Insurance Policies and Claims: Exceptions, Coverages, and Liabilities, Exams of Insurance law

Download Insurance Policies and Claims: Exceptions, Coverages, and Liabilities and more Exams Insurance law in PDF only on Docsity! Louisiana Adjuster Exam with Correct Answers. The coverage territory of the Business Auto form provides for "worldwide liability coverage" for private passenger autos that the insured: a) Hires, leases, rents or borrows without a driver while outside the United States, its territories and possessions. b) Purchases while outside the United States, its territories and possessions. c) Sells while outside the United States, its territories and possessions. d) Occupies while outside the United States, its territories and possessions. - Correct Answers Hires, leases, rents or borrows without a driver while outside the United States, its territories and possessions.. Which of the following dwelling types would be eligible for the Limited Theft coverage endorsement to their Dwelling policy? - Correct Answers A nonowner-occupied one-family dwelling. Which of the following shows a correct sequence of activities for an adjuster when negotiating a claim? - Correct Answers Acknowledging the claim, then opening a line of communication with the insured or claimant.. A slippery floor is an example of: - Correct Answers A physical hazard. An insured suffers a partial fire loss to his residence. Under an HO-3 policy what insuring agreement is available to pay for temporary, alternate living quarters? - Correct Answers Coverage D Which of the following is the BEST explanation as to the reason insurance policies are called "unilateral contracts"? - Correct Answers Because the insurance company is the only party to the contract that can be sued if they do not meet the terms.. Which of the following terms means "liability through another person"? - Correct Answers Vicarious/Imputed liability All of the following are duties of the insured after a loss, EXCEPT: Answer Choices:Select the Correct Answer a) Promptly hiring a public adjuster to assist in presenting the claim to the insurance company. b) Promptly reporting the loss to the insurer. c) Cooperating with the insurer in the investigation of the claim by providing the information requested by the adjuster. d) Submitting to an examination under oath (EUO) if requested by the insurer. - Correct Answers Promptly hiring a public adjuster to assist in presenting the claim to the insurance company The "liberalization clause" of an insurance policy: a) States that if an insurer decides to broaden its standard policy coverages, then all outstanding policies issued prior to that decision will automatically receive those new coverages at no additional premium. b) States that the insurer retains the right to suspend or cancel the policy at any time during the policy period. c) States that if a mortgage company liberalizes its loan agreement with the named insured, the insurer must be sent the revised wording within 60 days. d) States that if the insurer broadens its underwriting eligibility requirements, all previously denied applicants must be notified within 60 days. - Correct Answers States that if an insurer decides to broaden its standard policy coverages, then all outstanding policies issued prior to that decision will automatically receive those new coverages at no additional premium. Anna is walking through the park one day while unwrapping an ice cream sandwich. It was a windy day, and the ice cream wrapper was covered with partially melted ice cream. Anna doesn't want to look for a trash can to throw away the wrapper so she simply throws it down. The wind takes the wrapper across the park and drops it to the ground just in time for Ulysses to ride onto it with his unicycle. The melted ice cream on the wrapper causes Ulysses' unicycle to slip out from under him and he falls backward, striking his head on the pavement. Several witnesses saw Anna throw the ice cream wrapper into the wind, so Ulysses sues her for his medical bills. Ultimately, Anna was not proven to be negligent and her insurance company did not have to pay damages to Ulysses. What is the most likely reason for the court's finding? - Correct Answers Anna could not have foreseen that the act of throwing her ice cream wrapper into the wind would have resulted in the bodily injuries to Ulysses. Which of the following losses would be covered by the EC peril of "volcanic eruption" under a standard Dwelling form? A) The cracks in the ceiling of the dwelling due to the earthquake preceding a volcanic eruption. B) The damage to an exterior patio from a large bolder that was dislodged due to an aftershock. C) The exterior siding of the dwelling that was ruined by the ash that settled on it from the erupting volcano. D) The cracked foundation of the covered dwelling resulting from the earthquake that caused the volcanic