RMIN Test 4

Question 1

Legal Wrong

Answer 1

violation of a person’s legal rights, or a failure to perform a legal duty owed to a certain person, to a business or organization, or to a society as a whole

Types: Crime, Breach of Contract, Tort

Question 2

Tort

Answer 2

Legal wrong for which the court allows a remedy in the form of monetary damages
Plaintiff → person who is injured
Tortfeasor → alleged wrongdoer

Question 3

Types of Torts

Answer 3

Intentional Tort
Strict liability (absolute liability)
Negligence

Question 4

Intentional Tort

Answer 4

Intentional act or omission in harm or injury to another person or damage to their property

Ex: libel, slander, invasion of privacy, assault, battery, false arrest

Question 5

Strict liability (absolute liability)

Answer 5

Liability imposed regardless of negligence or fault

Ex: defective products, damages caused by animals (dog bite), hazardous activities, workers compensation

Question 6

Negligence

Answer 6

failure to exercise the standard of care required by law to protect others from harm

Standard of care
- Based on the care requires by a reasonably prudent person
- Not the same for each wrongful act

Question 7

Elements of Negligence

Answer 7

1. Existence of a legal duty to protect others from harm
2. Failure to perform that duty
3. Damage or injury to the plaintiff
4. Proximate cause relationship between the negligent act and the
   infliction of damages

Question 8

Defenses Against Negligence

Answer 8

1. Contributory negligence
2. Comparative negligence
3. Last clear chance rule
4. Assumption of risk

Question 9

Contributory negligence

Answer 9

Injured person cannot collect damages if his or her care falls below the standard of care required for his or her protection

Under strict application of common law, injured party cannot collect damages if his or her conduct contributed in any way to the injury

Question 10

Comparative negligence

Answer 10

Financial burden of the injury is shared by both parties according to their respective degrees of fault

Pure rule → Can collect damages even if you are negligent, but your reward is reduced in proportion to your fault

50 percent rule
Cannot recover if you are 50 percent more at fault
51 percent rule
Cannot recover if you are 51 percent to more at fault

Question 11

Last clear chance rule

Answer 11

A plaintiff who is endangered by his or her own negligence can still recover damages from the defendant if the defendant has a last clear chance to avoid the accident but fails to do so

Question 12

Assumption of risk

Answer 12

A person who understands and recognizes the danger inherent in a particular activity cannot recover damages in the event of an injury

Question 13

Compensatory Damages (type of damages)

Answer 13

Compensate the victim for losses actually incurred

Question 14

Special Damages (type of damages)

Answer 14

Provide compensation for medical expenses, lost earnings, or property damages

Question 15

General Damages (type of damages)

Answer 15

Cannot be specifically measured (pain and suffering)

Question 16

Punitive Damages (type of damages)

Answer 16

Designed to punish people and organizations so that others are deterred from committing the same wrongful act.

Question 17

Imputed Negligence—Negligence of One Person Imputed to Another Person

Answer 17

A. If there is an employer–employee relationship
B. If a vicarious liability law applies
C. If there is a joint business venture
D. If a dram shop law applies

Question 18

Res Ipsa Loquitur

Answer 18

this term means the thing speaks for itself

Question 19

Three elements must be present for it to apply: Res Ipsa Loquitur

Answer 19

(a) the event must be such that it would not have occurred unless someone was careless;
(b) the instrumentality causing the accident must be in the
exclusive control of the defendant; and
(c) the injured party has not contributed to the accident in any way.

