California Property & Casualty Insurance License, Practice Exams

Choosing a high deductible and paying small losses out of pocket is an example of which method of handling risk?

1. Retention ✓
2. Avoidance
3. Transfer
4. Sharing

Why: Retention means accepting responsibility for some or all of a loss, such as through deductibles or self-insurance.

Under PAP Part B, a family member struck by a car while walking across the street is:

1. Covered only if the striking vehicle was uninsured, since Part B follows the tortfeasor
2. Not covered, because Part B reaches only persons occupying the covered auto
3. Covered, since family members are insureds for medical payments as pedestrians struck by an auto ✓
4. Covered only under Part A liability, once fault is established against the driver

Why: Part B covers the named insured and family members as pedestrians when struck by a motor vehicle, in addition to occupants of the covered auto.

Grouping similar exposures together and charging all members of the group the same base rate is known as:

1. Schedule rating
2. Judgment rating
3. Retrospective rating
4. Class (manual) rating ✓

Why: Class rating (manual rating) applies the same rate to all members of a homogeneous group of similar risks.

The CGL 'Other Insurance' condition typically makes the CGL coverage:

1. Primary, but excess over certain other coverages in specified situations ✓
2. Always pro rata with all other collectible insurance, regardless of type
3. Void from inception if other insurance covers the loss
4. Always excess over every other policy the insured carries

Why: The CGL is generally primary but becomes excess in specified situations (e.g., certain additional-insured or fire scenarios) per the Other Insurance condition.

Which of the following best describes fraud in an insurance context?

1. A clerical error by the insurer in preparing the declarations page
2. An ambiguous policy provision that is capable of two readings
3. An honest mistake on the application that the applicant did not know was wrong, and would not have made had the true position been explained
4. An intentional act of deception to induce the other party to part with something of value ✓

Why: Fraud is an intentional deception or misrepresentation made to gain an unfair or unlawful advantage.

An insured increases jewelry coverage by scheduling items. Scheduled items differ from blanket Coverage C because they:

1. Are excluded from theft coverage unless a burglar alarm is installed
2. Have lower limits than Coverage C provides for the same class of property
3. Require a mortgage clause naming the lender before the schedule takes effect
4. Are individually listed and valued, often with broader perils and no deductible ✓

Why: Scheduled personal property is individually listed and valued, generally insured on a broader open-peril basis, often with no deductible and above Coverage C sublimits.

A 'per person' limit in a liability policy applies to:

1. Property damage claims only
2. The deductible per claimant
3. The maximum payable for bodily injury to one individual ✓
4. The total of every claim paid during the policy period, across all occurrences

Why: A per-person limit caps the amount payable for bodily injury sustained by any single individual.

Personal property losses under most Homeowners forms are settled on what basis unless replacement cost is endorsed?

1. Market value
2. Replacement cost
3. Agreed value
4. Actual cash value (ACV) ✓

Why: Coverage C personal property is settled on an actual cash value basis (replacement cost minus depreciation) unless replacement cost coverage is added by endorsement.

How many hours of prelicensing study on ethics and the Insurance Code must a new applicant for a life agent license complete, and what must be included?

1. 20 hours, including two hours on annuity suitability standards
2. 12 hours, including one hour of study on insurance fraud ✓
3. 8 hours, including one hour on long-term care insurance
4. 24 hours, including three hours of study on ethics

Why: Sec. 1749(a) requires new applicants for the listed licenses to complete 12 hours of study on ethics and this code, including one hour of study on insurance fraud.

Under the California Standard Form Fire Insurance Policy (§2071), within how many days after a loss must the insured render a signed and sworn proof of loss to the company, unless the time is extended in writing?

1. 60 days ✓
2. 30 days
3. 90 days
4. 45 days

Why: The 'Requirements in case loss occurs' clause requires a sworn proof of loss within 60 days after the loss, unless the insurer extends the time in writing.

Under the PAP, an insured loaning their covered auto to a friend who then causes an accident results in:

1. Liability coverage applying, since a permissive user of the covered auto is an insured ✓
2. Coverage only if the friend is a family member or a resident of the named insured's household at the time of the accident
3. No coverage because the named insured was not driving, leaving the friend's own policy as the only source of recovery
4. Coverage only under Part C, treating the friend as an uninsured motorist

Why: A person using the named insured's covered auto with permission is an insured under Part A, so the policy responds to that permissive user's liability.

Insurance that covers a single, identified item for a specific amount is called:

1. Blanket insurance over multiple items
2. Pro rata insurance shared among carriers
3. Specific (scheduled) insurance ✓
4. Aggregate insurance

Why: Specific/scheduled insurance lists individual items, each with its own assigned limit of coverage.

A homeowner fails to clear ice from their walkway and a visitor slips and breaks an arm. Which negligence element is satisfied by the homeowner's failure to maintain the walkway?