eruption. - Correct Answers The exterior siding of the dwelling that was ruined by the ash that settled on it from the erupting volcano. The exterior siding would be covered because it was damaged by the ash from the volcano. All the other answer choices would not be covered because they are associated with an earthquake. Jamie has submitted a claim against Ron's insurance policy for a loss he has legitimately suffered. This claim is a: A) Third-party property claim. B) First-party liability claim. C) Third-party liability claim. D) First-party property claim. - Correct Answers Third-party liability claim When a "claimant" submits a claim against an "insureds" policy, the claim is a third-party liability claim (even if the claimant suffered a "property damage loss"). Alex has his SUV covered under a standard Personal Automobile policy. He has borrowed a trailer from his friend Josh, hitched it to his SUV, and begins moving some boxes from his house to a new house he recently purchased. After he has unloaded the trailer, he is driving back to his house and loses control of his vehicle, wrapping Josh's trailer around a tree. There is no other insurance covering Josh's trailer and Alex's Part D deductible for "Collision" is $250. His deductible for "Other Than Collision" is $300. Before the accident, the ACV of the trailer was $2,000. The cost to repair or replace the trailer with like kind and quality is $1,800. How much coverage would Alex's policy provide? - Correct Answers $1,500 The policy will pay the LESSER of the ACV or the cost to repair or replace with like kind and quality. This would be $1,800 minus the "Collision" deductible of $250, which leaves us with $1,550. However, the Part D limit of liability specifies that no more than $1,500 will be paid for a non-owned trailer, therefore, the correct answer is $1,500. All of the following are duties of the insurer in case of a loss as specified by insurance policies, EXCEPT: - Correct Answers To pay amounts to the insured or a third-party claimant that are at least as high as the national average of similar claim settlements. Insurance claim settlement amounts are determined by a policy's limit of liability, not a national average that is paid on similar claims. The attempt to restore an insured to his or her previous financial condition before a loss occurred is BEST described as: - Correct Answers Indemnification All of the following statements regarding the Motor Carrier Act of 1980 are correct, EXCEPT: A) The Act requires truckers to certify that they are able to meet financial obligations arising from physical damage to nonowned trailers being used under a written Trailer Interchange agreement. B) The Act requires truckers to certify that they are able to meet financial obligations arising from liabilities of their trucking operations. C) The Act deregulated the commercial trucking industry. D) The Act requires that the MCS-90 endorsement be attached to a Truckers policy to demonstrate proof of financial responsibility for liabilities arising from their trucking operations. - Correct Answers The Act requires truckers to certify that they are able to meet financial obligations arising from physical damage to nonowned trailers being used under a written Trailer Interchange agreement. is correct. When the property covered under an insurance policy is destroyed beyond repair and nothing of value remains, this is known as: - Correct Answers Actual total loss. Which of the following types of property would be covered by Coverage B of a standard, unendorsed Businessowners policy? a) An owned automobile. b) An unscheduled exterior business sign. c) A copy machine that is leased by the covered business. d) An outdoor fence. - Correct Answers A copy machine that is leased by the covered business. The Homeowners forms exclude coverage for loss resulting from "earth movement" but the peril of "earthquake" can be added by endorsement as an insured peril for: - Correct Answers Coverages A, B, and C In order to be covered under Coverage C - Medical Payments of the Commercial General Liability policy, bodily injury must be caused by - Correct Answers An accident Under a liability policy the insurance company will pay damages on behalf of an insured when - Correct Answers When it is established that the insured is legally liable Which of the following statements is NOT TRUE regarding the Dwelling Under Construction endorsement to a Dwelling policy? a) The endorsement must be purchased by the intended occupant of the dwelling when it is complete. b) The available policy limit of the endorsement increases as construction of the dwelling progresses. c) The limit the endorsement will pay at any given time in the construction process is 25%, 50%, or 75%. d) The intended occupant of the dwelling under construction must be the named insured on the Dwelling policy. - Correct Answers The limit the