Question 20

Specific Applications of the Law of Negligence

Answer 20

A. Ownership of Property
1. Degree of care required for trespasser, licensee, or invitee
2. Attractive nuisance doctrine—a condition that can attract
and injure children

B. Employer and Employee Relationships
1. Must be an employee
2. Must be acting within the scope of employment

C. Parents and Children
1. Under common law, parents usually were not liable for a
child’s tort
2. Today, parents can be held liable if a child is given a dangerous instrument or if a child is acting as an agent for the parent

Question 21

General Liability Loss Exposures

Answer 21

A. Premises and Operations

• Liability because of ownership and maintenance of premises
• Liability because of operations, either on or off premises

B. Products Liability → arising out of the manufacturing and sale of products

C. Completed Operations

• Typical insureds: plumbers, electricians, heating/cooling system repairpersons
• Provides coverage for losses that occur after the work is completed

D. Contractual Liability → arising out of the assumption of legal liability through a written or oral contract

E. Contingent Liability → arising out of work done by independent contractors

Question 22

Commercial General Liability (CGL) Policy

Answer 22

Coverage A—bodily injury and property damage liability
Covers stuff you do to others properties

Coverage B—personal and advertising injury liability
covers legal liability for false arrest, slander, privacy violations

Coverage C—medical payments regardless of legal liability to promote goodwill

Question 23

Employment-related practices liability insurance coverage, the insurer agrees to pay damages resulting from a “wrongful act” arising out of:

Answer 23

Demotion or failure to promote

Termination

Negligent hiring or supervision

Retaliatory action against employees

Coercing an employee to commit an unlawful act

Work-related harassment

Employment-related libel

Other work-related abuse

Question 24

Workers Compensation Insurance

Answer 24

A. Workers compensation insurance provides medical care, cash
benefits, survivor benefits, and rehabilitation services to workers
who are injured or die from job-related accidents or disease

B. Benefits are paid on the principle of liability without fault: the
employer is held absolutely liable for job-related accidents and
diseases regardless of fault

Question 25

Commercial Umbrella Policy

Answer 25

A. Pays the ultimate net loss in excess of the retained limit for bodily injury, property damage, and personal and advertising injury to which the insurance applies 1. The ultimate net loss is the total sum the insured is legally obligated to pay as damages 2. The umbrella policy is excess over the required underlying coverages.

Question 26

Cyber Liability Insurance

Answer 26

covers damages arising from the failure of a data holder to protect private information from being accessed by an unauthorized party 1. Purchase a stand-alone cyber liability form 2. Purchase a cyber liability endorsement 3. Purchase cyber property and liability coverage in a single policy

Question 27

Directors and Officers (D&O)

Answer 27

A (D&O) liability policy provides financial protection for the directors and officers and the corporation if they are sued for mismanagement of the company’s affairs

Question 28

Overview of Commercial Property Policy

Answer 28

- A monoline policy contains only one type of coverage - A package policy is one that combines two or more coverages into a single policy

Question 29

Building and Personal Property Coverage Form

Answer 29

A. Covered Property - Building - Business personal property & inventory - Personal property of others - additional coverage (debris removal, preservation of property, fire department service charge, pollutant cleanup and removal, increased cost of construction, and electronic data)

Question 30

Causes-of-Loss Basic Forms

Answer 30

Provides coverage for 11 basic causes of loss: Fire Lightning Explosion/Windstorm or hail Smoke Aircraft or vehicles Vandalism Riot or civil commotion Sprinkler leakage Sinkhole collapse Volcanic action

Question 31

Cause-of-loss Broad form

Answer 31

This form includes all causes of loss covered by the basic form plus falling objects; weight of snow, ice, or sleet; and water damage. Collapse is also covered under certain conditions.

Question 32

Causes-of-Loss-Special Form

Answer 32

This form insures against direct physical loss to covered property. This means that all direct physical damage losses are covered unless specifically excluded.

Question 33

Coverage Form- Building and Personal Property Coverage Form

Answer 33

1. Building and personal property coverage form 2. Business income and extra expense coverage form 3. Commercial crime coverage form 4. Inland marine coverage form(s) 5. Equipment breakdown protection coverage form 6. Commercial general liability coverage form 7. Business auto coverage form

Question 34

Reporting Forms

Answer 34

- The value reporting form is used to insure fluctuations in business personal property -Premiums are based on the actual value of the covered property -A peak season endorsement increases the amount of insurance in force during a specified period to reflect higher inventory values.

