State: California | Category: Property and Casualty Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. During the initial contact after a loss, which action should the adjuster take?
Early contact should establish duties, collect essential information, and preserve evidence to support a fair adjustment.
2. The Contractual Liability Exclusion in CGL generally excludes liability assumed under contract, except for which of the following?
The exclusion typically excludes liability assumed under contract, but insured contracts listed in the policy are often covered.
3. Bodily Injury (BI) liability coverage in an auto policy primarily pays for injuries to which of the following?
BI liability pays for injuries or death suffered by others in an accident for which the insured is legally responsible, not for the insured's own injuries.
4. A supply bond guarantees that a supplier will:
A supply bond guarantees that the supplier will provide the goods or materials as specified in the contract, or the surety will cover the losses up to the bond amount.
5. Under a standard HO-3 policy, Coverage C (Personal Property) is typically written on which basis?
In HO-3, dwellig and other structures are open peril, while personal property (Coverage C) is typically insured on a named-peril basis.
6. A policy shows BI limits of 50/100 and a PD limit of 50,000. What does the middle number (100) represent?
In a split limit notation, the first number is BI per person, the second is BI per accident (total for all injured in the accident), and the third (if present) is PD per accident.
7. Misrepresentation occurs when the applicant provides information that is:
Misrepresentation involves false statements that are material and relied upon by the insurer when issuing the policy. It can lead to denial of coverage or rescission.
8. Which characteristic is essential for an insurer to adequately price risk in property/casualty lines?
A large pool of similar exposure units provides data to predict losses and set premiums accurately.
9. What does a Combined Single Limit (CSL) mean in auto liability?
CSL sets one single limit per accident for both bodily injury and property damage, rather than separate BI and PD limits.
10. Regulations proposed by the California Department of Insurance must be approved before taking effect by which entity?
CA regulations proposed by state agencies must be reviewed and approved by the Office of Administrative Law (OAL) for form and legality before final adoption.
11. A material fact is a fact that:
A material fact is information a reasonable insurer would consider important in making underwriting or coverage decisions.
12. Waiver in an insurance contract is best described as:
Waiver occurs when a party voluntarily gives up a known right, which may affect future enforcement of that right.
13. A probate bond is typically required to:
Probate bonds protect the estate and heirs by ensuring that the fiduciary (executor/administrator) acts honestly and fulfills duties according to law.
14. The California Department of Insurance has authority to examine financial condition of which insurers?
CDI can examine the financial condition of all insurers admitted to transact business in California, including domestic and foreign (foreign) insurers.
15. Who is considered an insured under CGL?
An insured includes the named insured and other persons or organizations described in the declarations and endorsements.
16. A supersedeas bond is used to:
A supersedeas bond allows the enforcement of a judgment to be postponed during an appeal, protecting the appellant from immediate execution of the judgment.
17. Under HO-2 broad form, personal property is insured on which type of peril basis?
HO-2 applies personal property coverage on a named-perils basis, listing specific perils that are covered.
18. Insurable interest in property insurance must exist at what time for a valid claim?
For property insurance, insurable interest must exist at the time of loss to establish a valid claim and ensure the interest is genuine.
19. Which form provides open peril coverage for the dwelling and other structures, while personal property is insured on a named-peril basis?
The Special Form (HO-3) provides open peril coverage for the dwelling and other structures, while personal property (Coverage C) is insured on a named-peril basis.
20. In a hull policy with a 80% coinsurance requirement and a loss of 40 on a hull valued at 100, how much does the insurer pay?
Under coinsurance, payout = loss × (amount of insurance carried / value). Here, 40 × (80/100) = 32.
21. Which statement about the exclusive remedy in workers' compensation is true?
The exclusive remedy doctrine generally prevents the employee from pursuing a civil action for damages for the same work-related injury.
22. What is tail coverage in relation to claims-made professional liability policies?
Tail coverage, or an extended reporting period, allows claims that arise during the policy period to be reported after the policy ends, preserving coverage for events that occurred earlier.
23. Which of the following is NOT typically covered as part of covered injuries & benefits?
Injuries off premises that are unrelated to work are generally not covered, whereas occupational diseases, work-related injuries, and related medical treatment are covered.
24. The exclusive remedy rule in workers' compensation means:
In most systems, workers' compensation is the exclusive remedy for work-related injuries, barring most civil lawsuits against the employer for the same injury.
25. Under Institute Cargo Clauses, which statement best describes the difference between Clause A (All Risks) and Clause B (Named Perils)?
Clause A provides broad coverage for all risks unless specifically excluded; Clause B covers only perils that are named in the policy.