endorsement will pay at any given time in the construction process is 25%, 50%, or 75% In a liability policy, the limits of coverage can be expressed as all of the following, EXCEPT a) Restricted b) Single c) Split d) Aggregate - Correct Answers Restricted There is no such limit a restricted limit. Liability limits can be expressed as a split limit for bodily injury and property damage, or a single limit for both bodily injury and property damage per occurrence. The policy may also contain an aggregate limit which is the most the policy will pay for all claims (bodily injury and property damage) submitted for the entire policy period. The supplementary payments of Section II - Liability of the Business Automobile policy covers the cost of a bail bond up to: - Correct Answers $2,000 Leslie holds a home state adjuster license in Florida and a nonresident adjuster license in Louisiana. A claimant has filed a lawsuit against Leslie for an unfair practice she committed while adjusting a claim in Louisiana and the papers have been served upon the Louisiana Commissioner. How long does the Commissioner have to forward a copy of the service of process to Leslie? - Correct Answers 10 days Imogene has purchased a personal auto policy including Parts A through D. She is driving to work one day and rolls through a stop sign, crashing into the car that had the right-of-way in an intersection. Imogene submits a claim for the accident. Which of the following would NOT be included in her claims payment? a) The injuries incurred by the other driver. b) Damage to the body of Imogene's automobile. c) Damage to the body of the other driver's automobile. d) The transmission problem Imogene was having prior to the accident. - Correct Answers The transmission problem Imogene was having prior to the accident.. Claims adjusters have a close relationship to the legal profession but must be careful not to become involved in the unauthorized practice of law. Which of the following would be an example of an adjuster who is engaged in the unauthorized practice of law? a) The adjuster has transmitted settlement offers on behalf of the principal. b) The adjuster has managed claims in compliance with their state's adopted Unfair Claim Settlement laws. c) The adjuster has expressed an opinion, formed from a factual analysis, regarding the extent of damage or injury. d) The adjuster has drafted the legally binding settlement papers on a claim. - Correct Answers The adjuster has drafted the legally binding settlement papers on a claim. All of the following would be eligible for coverage by the Business Pursuits endorsement to the Homeowners policy, EXCEPT: a) A salesperson who works for "We Sell Great Stuff" who injures a client while conducting a product demonstration. b) An office administrator who injures a client by spilling hot coffee in her lap. c) An instructor for a continuing education course, who is sued by a student who is offended by a joke he or she told while conducting the course. d) An architect employed by "Architects Are Awesome", who draws up plans for a client, but has incorrectly drawn the dimensions for the home, causing it to collapse and cause bodily injury. - Correct Answers An architect employed by "Architects Are Awesome", who draws up plans for a client, but has incorrectly drawn the dimensions for the home, causing it to collapse and cause bodily injury. . Insurance companies often outsource a large percentage of their processes to Third Party Administrators (TPAs). All of the following facts about TPAs are true, EXCEPT a) TPAs can collect premiums from insureds. b) TPAs must be licensed and renew their licenses annually. c) TPAs can adjust and process claims. d) TPAs assume the risk on the policies they handle. - Correct Answers TPAs assume the risk on the policies they handle. Which of the following is NOT a "duty of the insured" after a loss? a) To meet with the adjuster and return the adjuster's phone calls. Which of the following statements regarding the "Pollution Liability Coverage Form" endorsement to a CGL policy is NOT TRUE? a) It provides coverage for bodily injury due to a "pollution incident" that occurred after the retroactive date. b) It can be attached to either an occurrence or claims-made CGL policy. c) It provides coverage for the clean-up costs resulting from a pollution incident that causes environmental damage. d) It provides coverage for property damage to others due to a "pollution incident" that occurred after the retroactive date. - Correct Answers It can be attached to either an occurrence or claims-made CGL policy The authority that is specifically provided to an adjuster (orally or in writing) by the insurance company who has appointed that adjuster is known as: - Correct Answers Express authority Under the "Emergency Program" in all states except Alaska and Hawaii, the National Flood Insurance Program will