Question 35

Business Income Coverage Form

Answer 35

The form covers the net profit or loss (before taxes) that would have been earned and continuing normal operating expenses, including payroll

Question 36

Extra Expense Coverage Form

Answer 36

The form covers the extra expenses incurred by a firm to continue operations following a loss.

Question 37

Other Commercial Property Coverages: Builder risk coverage form

Answer 37

insure building under construction

Question 38

Other Commercial Property Coverages: Condominium association coverage form

Answer 38

covers commercial and residential condominiums

Question 39

Other Commercial Property Coverages: Equipment breakdown insurance

Answer 39

losses due to the accidental breakdown of covered equipment

Question 40

Other Commercial Property Coverages: Cyber property insurance

Answer 40

damage to property and computer networks

Question 41

Other Commercial Property Coverages: Terrorism insurance

Answer 41

covers direct physical damage to the insured’s property resulting from an act of terrorism

Question 42

Other Commercial Property Coverages: Ocean mariner insurance

Answer 42

protection for goods transported over water

Question 43

Other Commercial Property Coverages: Inland Marine

Answer 43

protection for goods shipped on land

Question 44

Other Commercial Property Coverages: Business floaters

Answer 44

covers property that frequently moves from 1 location to another, in such as contractors equipment and garments in the process of manufacturing

Question 45

Businessowners Policy (BOP)

Answer 45

Eligible Business Firms: Package policy specifically designed for small-to medium sized retail stores, office buildings, apartment buildings, and similar firms BOP provides property and liability coverage in 1 policy Coverage included buildings described in the decorations, fixtures, permanently installed machinery and equipment BOP Coverages: - Buildings - Business personal property - Covered causes of loss - Additional coverages - Deductible (one for all lines) - Business liability insurance

Question 46

Other coverage available with a BOP:

Answer 46

Outdoor signs Money and securities Employee dishonesty Mechanical breakdown Peak season provision Property in the insured’s care Debris removal and collapse Interruption of computer operations

Question 47

Commerical Crime Insurance Program

Answer 47

Commercial crime coverage form Commercial crime policy Government crime coverage form Government crime policy Employee theft and forgery policy Government employee theft and forgery policy Kidnap/ransom and extortion coverage --The first six forms listed can be written in two versions—a discovery version and a loss-sustained version.

Question 48

Discovery Version

Answer 48

covers losses discovered during the policy period or within 60 days after the policy expiration date, regardless of when the loss occurred

Question 49

Loss-sustained version

Answer 49

covers losses that occur during the policy period and are discovered during the policy period or within one year after the policy expires

Question 50

Kidnap and ransom (K&R) Insurance

Answer 50

Protects individuals and business from the financial losses that can result from kidnapping, extortion, and ransom demands: Coverage: 1. Ransom payments 2. Loss of income 3. Interest on bank loans 4. Medical care 5. Business interruption 6. Crisis management consultants 7. Support services 8. Public relations expenses 9. Hostage negotiation services 10. Emergency evacuation

Question 51

Commercial Crime Coverage Form

Answer 51

1. Employee theft 2. Forgery or alteration 3. Inside the premises—theft of money and securities 4. Inside the premises—robbery or safe burglary of other property 5. Outside the premises 6. Computer and funds transfer fraud 7. Money orders and counterfeit paper currency

Question 52

Employee Theft (commerical crime coverage form)

Answer 52

coverage pays for the loss of money, securities, and other property that results directly from theft committed by an employee

Question 53

Forgery or alteration(commerical crime coverage form)

Answer 53

coverage pays for a loss that results directly from forgery or from the alteration of checks drawn by the insured or the insured’s agent

Question 54

Inside the premises-theft of money and securities(commerical crime coverage form)

Answer 54

Loss of money or securities due to theft, disappearance, or destruction inside the premises or a bank ex: A thief breaks in at night and steals cash from a locked drawer

Question 55

Inside the premises—robbery or safe burglary of other property (commerical crime coverage form)