1. Duty
2. Proximate cause
3. Damages
4. Breach of duty ✓

Why: Failing to act as a reasonably prudent person would (clearing the ice) is the breach of the duty of care owed to the visitor.

Under the unendorsed PAP, towing and labor (Part D) coverage is:

1. An optional coverage that must be added, with a stated per-disablement limit ✓
2. Built into Part A liability, so any tow after an accident is paid within the liability limit
3. Included automatically at full cost whenever the policy carries collision, with no separate premium
4. Available only for rental cars the insured hires while the covered auto is being repaired

Why: Towing and labor costs coverage is an optional add-on with a small per-disablement limit (e.g., $25–$75), not automatically included.

An 'aggregate' limit represents:

1. The maximum the insurer will pay for all covered losses during the policy period ✓
2. The sublimit that caps payment for any one injured person
3. The most the insurer will pay for any one claim, however many claims are made in the year
4. The retained amount subtracted from each loss payment

Why: An aggregate limit is the total maximum the insurer will pay for all losses during the entire policy period.

PAP Part A supplementary payments include all of the following EXCEPT:

1. Interest that accrues on a judgment after it is entered, until the insurer pays its limit
2. Bail bonds up to $250 after an accident
3. The full bodily injury damages owed to the claimant ✓
4. Attorney fees and the cost of defending a suit

Why: Supplementary payments include defense, bail bonds, post-judgment interest, and certain expenses, but NOT the damages themselves, which are paid within the liability limit.

A Contractors Equipment floater typically covers:

1. Completed buildings the contractor has turned over to the project owner and been paid for
2. Mobile equipment and tools such as bulldozers and cranes used by a contractor ✓
3. Office furniture and files at the contractor's headquarters
4. The contractor's accounts receivable records

Why: The Contractors Equipment floater is an inland marine form covering mobile tools, machinery, and equipment a contractor uses at various job sites.

In ocean marine, Freight coverage protects:

1. Port fees and wharfage charges billed at each call
2. The cargo owner's anticipated profit once the goods reach market
3. The crew's wages, provisions, and repatriation expenses if the voyage is abandoned midway
4. The shipowner's loss of earnings/freight revenue if cargo is not delivered ✓

Why: Freight insurance covers the shipowner's potential loss of freight income (the money earned for transporting cargo) if a covered loss prevents delivery.

An insurer incorporated in the state where it is transacting business is classified as:

1. Alien
2. Domestic ✓
3. Foreign
4. Reciprocal

Why: A domestic insurer is one organized under the laws of the state in which it is doing business.

When a worker dies from a compensable injury, workers' compensation typically provides:

1. Death/survivor benefits to dependents plus a burial allowance ✓
2. Only reimbursement of medical bills
3. A lump sum equal to lifetime earnings to the estate
4. Nothing, because death ends the claim

Why: Death benefits provide income (survivor) benefits to the deceased worker's dependents and a statutory burial/funeral allowance.

Under the Dwelling Policy, Coverage A applies to which of the following?

1. Detached garages and sheds
2. Household personal property
3. The dwelling itself ✓
4. Loss of rental income

Why: Coverage A is the Dwelling coverage, insuring the described residence structure. Other structures are Coverage B, personal property is Coverage C.

Under the PAP, a family member who owns their own vehicle insured under a separate policy is, for liability while driving that owned vehicle:

1. Covered for physical damage only, because Part D of the named insured's policy automatically follows any auto a resident relative owns
2. Covered under Part C only, so uninsured motorist benefits respond but bodily injury liability does not
3. Generally not covered for that separately owned vehicle under the named insured's pap (owned-but-not-insured exclusion) ✓
4. Fully covered under the named insured's pap, since every resident family member is an insured for liability in any vehicle they drive

Why: The PAP excludes liability for vehicles owned by a family member that are not insured under this policy (other than the named insured's covered autos).

Inland marine transportation coverage frequently insures property:

1. That is permanently attached to the insured's building foundation
2. Only while it is aboard an ocean vessel
3. Only while it sits inside the insured's own warehouse
4. While being shipped by truck, rail, or other land conveyance ✓

Why: Inland marine transportation coverage protects goods in transit over land (and inland waterways), reflecting marine insurance's roots in covering moving property.

An employee is injured in a fight at work. Under Section 3600, compensation is barred if the injury arose out of an altercation in which the injured employee was:

1. Trying to break up the fight
2. Merely present as a bystander
3. The initial physical aggressor ✓
4. Acting in self-defense

Why: Section 3600(a)(7) denies compensation where the injury arises out of an altercation in which the injured employee is the initial physical aggressor.

A producer who exceeds the actual authority granted by the insurer but acts within the authority the public reasonably believes the producer has may still bind the insurer because of:

1. Express authority
2. Subrogation
3. Apparent authority ✓
4. The law of large numbers

Why: Apparent authority can bind the insurer when a third party reasonably relies on the appearance of authority the insurer permitted to exist.