insure a single-family residence for up to: - Correct Answers $35,000. The DP-3 standard Dwelling form provides: - Correct Answers Open peril coverage on the dwelling and other structures and broad form peril coverage on contents. Under a standardized Dwelling form, a loss by a covered peril for Improvements, Alterations and Additions is covered for up to: - Correct Answers 10% of the Coverage C limit of liability.. Before the acts of September 11, 2001 in the United States, insurers: - Correct Answers Did not exclude coverage, nor did they charge an extra premium to cover damages caused by terrorism Before the acts of September 11, 2001 in the United States, insurers did not exclude coverage, nor did they charge an extra premium to cover damages caused by terrorism. Usually, the damage caused by the terrorism, such as a fire that started after a homemade bomb explodes, would be covered by the peril of fire Liam is a licensed Louisiana adjuster who thoroughly dislikes studying and feels that its unfair that Louisiana requires him to complete continuing education to renew his license. In spite of Liam's strong feelings, he purchases a continuing education course from "CE Courses R Us" to meet his requirements for license renewal. After briefly skimming the course, Liam fails the final exam and is not granted the continuing education hours he needs. Liam is furious and makes false statements on social medial about how "CE Courses R Us" cheated him out of his money. Liam has violated: - Correct Answers The general requirements of the Louisiana Standards of Conduct for Adjusters. Patrice has received a reduced payment for her insurance claim and the explanation states that the reduction was due to the "obsolescence" of the damaged property. Which of the following best describes the reason for the reduction in the claims payment? - Correct Answers The property that was destroyed was obsolete. Most aircraft physical damage (hull) policies are settled on a - Correct Answers Insured value basis. Kelly, Vince, Ed, and Ginny are all staff adjusters. Which of these adjusters is acting appropriately as a fiduciary agent - Correct Answers Ed knows the claimant can't possibly afford to pay for their extensive damages, but he denies the claim anyway because the cause of loss was not covered by the policy.. If a claim is not covered by the policy, the staff adjuster has a fiduciary responsibility to protect the financial interest of the insurer and deny the loss. The fact that the claimant can't afford to pay for the damages has nothing to do with the coverage issue. In which of the following cases of alleged negligence would the defendant not be legally liable? Bill was restoring an antique auto at his auto store's garage when Jeff drove by the garage. Jeff slowed his car and looked over his shoulder to admire the antique car. Suddenly his car struck a telephone pole. Jeff sues Bill for damages. Jack was having a walkway at his business replaced. There were still several large spaces to be filled when a mail carrier, whose back was broken from the fall, sued Jack for damages. Irene purchased several jars of crabapple jam from a gourmet jam and jelly company. She suffered severe gastric disturbance as a result of eating the jam and sued for damages from the jam and jelly company. Susan accidentally dropped a bowling ball on the foot of Lynette at the local bowling alley. Lynette sued Susan for damages. - Correct Answers Bill was restoring an antique auto at his auto store's garage when Jeff drove by the garage. Jeff slowed his car and looked over his shoulder to admire the antique car. Suddenly his car struck a telephone pole. Jeff sues Bill for damages All of the following are a "cause of loss" form, EXCEPT: a)Basic. b)Broad. c)Comprehensive. d)Special. - Correct Answers Comprehensive Willie's Widgets has been earning a large portion of their market share for 10 years. During Willie's 11th year in business, Wynonna's Widgets opens and her superior marketing practices leaves Willie unable to continue in business. Which of the following types of risk caused Willie's loss? - Correct Answers Dynamic risk Which of the following would NOT be determined by a court when an insurer has filed a declaratory judgment action? a)If a particular exclusion would apply to the claim that is the subject of the action. b)If a particular insuring agreement would provide coverage for the claim that is the subject of the action. Products being imported from Great Britain into the United States would be covered by - Correct Answers Ocean marine policies A fur coat that is insured by a Personal Articles Floater is damaged by a pet. Coverage for the coat would be provided because the policy is written on: - Correct Answers An open peril basis. A public adjuster's fiduciary responsibility is to: - Correct Answers The insured. Horatio is a business owner who is part of