12. HRC Company purchased an unendorsed ISO Commercial General Liability (CGL) policy. All of the following claims would be covered under the CGL policy EXCEPT
(a) workers compensation liability.
(b) property damage liability.
(c) personal and advertising
a
13. Crystal Clean, a dry cleaning business, was concerned that clothing left in its care by customers might be lost, damaged, or destroyed. What type of insurance can Crystal Clean purchase to address this liability exposure?
(a) employers liability insur
b
14. Which of the following statements concerning directors and officers liability insurance (D&O) is true?
I. D&O policies usually cover the personal liability of directors and officers.
II. D&O policies exclude coverage for claims brought by employees an
a
Chapter 27
1. In the ISO Commercial Crime Coverage form, theft is defined as the
(a) unlawful taking of money, securities, or property to the deprivation of the insured.
(b) unlawful taking of property from a person by someone who has caused or threatened
a
2. In the ISO Commercial Crime Coverage form, robbery is defined as the
(a) unlawful taking of money, securities, or property to the deprivation of the insured.
(b) unlawful taking of property from a person by someone who has caused or threatened to cause
b
3.
Last National Bank believed it had been properly authorized to transfer $250,000 to the off-shore account of one of its corporate customers. The authorization was fraudulent, however, and the transferred funds were stolen. Under which commercial crime
d
4. In the context of a surety agreement, the party who agrees to perform certain acts or fulfill certain obligations is called the
(a) fidelity.
(b) obligee.
(c) surety.
(d) principal.
d
5. In the context of a surety agreement, the party who agrees to answer for the debt, default, or obligation of another party is called the
(a) principal.
(b) obligee.
(c) surety.
(d) fidelity.
c
6. Which of the following statements about surety bonds is (are) true?
I. The surety has a legal right to recover a loss payment it makes on behalf of a defaulting principal.
II. The obligee is the party who benefits from the bond if the principal fails t
c
7. A bond that guarantees that the person responsible for the property of another will faithfully exercise his or her duties is called a
(a) fiduciary bond.
(b) performance bond.
(c) court bond.
(d) contract bond.
a
8. Which of the following statements is true with respect to differences between insurance and surety bonds?
I. Insurance is a 2-party contract; surety involves 3 parties.
II. Insurers usually do not have the right to recover a loss payment from an insure
c
9. All of the following statements about a surety are true EXCEPT
(a) A surety expects no losses to occur.
(b) While the surety guarantees the principal's character and ability to perform, these qualities are outside the principal's control.
(c) The suret
b
10.
Al's Electric Service is an electric contracting company in Metro City. The owner of the company, Al Richards, posted a bond guaranteeing that all work performed by his company will comply with local building codes. This bond is an example of a
(a) fi
b
11.
State X hired Build-Right Const. to build a bridge. State X required that construction be complete in 2 years. Les Johnson is the president of Build-Right. State X required that Build-Right's promise to perform be guaranteed by a third party. Build-Ri
d
1. A tort is defined as a
(a) breach of contract which is punishable by a fine.
(b) legal wrong for which the law allows a remedy in the form of money damages.
(c) legal wrong against society which is punishable by fines.
(d) legal wrong against society w
b
2. All of the following are examples of intentional torts EXCEPT
(a) negligence.
(b) trespass.
(c) slander.
(d) assault.
a
3. A situation in which a person is held legally liable even though fault or negligence cannot be proven is an example of
(a) general damages.
(b) comparative negligence.
(c) an intentional tort.
(d) absolute liability.
d
4. All of the following are elements of a negligent act EXCEPT
(a) the existence of a no- fault law.
(b) the failure to perform a legal duty to use reasonable care.
(c) damages or injuries to a claimant.
(d) proximate cause between the negligent act and t
a
5. Damages awarded for losses that can be determined or measured are
(a) special damages.
(b) general damages.
(c) punitive damages.
(d) comparative damages.
a
6. Which of the following statements about monetary damages awarded by a court is (are) true?
I. The purpose of general damages is to provide benefits for medical expenses or loss of earnings.
II. The purpose of punitive damages is to punish the tortfeaso
b
7. Nancy was injured when she drove her car through a stop sign and was struck by Philip's car. Philip saw Nancy and could have stopped. However, he failed to do so since he had the right-of-way. Nancy can recover damages from Philip under which of the fo
b
8. Common situations involving absolute liability include all of the following EXCEPT
(a) blasting operations.
(b) operating a motor vehicle.
(c) work-related injuries under workers compensation.
