1. Under the Personal Automobile Policy, trailers would NOT be covered when towed by a
A. private passenger vehicle
B. pickup truck used on a farm
C. customized van taken on a vacation
D. dump truck used to haul trash Correct
Explanation
Under a Personal Automobile Policy (PAP), trailers are typically covered when towed by vehicles designed for personal use, such as private passenger vehicles, pickup trucks, or vans, as long as they are used for personal purposes. A private passenger vehicle (A) is a standard covered vehicle under PAP, so trailers towed by it are covered. A pickup truck used on a farm (B) is considered a personal use vehicle under PAP, assuming it’s not primarily used for commercial purposes, so trailers are covered. A customized van taken on a vacation (C) qualifies as a personal use vehicle, so trailers towed by it are covered. A dump truck used to haul trash (D) is a commercial vehicle not typically covered under a standard PAP, which is designed for personal use vehicles. Therefore, trailers towed by a dump truck are not covered.
2. What level of agent authority is given when the principal gives the agent authority in writing?
A. Express Correct
B. Implied
C. Apparent
D. Direct
Explanation
Express authority is granted when the principal explicitly, often in writing, authorizes the agent to act on their behalf, such as in a written contract. Implied authority (B) is not explicitly stated but inferred from the agent’s role or actions necessary to carry out express authority. Apparent authority (C) arises when a third party reasonably believes the agent has authority based on the principal’s actions, not necessarily in writing. Direct authority (D) is not a standard term in agency law. Since the question specifies authority given in writing, express authority is the correct choice.
3. When an insured and an insurer CANNOT agree on the amount of indemnification, what stipulation provides either party with an assessment of the loss?
A. Arbitration
B. Coinsurance
C. Subrogation
D. Appraisal Correct
Explanation
The appraisal process is used in insurance policies when the insured and insurer cannot agree on the amount of a loss, with each party selecting an appraiser to determine the loss value, often involving an umpire if needed. Arbitration (A) is a broader dispute resolution process that may involve legal issues beyond loss valuation. Coinsurance (B) requires the insured to carry adequate insurance relative to property value, unrelated to loss assessment disputes. Subrogation (C) involves the insurer recovering losses from a third party responsible for the damage, not resolving disputes over loss amounts.
4. The director may deny, suspend, revoke, or refuse to renew a license for all of the following actions EXCEPT
A. demonstrating incompetence in the conduct of business
B. having been arrested on a felony charge Correct
C. having admitted to committing fraud
D. providing incorrect, misleading, or materially untrue information in the license application
Explanation
Insurance regulators can deny, suspend, revoke, or refuse to renew a license for incompetence in business conduct (A), which shows an inability to perform duties ethically or effectively; admitting to fraud (C), indicating dishonesty; or providing incorrect, misleading, or untrue information on a license application (D), violating licensing integrity. Simply being arrested on a felony charge (B) does not automatically result in license action, as an arrest is not a conviction or admission of guilt; a conviction or proven misconduct is typically required.
5. A special limitation applies to business income losses under a businessowners policy (BOP). This limitation applies to losses resulting from loss or damage to
A. foundations and retaining walls
B. security systems
C. electronic media and records Correct
D. outdoor signs
Explanation
Under a Businessowners Policy (BOP), a special limitation applies to business income losses resulting from loss or damage to electronic media and records (C), which can disrupt business operations and are subject to specific coverage limits, often 60 days or other time-based restrictions. Foundations and retaining walls (A) are typically covered under property damage but not specifically tied to business income loss limitations. Security systems (B) are not highlighted as a special limitation for business income losses. Outdoor signs (D) may have separate coverage limits but are not typically linked to business income loss limitations in a BOP.