a business owners group that are buying old commercial buildings in their small city and refurbishing them. Horatio has bought a beautiful historical building made mostly of wood. He installs a sprinkler system right away to prevent a fire. What risk management strategy is Horatio using? - Correct Answers Risk reduction All of the following statements are TRUE regarding the perils of the Homeowners forms, EXCEPT a) Riot or Civil Commotion is covered for both the buildings and personal property under the open perils of the HO-5 form. b) Fire or lightning is a named peril for personal property under the HO-3. c) Explosion is a named peril of the HO-2 form for both dwelling and personal property. d) Fire or lightning is a named peril covering the buildings and other structures under an HO-4 form. - Correct Answers Fire or lightning is a named peril covering the buildings and other structures under an HO-4 form. The 1943 New York Standard Fire policy provides for an insured to bring a lawsuit to recover a loss from the insurer within _________; the Louisiana Standard Fire Policy amends this to allow the insured to bring a lawsuit against the insurer to recover a loss ___________. - Correct Answers One year; two years All of the following statements describe actions that Louisiana adjusters should not engage in, EXCEPT: a) Adjusters may not act as public adjusters. b) Adjusters cannot acquire salvage and sell it for financial gain. c) Adjusters should not explain policy coverage to the insured, that is the job of the agent/producer only. d) Adjusters working for insurers cannot accept compensation from a contractor employed by the insured. - Correct Answers Adjusters should not explain policy coverage to the insured, that is the job of the agent/producer only. For a building to be eligible for a Flood insurance policy issued by the NFIP, it must be resistant to all the following, EXCEPT: a) Floatation. b) Collapse. c) Lateral movement. d) Rotation. - Correct Answers Rotation. All of the following would be excluded by the basic cause of loss form under a Commercial Property policy, EXCEPT a) Damage caused to the covered buildings electrical system by a power surge. b) A water pipe that bursts and damages the interior of the building. c) Water leaks from the sprinkler system in the building, causing wall and floor damage. d) Damage to flooring that occurs when water seeps from the dishwasher in the corporate kitchen for several months. - Correct Answers Water leaks from the sprinkler system in the building, causing wall and floor damage.. Mike purchased a policy several years ago to cover him for liability. Last year, Mike determined that the limits of his liability policy were not high enough to cover him adequately should a loss occur, so he purchases an excess liability policy to provide more coverage. Mike experiences a loss, and discovers that his underlying liability policy had expired before the loss, but his excess liability policy is still in effect. How will this loss be paid? - Correct Answers It will be denied, due to nonconcurrency.. The claim will be denied, due to nonconcurrency. If the underlying liability policy was expired, the excess policy will not be triggered to pay anything on the claim. A Farm Liability policy provides each of the following coverages, EXCEPT: a) Bodily injury and property damage. b) Personal injury and advertising injury. c) Medical payments. d) Professional liability. - Correct Answers Professional liability. The pre-defined amount of an insurance claim that is paid by the policyholder is known as: - Correct Answers The deductible Which of the following statements is NOT true concerning the Law of Large numbers? A) Insurance is based on the Law of Large Numbers. B) The larger the sample group, the more accurate the results. C) The larger the sample group, the more predictable results. D) The size of the sample group is not relevant to the accuracy of the results. - Correct Answers The size of the sample group is not relevant to the accuracy of the results. The traditional definition of actual cash value (ACV) is - Correct Answers Replacement cost minus depreciation B) Consideration. C) Offer and acceptance. D) Legal purpose. - Correct Answers Legal purpose A standard Homeowners policy is best described as: - Correct Answers A package policy that provides both property and liability insurance.. Insurance adjusters have the "power to bind". Which of the following statements best describes what this means? A) The adjuster never acts with self-interest. B) The principal is bound to the decisions of the adjuster. C) Adjusters should not profit from a claim without the permission of the claimant. D) If a conflict of interest exists, the adjuster should not work on that claim. - Correct Answers The principal is bound to the decisions of the adjuster.. Soraya is a company adjuster who is investigating