(d) crop dusting.
b
9. All of the following may give rise to imputed negligence EXCEPT
(a) employer-employee relationships.
(b) joint business ventures.
(c) vicarious liability laws.
(d) attractive nuisance situations.
d
10. Laws under which businesses that sell liquor may be held liable for the negligence of those who consume the liquor are referred to as
(a) proprietary function laws.
(b) attractive nuisance laws.
(c) assumption of risk laws.
(d) dram-shop laws.
d
11. Under one doctrine, a person who understands the danger inherent in an activity cannot recover damages in the event of injury from the activity. This doctrine is the
(a) contributory negligence doctrine.
(b) assumption of risk doctrine.
(c) comparativ
b
12. Shareholders and employees harmed by the negligent acts and deceptive statements of company leaders may file lawsuits against the company leaders. Such claims are covered under which type of insurance?
(a) employment practices liability insurance
(b)
c
13. A defendant who is only slightly liable may be required to pay the full damages under which?
(a) the joint and several liability rule
(b) the collateral source rule
(c) arbitration
(d) res ipsa loquitor
a
14. Francis opened a store and knows customers who come to the store may be injured on the premises and hold her responsible. Under common law, customers are considered
(a) aliens.
(b) licensees.
(c) trespassers.
(d) invitees.
d
15. James, injured in an auto accident caused by another motorist's negligence received severe facial lacerations. After dismissal from the hospital he still had severe back pain. In payment for his pain and suffering, and disfigurement, James will receiv
d
1. All of the following are covered for liability under a PAP EXCEPT
(a) a nonowned van which is driven by the insured on a regular basis.
(b) a trailer owned by named insured.
(c) a borrowed auto used by the insured as a substitute auto.
(d) a newly acqu
a
2. All the following are insured's under liability coverage of a PAP EXCEPT
(a) a friend to whom the named insured loans a covered auto.
(b) the employer of named insured for actions resulting from the named insured's use of a covered auto.
(c) the former
c
3. Which of the following persons is (are) covered for liability insurance under the PAP?
I. A family member who drives a covered auto.
II. A family member who drives a friend's auto.
(a) I only
(b) II only
(c) both I and II
(d) neither I nor II
c
4. Which of the following situations would be covered under the liability section of the PAP?
I. An attendant at a parking lot is sued by a pedestrian who is injured when the attendant has an accident while parking an auto.
II. The daughter of the named i
b
5. Which of the following statements about the medical payments coverage of the PAP is true?
(a) The amount of the benefit typically is $100,000.
(b) Covered expenses must be incurred within 6 months of the accident.
(c) Covered expenses include the cost
c
6. All of the following are exclusions under the medical payments coverage of the PAP EXCEPT
(a) injuries incurred while riding a motorcycle.
(b) injuries incurred while an auto is being used without the presumption that permission would have been granted
c
7. Which of the following statements about uninsured motorists coverage is true?
(a) The coverage usually applies only to PD.
(b) The coverage applies only if the uninsured motorist is legally liable.
(c) Unless higher amounts are purchased, the max benef
c
8. All of the following are considered uninsured vehicles under uninsured motorists coverage of the PAP EXCEPT
(a) a vehicle owned by an individual that is insured, but for less than the amount required by the state's financial responsibility law.
(b) a h
c
9. All of the following statements about Part D (coverage for damage to your auto) of the PAP are true EXCEPT
(a) Coverage may be purchased with or without collision insurance.
(b) Losses are paid regardless of fault.
(c) Coverage applies to a nonowned au
d
10. Which of the following is considered to be a collision loss under Part D (coverage for damage to your auto) of the PAP?
(a) The covered auto hits a deer.
(b) The covered auto is wrecked by a thief after it is stolen.
(c) The covered auto is damaged wh
c
11. All of the following losses are excluded under Part D (coverage for damage to your auto) of an unendorsed PAP EXCEPT
(a) damage by vandals to a portable car telephone.
(b) theft of a compact disc player which was permanently installed in the auto.
(c)
b
12. Duties of an insured after a covered collision loss include which of the following?
I. Take reasonable steps to protect the vehicle from further damage.
II. Admit fault if the insured believes he or she caused the collision.
(a) I only
(b) II only
(c)
a
13. In addition to providing coverage in the United States, its territories and possessions, and Puerto Rico, where else does the PAP provide coverage?
(a) in Mexico
(b) in Canada
(c) in both Mexico and Canada
(d) anywhere in the world
b
14. All of the following statements about the termination provisions of the PAP are true EXCEPT
(a) The insured can cancel the policy for any reason.