Answer 55

robbery or safe burglary of other property pays for the loss or damage to other property inside the premises by the actual or attempted robbery of a custodian, or by safe burglary inside the premises

Question 56

Outside the premises (commerical crime coverage form)

Answer 56

agreement covers the theft, disappearance, or destruction of money and securities outside the premises while in the custody of a messenger or an armored-car company

Question 57

Money orders and counterfeit paper currency (commerical crime coverage form)

Answer 57

Covers losses that result from accepting invalid money orders or counterfeit paper currency in good faith during the normal course of business

Question 58

Computer and funds transfer fraud (commerical crime coverage form)

Answer 58

agreement covers the loss of money, securities, and other property if a computer is used to transfer property fraudulently from inside the premises to a person or place outside the premises covers the loss of funds that result directly from fraudulent instructions that direct a financial institution to transfer or pay funds from the insured’s account

Question 59

Commerical Crime Coverage Form Exclusions

Answer 59

1. Dishonest acts or theft committed by the named insured, partners, or members 2. Knowledge of dishonest acts of employees prior to policy period 3. Dishonest acts or theft by employees, managers, directors, trustees, or representatives 4. Confidential or personal information 5. Data security breach 6. Indirect loss 7. Inventory shortages (applies to the employee theft insuring agreement) 8. Trading losses

Question 60

Financial Institution Bonds

Answer 60

designed for commercial banks and other financial institutions

Question 61

7 types of Financial Institution Bonds

Answer 61

A. Fidelity Coverage B. On-Premises Coverage C. In-Transit Coverage D. Forgery or Alteration Coverage E. Securities Coverage F. Counterfeit Money G. Fraudulent Mortgages

Question 62

Agreement A- Fidelity coverage (Financial Institutions Bonds)

Answer 62

covers loss that result directly from the dishonest or fraudulent acts of employees acting alone or in collusion with others, for the purpose of causing the insured to sustain such loss

Question 63

Agreement B – On premises coverage (Financial Institutions Bonds)

Answer 63

covers loss of property on the premises for a broad list of perils, including robbery, burglary, misplacement, mysterious unexplainable disappearance, and theft

Question 64

Agreement C – In-transit coverage (Financial Institutions Bonds)

Answer 64

covers losses to property in-transit for a broad list of perils

Question 65

Agreement D – Forgery or alteration coverage (Financial Institutions Bonds)

Answer 65

covers loss from forgery or alteration of most negotiable instruments

Question 66

Agreement E – Securities coverage (Financial Institutions Bonds)

Answer 66

covers losses to the insured because securities accepted in good faith have been forged, altered, lost, or stolen

Question 67

Agreement F – Counterfeit currency coverage (Financial Institutions Bonds)

Answer 67

covers loss to the insured from accepting counterfeit money

Question 68

Agreement G – Fraudulent mortgages coverage (Financial Institutions Bonds)

Answer 68

covers loss that results directly from having accepted or acted upon any mortgage on real property that proves defective because of a fraudulent signature

Question 69

Principal (Obligor)

Answer 69

the party who agrees to perform certain acts or fulfill certain obligations

Question 70

Obligee

Answer 70

the party who benefits from the bond if the principal fails to perform

Question 71

Surety

Answer 71

the party who agrees to answer for the debt, default, or obligation of another

Question 72

Types of Surety Bonds

Answer 72

1. Contract bonds A. A bid bond B. A performance bond C. A payment bond D. A maintenance bond E. A completion bond 2. License and permit bonds 3. Public official bonds 4. Judicial bonds A. Fiduciary bond B. Attachment Bond C. Court Bond D. Bail Bond some bonds cannot be classified in any other group such as: An auctioneer’s bond A lost-instrument bond An insurance agent bond

Question 73

Contract Bonds

Answer 73

these bonds are used in connection with construction contracts and guarantee that the principal will fulfill all contractual obligations.