a third-party claim submitted by Chris. Soraya is a new adjuster and wants to be sure she does not waive any of the insurer's rights under the policy so she sends a reservation of rights letter to Chris. Which of the following statements is true in this situation? A) Soraya was correct in taking this action because as a fiduciary she must act in the best interest of her principal. B) Soraya should not have taken this action because a non-waiver agreement is appropriate notice that should be sent to third-party claimants. C) Soraya was correct in taking this action because sending the reservation of rights informs the claimant that they must comply with their required duties as indicated in the policy conditions. D) Soraya should not have taken this action because a third-party claimant has no rights or obligations under the policy. - Correct Answers Soraya should not have taken this action because a third-party claimant has no rights or obligations under the policy.. Reservation of rights documents are only used with first-party claims because third-party claimants have no obligations under the policy. To obtain an insurance agent, producer, or adjuster license, an applicant must be: - Correct Answers At least 18 years of age An HO-5 form provides which of the following coverages for dwellings and their contents? A) Broad form perils for buildings and open peril coverage for personal property. B) Open peril coverage for buildings and personal property. C) Open peril coverage for buildings and broad form coverage for personal property. D) Name peril coverage for both buildings and personal property. - Correct Answers Open peril coverage for buildings and personal property.. An insured has her property covered under an "open peril" cause of loss form. She experiences a loss. The burden of proof that the peril that was the actual cause of loss in the claim, lies with: - Correct Answers The insurance company. When an insured business is held liable for the acts of a subcontractor they have hired, it is known as: - Correct Answers Vicarious liability. The "Business Income" additional coverage of the standard Businessowners policy provides coverage for "ordinary payroll coverage" for - Correct Answers 60 days unless the insured selects and schedules a different amount. The insurance company pays for only the loss of business income sustained during the restoration period that takes place within 12 consecutive months after the date of the covered loss or damage. However, it pays for ordinary payroll expenses for only 60 days after the date of loss unless a higher number of days is on the declarations. All of the following statements are true regarding a lawyer who is acting in the capacity of an adjuster, EXCEPT: A) Lawyers may act in the capacity of an adjuster for an insurance company without an adjuster license. B) Lawyers can never act in the capacity of an adjuster without being subject to the adjuster licensing requirements of the state(s) in which they are working. C) Lawyers who are acting the capacity of an adjuster for an insurance company are subject to all the laws and regulations to which the insurance company is subject. D) Lawyers for insurance companies work closely with company adjusters to carry out the procedures necessary to settle claims. - Correct Answers Lawyers can never act in the capacity of an adjuster without being subject to the adjuster licensing requirements of the state(s) in which they are working.. What type of liability is specifically imposed by statutory law? A) Attractive nuisance. B) Imputed liability. C) Strict liability. D) Intentional tort. - Correct Answers Strict liability A written modification of an insurance policy is known as a(n): - Correct Answers Endorsement form The first insurance policy to have its wording standardized by law is: - Correct Answers The 1943 New York Standard Fire policy a) Coverage for the buildings. b) Coverage for the negligence of the insured. c) Coverage for the business personal property. d) Coverage for office equipment. - Correct Answers Coverage for the negligence of the insured When an insured purchases the "Automatic Increase in Insurance" endorsement to their Dwelling policy, they can select which of the following percentages of increase? - Correct Answers 4, 6, or 8%. Following a hearing, what is the monetary penalty that may be imposed by the Louisiana Insurance Commissioner for using deceptive or unfair methods of competition? a) A statewide public reprimand by the Commissioner, a fine of $5,000 and loss of license. b) Loss of license and a fine of $500. c) Loss of license and a fine of $100. d) A fine of up to $1,000 for each act up to a total of $100,000 if the person did not know the act was a violation. - Correct Answers A fine of up to $1,000 for each act up to a total of $100,000 if the person did not know the act was a violation.. If a person is