(b) The insurer can cancel a newly written policy for any reason if it has been in force for less than 60
c
15. Ken fell asleep while driving late at night, crossed the center line and hit a car approaching from the other direction. The following losses occurred:
� The driver of the other car suffered $30,000 in bodily injuries.
� Ken's car sustained $5,000 in
a
16. Dennis was involved in an accident. He believes the damage to his auto is $6,000. His insurer believes the damage is only $3,500. Which PAP provision is designed to handle disputes between the insurer and the insured over the amount of the loss?
(a) o
d
Chapter 21
1. Under financial responsibility laws, proof of financial responsibility is required under all the following EXCEPT
(a) the use of an auto by any driver with < 3 yrs of driving experience.
(b) an automobile accident involving PD over a specifi
a
2. Financial responsibility law defects include which of the following?
I. Accident victims may not be fully compensated for their injuries.
II. They apply only to PD losses, not to bodily injury claims.
(a) I only
(b) II only
(c) both I & II
(d) neither
b
3. Which of the following statements about uninsured motorists coverage is true?
(a) An innocent motorist must establish that the uninsured motorist is legally liable.
(b) The amount of coverage in most states must be at least $300,000.
(c) Property damag
a
4. All of the following are arguments for no-fault automobile insurance laws EXCEPT
(a) It is often difficult to determine fault under the tort liability system.
(b) A large portion of each premium dollar is used for purposes other than compensating accid
d
5. The term used to describe plans in which automobile insurers participate to make insurance available to drivers unable to obtain coverage in the standard market is the
(a) foreign market.
(b) fair market.
(c) residual (shared) market.
(d) high-premium
c
6. Under which type of automobile insurance arrangement are all automobile insurers in a state assigned their proportionate share of high-risk drivers based on the total volume of auto business written in the state?
(a) automobile insurance plan
(b) unsat
a
7. Which of the following statements about the factors affecting automobile insurance rates is true?
(a) Because the chance of accidents due to mechanical malfunctions or poor maintenance is increased, the cost of collision coverage increases as a car get
d
8. All of the following are major rating factors for determining private passenger automobile insurance premiums EXCEPT
(a) gender
(b) age
(c) race
(d) marital status.
c
9. All of the following statements about shopping for auto insurance are true EXCEPT
(a) Adequate liability insurance is the most important consideration.
(b) Consideration should be given to dropping Physical Damage insurance on an older car with a low v
d
10. In the state where Susan lives, drivers whom private insurance companies do not want to cover are placed in a common pool, and each company pays its pro rata share of pool losses and expenses. A common policy is used for all high-risk drivers. Susan's
b
11. Amber believes that her auto insurance premium is too high. All of the following will reduce Amber's auto insurance premium EXCEPT
(a) Amber could raise her physical damage deductible.
(b) Amber could move from the city where she lives to a rural area
c
12. A credit-based score that insurers claim is highly predictive of future claims costs is an individual's
(a) combined ratio.
(b) loss ratio.
(c) insurance score.
(d) underwriting score.
c
Chapter 22
1. Which of the following statements is (are) true regarding renters insurance?
I. Renters insurance is needed if you rent a house, but not needed if you rent an apartment.
II. The ISO renter's policy provides "all-risks" coverage on the insure
d
2. Which homeowners policy is designed for the tenants of rented premises?
(a) Homeowners 2
(b) Homeowners 4
(c) Homeowners 6
(d) Homeowners 8
b
3. Which of the following statements about the Homeowners 3 policy is (are) true?
I. Losses to the dwelling are always settled on an actual cash value basis.
II. Coverage on personal property is limited to $5000.
(a) I only
(b) II only
(c) both I and II
(
d
4. Insured's under Section I of the Homeowners 3 policy include which of the following?
I. A spouse of the named insured if living in the same household
II. The named insured's children who are under age 24 and who are temporarily away at college
(a) I on
c
5. Section I of the Homeowners 3 policy provides coverage for all of the following EXCEPT
(a) loss of use.
(b) personal property.
(c) other structures.
(d) medical payments.
d
6. All of the following are covered under the dwelling coverage (A) of the Homeowners 3 policy EXCEPT
(a) any structure attached to the dwelling.
(b) the land on which the insured dwelling is located.
(c) materials and supplies intended for alteration or
b
7. Which of the following statements about the coverage for other structures (Coverage B) under the Homeowners 3 policy is true?
