

In the event of an administrative action held in another jurisdiction or by another governmental agency in Oregon, the producer must notify the Director within 30 days of the final disposition of the matter.

Question 11

What is the purpose of the FAIR plan?

Answer 11

1. Assure stability in the property insurance market
2. Assure the availability of essential property insurance to owners of insurable property
3. Encourage the maximum use of the normal market in obtaining essential property insurance
4. Provide for the equitable distribution among authorized insurers of the responsibility for insuring property that is not insurable through the normal market

Question 12

A specific coverage part is listed on the commercial package policy declarations page, but there is no premium shown What does that mean?

Answer 12

There is no coverage

Question 13

Which of the following perils is covered by flood insurance?
A. Landslide
B. Rain that enters through a defective roof and accumulates in the basement
C. Sinkhole collapse
D. Mudslide caused by accumulations of water under the ground

Answer 13

D. Mudslide caused by accumulations of water under the ground

Flood policies exclude losses caused by landslides, sinkholes, or falling water. Rising water or excessive runoff IS covered.

Question 14

A building insured with commercial property insurance has been vacant 90 days. Which of the following is not true?
A. Payment for unnamed perils is reduced by 25%
B. The insured has no coverage for losses caused by theft
C. The insured has no coverage for losses caused by glass breakage
D. Payment for unnamed perils is reduced by 15%

Answer 14

A. Payment for unnamed perils is reduced by 25%

If the building has been vacant for more than 60 consecutive days before the loss, the insurer will not pay for damages caused by vandalism, sprinkler leakage, glass breakage, water damage, theft, or attempted theft. If the loss is caused by any other peril, the insurer will reduce the amount they would have otherwise paid by 15%

Question 15

Who will transport the property of anyone who hires them?

Answer 15

Common carriers

Question 16

What is the basic limit for costs incurred at the place a vehicle is disabled providing by the towing and labor costs endorsement?

Answer 16

$25

Higher limits are available for an additional premium.

Question 17

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices:
A. Stating that the insurance policy is a share of stock
B. Exaggerating the benefits provided in the policy
C. Stating that the competitors will arbitrarily increase their premiums each year
D. Making comparisons between different policies

Answer 17

D. Making comparisons between different policies

Making accurate comparisons of policies is not illegal.

Question 18

Workers compensation rating is developed by applying a rating bureau job classification rate to each

Answer 18

$100 of payroll

Question 19

The regular National Flood Insurance Program would insure an eligible single-family dwelling for up to

Answer 19

$250,000

Question 20

The purpose of a joint underwriting association is to create a mechanism that

Answer 20

Requires authorized insurers to provide commercial liability insurance.

A joint underwriting association is a mechanism that requires casualty insurers in Oregon to provide commercial liability insurance to certain businesses and service providers on either an assigned risk basis or through a joint underwriting pool.

Question 21

Workers compensation statuses require employers to meet capital reserves requirements sufficient to pay any claims that might arise. Employers can meet such obligations through all of the following EXCEPT:
A. Assigned risk plans
B. Competitive state funds
C. Second injury funds program
D. Self-insurance plans

Answer 21

C. Second injury funds program

Second injury funds are a method by which employers manage the risk associated with the hiring of “previously injured” potential employees.

Question 22

All statements in an application for insurance will be deemed to be representations and not warranties, EXCEPT those found within
A. Workers compensation policies
B. Property policies
C. Surety policies
D. Home protection policies

Answer 22

C. Surety policies

Question 23

Which of the following dwelling coverage forms would pay replacement cost for the dwelling?
A. All dwelling property coverage forms
B. DP-1
C. DP-2 and DP-3
D. DP-3 only

Answer 23

C. DP-2 and DP-3

DP-2 and DP-3 pay replacement as long as the house is insured for at least 80% of its value on the date of loss.

Question 24

Which symbol is available to an insured with vehicles subject to no-fault coverage?

Answer 24

Symbol 5

Symbol 5 covers owned autos subject to no-fault coverage.

Question 25

If a worker is killed in a work-related equipment accident, the dependents would receive workers compensation survivor benefits. The maximum amount for these benefits is

Answer 25

133 1/3% times the state’s average weekly wage.

They cannot exceed this amount.

Question 26

Under farm liability, Coverage H includes

Answer 26

Bodily injury

Question 27

Farm policy Coverage B - Structures would pay how much for loss of an outside antenna, tower, or satellite dish?

Answer 27

Up to $1,000

Question 28

Which personal auto coverage would pay for the insured’s travel expenses and loss of earnings while involved in the settlement process of a covered loss?

Answer 28

A. Liability coverage

Supplementary payments, found in Part A - Liability, include expenses incurred by the insured at the insurer’s request, including $200 per day for attending trials or hearings.

Question 29

Alan has a Personal Auto Policy with Part C limits of $100/$300 Uninsured/Underinsured Motorist. Alan is injured by Ben, who has Part A limits of $50/$100. The police determine that Ben is at fault for the accident and Alan’s $125,000 of medical expenses. How much will Alan’s Part C pay?

Answer 29

$50,000

Underinsured motorist coverage acts as excess over the at-fault motorist’s coverage. The policy will pay the amount necessary to bring payment up to the per person limit.

Question 30

The party to a surety or fidelity bond who promises to fulfill the obligation is the

Answer 30

Principal

The principal purchased the bond and promises to perform.