found guilty of using unfair methods of competition or deception, the Commissioner may order the person to cease and desist from the method of competition, act or practice and/or order a fine of up to $1,000 for each act up to a total of $100,000 if the person did not know the act was a violation. If the person know or reasonably should have known the act was a violation, the fine may be up to $25,000 for each act, up to a total of $250,000 in any six month period and/or suspension or revocation of the person's license. Which of the following most closely describes a claim reserve? a) An estimate of all losses paid to date on claims. b) An expectation of losses incurred but not yet reported. c) An amount expected to be ultimately paid on an open claim. d) An amount set aside to pay a claimant's attorney. - Correct Answers An amount expected to be ultimately paid on an open claim The duties of the insured after a loss are included in insurance policy language to: - Correct Answers Assist in the adjuster's investigation of the claim. Adrianna owns a dwelling that is covered under a DP-3 form and located in a rural area close to a small wooded area. While grazing outside of Adrianna's picture window one day, a deer sees its own reflection and jumps through the picture window to scare off the "other" deer. Once inside the dwelling, the deer realizes he is trapped and causes significant damage to the walls, floor and furniture. Adrianna is covered for $100,000 under Coverage A and for $50,000 under Coverage C. Which of the following statements is TRUE regarding this loss? a) The entire claim would be denied by the insurance company. b) The insurer would pay RCV on the dwelling and ACV for the personal property. c) The insurer would pay RCV on both the dwelling and the personal property. d) The insurer would deny the claim for the personal property and pay the loss to the dwelling on an RCV basis - Correct Answers The insurer would deny the claim for the personal property and pay the loss to the dwelling on an RCV basis.. Because the DP-3 is an open peril form for dwelling coverage, the loss to the dwelling is not excluded. However, the personal property coverage is provided on a named perils basis and this type of loss is not named in the policy, therefore it would not be covered. A Personal Automobile policy provides liability coverage on a single limit basis for $100,000. A covered accident caused by Mr. Jones involves a $75,000 liability judgment to Mr. Allen for his injuries and $25,000 liability judgment for the damage to his car. In addition, $20,000 in legal bills are incurred defending the insured. The company will pay: - Correct Answers $120,000. Legal expenses are in addition to the limit of liability. The single limit covers both bodily injury and property damage liability. Therefore, the policy will pay the $100,000 in damages and the cost to defend the insured in the lawsuit for a total of $120,000. An insurance contract is considered to be an aleatory contract. All of the following are characteristics of an aleatory contract, EXCEPT: a) The contract is contingent upon uncertain events. b) The contract allows the insurer to receive from an individual insured, much more money in premiums than is paid out in claims. c) The contract allows the insured to receive a return in claims payments that is nearly equal to the amount paid in premium. d) The contract allows an individual insured to receive much more in claims payments than was paid in premiums. - Correct Answers The contract allows the insured to receive a return in claims payments that is nearly equal to the amount paid in premium.. The Home Day Care Coverage endorsement imposes a policy year aggregate limit for liability and medical payments coverage combined. The amount of this limit: - Correct Answers Corresponds to the Coverage E limit shown on the Declarations page of the policy.. Chris is insured through Binders Keepers Insurance Company and his policy period ends in 12 months. However, Chris has decided that he wants to cancel his policy in order to purchase another one from a company that advertises with cute commercials on television. Chris calls his agent to cancel the policy and is informed that the unearned premium (UEP) on the cancelled policy will be returned to him by mail in a couple of weeks. When Chris receives the check, he is surprised to find that it's made out for less Absolute or strict liability is liability without fault. It is occasionally imposed by statute on those participating in specified activities that are considered especially hazardous. For example, in some states, ownership of certain dog breeds places strict liability upon the owners in case of any damage or injury to others. Holden is a staff adjuster for Binders Keepers, Inc., an insurance company. He has been engaged in an investigation of a third-party claim against an