(a) The amount of insurance on other structures is equal to a percent of the coverage on the dwelling.
(b) Structures attached
a
8. The Homeowners 3 policy limits the coverage provided on certain personal property (e.g. coins and silverware). This personal property can be adequately insured by
(a) lowering the deductible which applies to personal property losses.
(b) storing the pr
c
9. Which of the following property is covered under the personal property coverage (Coverage C) of the Homeowners 3 policy?
(a) a pet iguana owned by the insured
(b) a bicycle owned by a foster child living with the named insured
(c) music CDs located in
b
10. All of the following statements about the coverage for loss of use (Coverage D) under an HO-3 policy are true EXCEPT
(a) If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result o
b
11. All of the following are additional coverages under Section I of the Homeowners 3 policy EXCEPT
(a) the reasonable expenses of removing debris of covered property after an insured loss.
(b) fire dept. service charges for which the insured is liable by
c
12. All of the following are covered perils under the personal property coverage (Coverage C) of an unendorsed Homeowners 3 policy EXCEPT
(a) earthquake.
(b) theft.
(c) windstorm.
(d) explosion.
a
13. All of the following are general exclusions under Section I of the Homeowners 3 policy EXCEPT
(a) losses due to earthquake.
(b) losses due to the failure of insured to use all reasonable means to save & preserve property after a loss.
(c) losses resul
c
14. Which of the following statements about the appraisal clause in the Homeowners 3 policy is true?
(a) The appraiser for each party is selected by a judge.
(b) A binding settlement can be reached only if the umpire agrees with both appraisers.
(c) Both
d
15. Under the Homeowners 3 policy, all of the following are options of the insurer for settling claims EXCEPT
(a) paying the claim in cash.
(b) replacing the property.
(c) repairing the property.
(d) paying the claim with insurance company stock.
d
16. All of the following statements about conditions in a policy are true EXCEPT
(a) If an insurer broadens coverage without an additional premium during the policy period, the broadened coverage applies immediately to the present policy.
(b) A waiver or
d
17. Which homeowners policy is specially designed to insure renters?
(a) HO-2
(b) HO-3
(c) HO-4
(d) HO-6
c
Chapter 23
1. All of the following persons are insured's for personal liability insurance under the homeowners policy EXCEPT
(a) children of the named insured under age 24 who are attending college full time and temporarily residing elsewhere.
(b) foster
c
2. Which of the following statements about medical payments coverage to others is true?
(a) Medical payments may be made for any resident of the named insured's household.
(b) Medical expenses incurred within 3 years of an accident are covered.
(c) Medica
b
3. All of the following are considered insured locations for medical payments to others (Coverage F) EXCEPT
(a) a new vacation home purchased by an insured during the policy period.
(b) a motel room where an insured is temporarily residing.
(c) a hall ren
d
4. Section II of the homeowners policy contains exclusions applying to all of the following EXCEPT
activities of the named insured's minor children.
business activities.
(c) transmission of a communicable disease.
(d) intentional injuries.
a
5. Liability arising out of all of the following are covered under the personal injury endorsement to the homeowners policy EXCEPT
(a) bodily injury.
(b) malicious prosecution.
(c) slander.
(d) invasion of privacy.
a
6. Factors that affect the cost of homeowners policies include which of the following?
I. Construction
II. Deductible amount
(a) I only
(b) II only
(c) both I & II
(d) neither I or II
c
7. Which of the following about buying homeowners insurance is true?
(a) There is no reason to carry insurance greater than 80% of a dwelling's replacement cost.
(b) Deductions for depreciation will be increased if a personal property replacement cost end
c
8. All of the following losses are covered under Section II of an unendorsed Homeowners 3 policy EXCEPT
(a) The homeowner accidentally dropped a bowling ball, injuring another bowler's foot.
(b) A baby sitter slipped and fell at the insured's home, breaki
c
9. Reggie just purchased a home. A friend told him to consider insurance coverage for natural disasters when insuring the home. Losses from all of the following perils are covered under an unendorsed Homeowners 3 policy EXCEPT
(a) tornadoes.
(b) floods.
(
b
10. Which of the following losses would be covered under the medical payments coverage of HO-3?
(a) injuries to another person arising out of the insured's negligent operation of a vehicle
(b) medical payments resulting from the transmission of a communic
c
11. A credit-based score that is highly predictive of future claims cost is an individual's
(a) CLUE score.
(b) insurance score.
(c) loss ratio score.