Question 74

Bid Bond (type of contract bonds)

Answer 74

If a contractor wins a bid but then backs out or fails to follow through, the bid bond compensates the project owner (obligee) for the difference in cost to hire the next lowest bidder. Obligee: Property woner or party requesting bids Principal: firm or party subtmitting the bid Guarantee: Party whose bid is accepted will sign a contract and furnish a performence bond

Question 75

Performance bond (type of contract bonds)

Answer 75

If a contractor fails to finish the job or doesn't do it properly, the performance bond protects the project owner by ensuring the job will still get done—either by: Paying the owner for the losses, or Hiring another contractor to finish the work Obligee: Property owner or party having work done Principal: Contractor doing the work Guarantee: Work will be completed according to contract specifications

Question 76

Payment Bond (type of contract bonds)

Answer 76

If a contractor fails to pay their team or suppliers, the payment bond protects those people by ensuring they still get paid—without having to sue the project owner Obligee: Project owner or party having work done Principal: Contractor doing the work Guarantee: bills for labor and materials will be paid when due

Question 77

Maintenance bond (type of contract bonds)

Answer 77

If something breaks or fails due to poor workmanship or materials after the project is done, the maintenance bond ensures the contractor comes back to fix it—or pays for repairs Obligee: Party having work done Principal: Contractor doing the work Guarantee: faulty work of principal will be corrected, or defective materials replaced

Question 78

Completion Bond (type of contract bonds)

Answer 78

If a contractor runs out of money, time, or resources, the completion bond guarantees the project will still be completed—usually by the surety stepping in to fund or finish the job Obligee: Lending institution or lessor Principal: Contractor doing the work Guarantee: guarntees completition of the building or improvement

Question 79

License and permit bonds (type of surety bonds)

Answer 79

guarantee that the principal will comply with all laws and regulation that govern his or her activities

Question 80

Public official bonds (Types of Surety Bonds)

Answer 80

guarantee that public officials will faithfully perform their duties for the protection of the public

Question 81

Judicial bonds (Types of Surety Bonds)

Answer 81

guarantee that the principal will fulfill certain obligations specified by law

Question 82

Fiduciary bond (type of judicial bond)

Answer 82

If someone is legally responsible for managing another person’s money, estate, or assets, a fiduciary bond protects the beneficiaries in case the fiduciary acts dishonestly, misuses funds, or makes costly mistakes Principal: fiduciary (e.g., executor, trustee, guardian) Obligee: The court or party requiring the bond Surety: The bonding company that guarantees the fiduciary’s actions

Question 83

Attachment Bond (type of judicial bond)

Answer 83

If you’re suing someone and want to freeze or take their property (like money or assets) while the case is ongoing, a court may allow it—but you need an attachment bond to protect the defendant in case it turns out the seizure was wrong Principal: The plaintiff (person requesting the attachment) Obligee: The defendant (person whose property is being seized) Surety: The bond company backing the plaintiff's responsibility

Question 84

Court Bond (type of judicial bond)

Answer 84

financial guarantee that you’ll follow the court’s rules or pay for damages if you don’t. If you fail to comply, the other party can make a claim on the bond to recover their losses protects the ward (minor/ incapable)

Question 85

Bail Bond (type of judiclal bond)

Answer 85

allows a person accused of a crime to be released from jail while awaiting trial, under the condition that they will appear in court when required Principal: The defendant (the accused person) Obligee: The court Surety: The bail bond company (or bondsman)

Question 86

An auctioneer’s bond (not classified in a group)

Answer 86

If an auctioneer breaks the rules—like failing to pay sellers, misrepresenting items, or committing fraud—the auctioneer’s bond protects the public and ensures victims can be compensated

Question 87

Lost-Instrument Bond

Answer 87

used to replace a lost, stolen, or destroyed financial instrument—such as a check, promissory note, stock certificate, or bond—that was originally issued to the holder.

Question 88

Insurance Agent Bond

Answer 88

If an insurance agent fails to act properly (e.g., misrepresents policies, steals premiums, or commits fraud), the insurance agent bond ensures that victims can be compensated for financial losses, and that the agent will comply with the law