Question 31

A loss has occurred before the first report has been filed on a value reporting coverage form. Which is NOT true?
A. 75% of the loss is paid if the loss occurred after the first report due date
B. Never more than 75% of the loss is paid
C. Full amount of loss up to the policy limit is paid if the loss occurs before the first report due date.
D. Provisional premium is based on 75% of the full amount of coverage

Answer 31

B. Never more than 75% of the loss is paid

If the loss is before the first report is due, full amount of the loss will be paid. Because provisional premium is based on 75% of the full amount of coverage, only 75% of the loss is paid if the first report is overdue.

Question 32

The form of payment bond that protects an owner contracting for work against liens from subcontractors, suppliers, or laborers who are not paid for their services and materials by the general contractor is called

Answer 32

Labor and material bond

A labor and material bond would cover the cost of retiring any mechanic’s lien placed on the property after the job was completed.

Question 33

All of the following are factors in rating workers compensation insurance EXCEPT
A. Sales
B. Payroll
C. Job classification
D. Loss experience

Answer 33

A. Sales

The hazard of the work, the amount of payroll, and the employer’s prior loss experience are all rating factors.

Question 34

All of the following are examples of risk retention EXCEPT
A. Deductibles
B. Self-insurance
C. Copayments
D. Premiums

Answer 34

D. Premiums

Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance

Question 35

An insured has just received notice that his policy will be cancelled. In the state of Oregon, he has only a few days to request a hearing with the Director. How many days?

Answer 35

30 days

Question 36

An insured was unable to work for a year following an automobile accident. At the time of the accident, she was earning $2,000 a month. How much will her PIP coverage pay for her lost income?

Answer 36

$16,800

PIP covers 70% of a person’s lost income, up to a maximum of $3,000 per month for 52 weeks. 70% of $2,000 is $1,400 (less than the allowed maximum), so in this case the insured can receive $16,800 ($1,400 x 12 = $16,800).

Question 37

Which endorsement is used to insure Coverage C (personal property) for values beyond the limiations of the homeowners policy?

Answer 37

Scheduled personal property endorsement

Items that are scheduled and insured under a scheduled personal property endorsement are covered on a valued basis.

Question 38

What covers a carrier for liability for loss to cargo while it is being transported in a truck?

Answer 38

Motor truck cargo policy - truckers form

Question 39

Which of the following employees would fall withing the definition of a “subject worker” under workers compensation law?
A. Sally works as a live-in housekeeper for the Morgensons.
B. Reggie works for a landscaping company and occasionally does yardwork at his employer’s residence
C. Smythe owns his own antique business
D. Harold is paid $25 a week to move the Shumfield’s lawn.

Answer 39

B. Reggie works for a landscaping company and occasionally does yardwork at his employer’s residence

Since Reggie’s employer is in the landscaping business, he would fall into the classification of a “subject worker”. All of the others would fall into the domestic servants/casual workers category.

Question 40

A business hosted an annual holiday party for employees and customers, after which a customer who had too much to drink was involved in an automobile accident. Occupants of the other car involved in the accident sued the business for serving the customer too much alcohol Will the businessowners policy provide coverage?

Answer 40

Yes, none of the exclusions will apply

The liquor liability exclusion applies only to insureds in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. In this case, the company’s businessowners policy most likely will have to pay.

Question 41

If a Cease and Desist Order is issued, what must the violator do?

Answer 41

Quit the actions stipulated in the order

Whenever the Director believes that an individual has been engaged or is going to engage in any Insurance Code violation, the Director may issue an order to discontinue such actions.

Question 42

When the condominium association coverage form and the condominium commercial unit-owners form both cover the same loss,

Answer 42

The association coverage form will be considered primary and pay the loss

Question 43

The extra expense coverage form provides

Answer 43

Coverage that will permit the insured to continue in business without interruption following a property damage loss

Extra expense coverage is for money spent to minimize a business interruption after a direct property loss.

Question 44

A premium discount is the term that describes when an insured owes a total standard premium greater than

Answer 44

$5,000

Question 45

The insured purchased a $200,000 extra expense policy. If the percentages applying to the limit of insurance are 40%, 80%, and 100%, what would be the maximum payable for a 47-day loss?

Answer 45

$160,000

Extra expense coverage is written with a minimum of 3 applicable percentages that apply to the limit of insurance in the declarations. When the period of restoration is 30 days or less, the first percentage applies; when it is more than 30 days and not more than 60 days, the second percentage applies; when more than 60 days, the third percentage applies.

Question 46

If the premium charged for a particular insured is increased or decreased for a future period based on that insured’s loss experience for a period in the recent past, the policy uses

Answer 46

An experience rating plan

An experience rating plan adjusts the premiums charges based on the claims history, positive or negative, of he individual insured.

Question 47

Which of the following is NOT the consideration in a policy?
A. The promise to pay covered losses
B. The application given to a prospective insured.
C. Something of value exchanged between parties
D. The premium amount paid at the time of application

Answer 47

B. The application given to a prospective insured

Consideration is something of value that is transferred between two parties to form a legal contract.

Question 48

What insurance concept is associated with the words “Weiss” and “Fitch”?

Answer 48

Guides describing company financial integrity

Because an insurance company’s strength and stability are two very crucial factors in its sustainability, independent rating services have formed to publish regular updates on the financial integrity of different insurance companies. Weiss and Fitch are two of these services, although there are more.

Question 49

Which dwelling policy insures a structure on an actual cash value basis?

Answer 49

DP-1