insured. Holden has advised his principal, Binders Keepers, Inc. that while performing the investigation, he found that it is very likely that the insured was not negligent and probably would not be found liable for the claim if the third-party decided to bring a lawsuit. Holden: - Correct Answers Is engaging in the unauthorized practice of law Mitch is covered by a Personal Auto policy. One night a cow breaks through a fence and is standing on the roadway. Mitch does not see the cow until it is too late and he hits it with his vehicle. Coverage for the damage to Mitch's vehicle: - Correct Answers Is provided under Part D - Other Than Collision. This loss is provided by Part D - Other Than Collision. Although, the definition of the "collision" coverage states that it will cover an impact of the insured's vehicle with another vehicle or object, the perils specifically listed in the "Other Than Collision" section determines that direct loss by contact with a bird or animal is covered under "Other Than Collision". Which of the following sections of an insurance policy contains language to assist an insurance company in managing moral and morale hazards? a) The conditions. b) The exclusions. c) The declarations. d) The insuring agreement. - Correct Answers The exclusions A vehicle rolled over exiting the interstate. The insured carries collision coverage with a $1,000 deductible and other than collision coverage with a $500 deductible. The damage to the vehicle is $2,000. What amount is the insurer responsible to pay? - Correct Answers $1,000. A vehicle that rolls over and sustains damage is considered to be a collision claim versus an other than collision claim. The damage to the vehicle is $2,000 and the deductible is $1,000. Therefore, the insurer is liable for $1,000. The "Free of Particular Average" clause of an Ocean Marine policy eliminates all coverage for partial losses to cargo unless caused by all of the following, EXCEPT: a) Stranding. b) Jettison. c) Fire. d) Collision. - Correct Answers Jettison.. The NAIC Model Unfair Claim Settlement Practices Act specifies that the insurance company must provide the proper claim forms with a reasonable explanation of how to use them to the claimant within: - Correct Answers 15 calendar days of the request.. Pete's business is covered by a standard Businessowners policy. He has been accused by a customer of displaying inaccurate pricing on his website. Which of the following statements best describes how this claim would be handled by the BOP? a) Pete has committed a crime so the BOP would not respond because criminal activity is excluded. b) Coverage for any claim caused by a wrong description of the price of goods, products or services is covered by the BOP for up to $10,000. c) Coverage for any claim caused by a wrong description of the price of goods, products or services is excluded by the personal and advertising injury coverage of the BOP. d) Pete is free to advertise any price on the website and change that price later, so now claim can be filed for this act. - Correct Answers Coverage for any claim caused by a wrong description of the price of goods, products or services is excluded by the personal and advertising injury coverage of the BOP. The penalty for failure to satisfy a coinsurance requirement of a property insurance policy is: - Correct Answers Only a portion of a partial loss will be paid.. Which of the following is TRUE regarding nuclear energy loss coverage under a Personal Automobile policy? a) The personal automobile policy will provide coverage for bodily injury or property damage caused by the insured's nuclear energy losses, but only if the nuclear energy loss occurs on a public roadway. b) The personal automobile policy will provide coverage for bodily injury or property damage caused by the insured's nuclear energy losses, if the limits of the insured's nuclear energy liability policy are exhausted. c) The personal automobile policy will not provide coverage for bodily injury or property damage caused by the insured's nuclear energy losses. d) The personal automobile policy will not provide coverage for bodily injury or property damage caused by the insured's nuclear energy losses, unless the nuclear energy loss is not radioactive. - Correct Answers The personal automobile policy will not provide coverage for bodily injury or property damage caused by the insured's nuclear energy losses.. Which of the following is NOT covered by liability coverage under a Homeowner policy? a) A snowmobile in a park. b) A golf cart on a golf course. c) A runaway lawnmower. d) Motorized wheelchair. - Correct Answers A snowmobile in a park.. The only owned recreational vehicle that is covered while off the insured's covered location, is a golf cart while playing golf. Vehicles pertaining to the service of the premises, or for use by the handicapped (such as a wheelchair) are covered.