(d) underwriting score.
b
12. Which of the following statements is (are) true concerning the use of an individual's credit history as an insurance rating factor?
I. Individuals with poor credit histories generally file more homeowners claims than do individuals with good credit hi
c
Chapter 25
1. All the following are in the common policy declarations page of a commercial package policy EXCEPT
(a) a description of the insured property.
(b) the policy period.
(c) the premium paid.
(d) the policy cancellation provisions.
d
2. All of the following are covered under the building and personal property coverage form EXCEPT
the insured's stock & inventory when located inside insured premises
(b) equipment used to service insured premises.
(c) the insured's use of interest in imp
d
3. All the following causes of loss are included in the causes-of-loss basic form policy EXCEPT
(a) fire.
(b) lightning.
(c) explosion.
(d) flood.
d
4. Which of the following
statements is (are) true
concerning full reporting
clause of the value reporting
form?
I. Failure to report accurately suspends coverage.
II. If insurer is able to prove inventory was under- reported, recovery is limited to propo
b
5. Which of the following statements
about the business income coverage
form is true?
(a) Business income is defined as gross
earnings before taxes.
(b) Payroll is excluded unless it is
specifically added.
(c) The form covers loss of business
income and e
c
6. The Building & Personal property coverage form provides several optional coverages. Under 1 of them no deduction is taken for depreciation when settling a loss. This is
(a) extra expense.
(b) agreed value.
(c) replacement cost.
(d) inflation guard.
c
7. XYZ, Inc. would suffer serious financial consequences if either of 2 major customers shut down & could not purchase XYZ products. Which of the following types of consequential loss protection would provide protection against this exposure?
(a) leasehol
d
8. Which of the following statements about the businessowners policy is (are) true?
I. It is designed primarily to meet the insurance needs of large manufacturing firms.
II. It is a package policy designed to meet the basic property and liability needs of
b
9.
The inventory at Frank's business fluctuates. Frank's property insurance requires periodic reporting of inventory values. Frank believes he can save money by under-reporting the inventory. Last period, Frank reported $200,000 when the value was really
c
10.
The exterior walls, the roof, and the plumbing, heating and air conditioning systems of a residential condominium can be insured through the purchase of
(a) condominium unit owners insurance.
(b) condominium association coverage form.
(c) dwelling pro
b
Chapter 26
1. The phrase "general liability" is used to refer to the legal liability of a business arising from all of the following EXCEPT
(a) employee injuries.
(b) products.
(c) liability assumed by contract.
(d) completed operations.
a
2. Liability arising out of work performed by independent contractors is referred to as
(a) contractual liability.
(b) contingent liability.
(c) care, custody, & control liab.
(d) customer's liability.
b
3. A customer was injured when a furnace exploded following its faulty installation by a heating and cooling business. For the heating and cooling business, this is an example of
(a) contingent liability.
(b) completed operations liability.
(c) products l
b
4. Which of the following exposures is covered under a Commercial General Liability Policy with no endorsements?
(a) pollution liability
(b) employment-related practices liability
(c) personal injury liability
(d) aircraft liability
c
5. In addition to the named insured, all of the following are insured's under the Commercial General Liability Policy EXCEPT
suppliers of products to the named insured's business.
(b) employees acting within the scope of their employment.
(c) real estate
a
6. All of the following are coverage options under the physical damage insurance of the Business Auto Coverage Form EXCEPT
(a) comprehensive coverage.
(b) specified causes-of-loss coverage.
(c) collision coverage.
(d) property damage liability coverage.
d
7.
Which of the following statements about workers compensation insurance is (are) true?
I.
Under the workers compensation part of the policy, the insurer agrees to pay the benefits required by the workers compensation law of any state listed in the polic
a
8. Which of the following statements about commercial umbrella policy is (are) true?
The policy is designed to cover only those loss exposures excluded by the underlying insurance contracts.
II. The policy is excess over the required underlying coverages.
b
9. Which of the following losses is generally covered under a commercial umbrella policy?
(a) liability arising out of workers compensation laws
(b) liability arising out of pollution
(c) liability arising out of infringement of a copyright
(d) cost of re
c
10. All of the following statements about liability coverage under the Businessowners Policy are true EXCEPT
(a) Liability arising out of personal injury is covered as part of the insuring agreement.
(b) Medical payments coverage is provided.
(c) The insu
c
11. Which of the following statements about errors and omissions insurance is true?
I. It is purchased by professionals to protect against claims arising for negligent acts, errors, and omissions.
II. Claims arising from fraudulent and dishonest acts are
a