State: Pennsylvania | Category: Property and Casualty Insurance | All tests in this Category:
Practice Test 1 Practice Test 21. What does a 'prior acts' endorsement address in a claims-made policy?
A 'prior acts' endorsement aligns with the retroactive date. It ensures coverage for acts occurring after that date that are first claimed during the policy period, preventing gaps when switching carriers.
2. Can the Pennsylvania Insurance Commissioner impose civil penalties for violations of the Insurance Code?
Regulators may impose civil penalties in administrative proceedings to enforce compliance and deter violations, subject to statutory limits and due process.
3. Which statement about insurable interest is correct?
For property insurance, insurable interest must generally exist at the time of loss. For life insurance, insurable interest must exist at policy inception. This prevents wagering on losses.
4. Piracy coverage in standard Ocean Marine cargo forms is generally:
Piracy is typically encompassed within the standard perils of the sea in many Ocean Marine cargo forms, though endorsements can modify coverage.
5. A material fact is a fact that:
A material fact is information a reasonable insurer would consider important in making underwriting or coverage decisions.
6. 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.
7. Fire Department Service Charge coverage within a Commercial Property policy:
Fire Department Service Charge provides coverage for the cost of fire department services, up to a specified limit, when responding to a covered loss at the insured location.
8. Supplementary Payments under CGL typically include which of the following?
Supplementary Payments cover defense costs and certain bonds; they are paid in addition to the policy limits.
9. Property Damage (PD) liability coverage pays for damage to:
PD liability covers damage to third-party property caused by an at-fault insured, not damage to the insured's own property or personal belongings.
10. Who is considered an insured under CGL?
An insured includes the named insured and other persons or organizations described in the declarations and endorsements.
11. Which clause requires the insurer to obtain the insured's consent before accepting a settlement that could impose obligations on the insured?
Consent to settle provisions protect the insured from settlements that may admit fault or impose obligations beyond coverage. Without consent, the insurer may not settle a claim on behalf of the insured.
12. Estoppel in an insurance contract refers to:
Estoppel prevents a party from asserting a right if their prior conduct or statements have led another party to rely on them in a manner that would be unjust to retract.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. Which statement best describes the indemnity principle in property & casualty insurance?
Indemnity aims to restore the insured to the financial position they had before the loss. It should not allow profit or windfalls beyond the actual loss.
19. Who bears the burden of proving the amount of loss in a typical property claim?
The insured generally has the primary burden to prove the loss amount with documentation, while the insurer investigates and assesses liability.
20. If a building has an 80% coinsurance requirement and replacement cost is $200,000, but the insured carries $120,000, a loss of $20,000 occurs. How much will be paid under coinsurance?
Required amount = 0.80 × 200,000 = 160,000. Payout = (120,000 / 160,000) × 20,000 = 0.75 × 20,000 = 15,000.
21. Money and securities are typically:
Money and securities are generally excluded from standard property coverage and require a separate endorsement or form to be covered.
22. Vocational rehabilitation benefits are designed to:
Vocational rehabilitation assists an injured worker in returning to suitable employment, often through retraining or job placement.
23. Replacement Cost vs Actual Cash Value in a Commercial Property policy is generally:
Most CP policies default to Actual Cash Value unless Replacement Cost coverage is added by endorsement; RC coverage is common for buildings and can be extended to personal property with the right endorsements.
24. 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.
25. A fidelity bond primarily covers losses caused by:
Fidelity bonds protect employers from losses due to employee dishonesty, such as theft or fraud.