Under California law, an 'underinsured motor vehicle' is one that is insured but for an amount that is:

1. Less than the uninsured motorist limits carried by the injured person ✓
2. Written by a carrier that has since been placed in liquidation, so that CIGA responds to the claim
3. Less than the bodily injury liability limits the injured person carries on their own vehicle
4. Less than the medical expenses the injured person has actually incurred to date

Why: Ins. Code §11580.2(p)(2) defines an underinsured motor vehicle as an insured vehicle whose limits are less than the uninsured motorist limits carried on the injured person's vehicle.

The portion of the rate intended to cover the insurer's expected losses and loss-adjustment expenses is the:

1. Expense loading
2. Pure premium / loss cost ✓
3. Profit factor
4. Reserve

Why: The pure premium (loss cost) component reflects expected claim costs; loading is added for expenses and profit.

What is the stated purpose of the Unfair Practices Article (Cal. Ins. Code Sec. 790)?

1. To regulate insurance trade practices by defining and prohibiting unfair methods of competition and unfair or deceptive acts ✓
2. To establish minimum capital, surplus, and reserve requirements that every admitted insurer in the state must continuously maintain
3. To create and administer the California Insurance Guarantee Association for the protection of policyholders of insolvent insurers
4. To set out the complete licensing, appointment, and continuing-education requirements applicable to life agents and broker-agents

Why: Section 790 states the article's purpose is to regulate trade practices by defining or determining, and prohibiting, unfair methods of competition and unfair or deceptive acts in the business of insurance.

Under Labor Code Section 3351, which of the following is included within the definition of 'employee' for workers' compensation purposes?

1. Only workers who are over 18 years of age
2. Persons who are not citizens or nationals of the United States, and minors ✓
3. Only workers employed full time on a salaried basis by a single California employer
4. Only persons lawfully employed who are citizens of the United States

Why: Section 3351 defines 'employee' broadly to include persons whether lawfully or unlawfully employed, expressly including noncitizens and minors.

When an applicant or licensee learns of a change in background information such as a felony charge or an admission of misappropriation of funds, notification to the commissioner must be in writing and sent within what period?

1. Within 10 days of learning of the change
2. Within 60 days of the date the applicant or licensee first becomes aware of the reportable change
3. Within 21 days of learning of the change
4. Within 30 days of the date the change is learned ✓

Why: Sec. 1729.2(d) requires notification to the commissioner in writing within 30 days of the date the applicant or licensee learns of the change in background information.

The policy provision that states the insurer's promise to pay covered losses is the:

1. Conditions
2. Insuring agreement ✓
3. Definitions
4. Declarations

Why: The insuring agreement is the insurer's core promise describing what coverage is provided in exchange for premium.

Protection and Indemnity (P&I) coverage in ocean marine provides:

1. Freight coverage on the shipowner's earnings if the cargo is never delivered to the consignee
2. Cargo coverage on the goods carried in the holds
3. Hull physical damage to the vessel, its machinery, and its equipment from perils of the sea
4. Third-party liability coverage for the shipowner (injury, cargo damage, etc.) ✓

Why: P&I provides broad third-party liability protection for shipowners, including bodily injury, illness of crew, damage to cargo, and other liabilities not covered by hull policies.

The HO-3 (Special Form) covers the dwelling and personal property on what basis, respectively?

1. Named perils on the dwelling; open perils on personal property
2. Open perils on the dwelling; named (broad) perils on personal property ✓
3. Named perils on both
4. Open perils on both

Why: HO-3 insures the dwelling and other structures on an open-perils basis but covers personal property (Coverage C) on a named-perils (broad form) basis.

An applicant relies on a driver's license and driving experience acquired outside the U.S. or Canada. Under §1861.025, that person is rebuttably presumed qualified as a Good Driver if licensed in the U.S. or Canada for at least:

1. The previous 18 months ✓
2. The previous 6 months
3. The previous 3 years
4. The previous 12 months

Why: Ins. Code §1861.025(d) creates a rebuttable presumption of Good Driver eligibility if the person has been licensed to drive in the U.S. or Canada for at least the previous 18 months and meets the other criteria for that period.

Under §1861.05, an insurer's rate change application is generally deemed approved how many days after public notice, absent a granted hearing request, a Commissioner-initiated hearing, or a threshold rate increase?

1. 60 days ✓
2. 180 days
3. 30 days
4. 45 days

Why: Section 1861.05(c) provides the application is deemed approved 60 days after public notice unless a consumer requests and is granted a hearing within 45 days, the Commissioner sets a hearing, or the increase exceeds the personal/commercial thresholds; in any event it is deemed approved 180 days after receipt absent disapproval or extraordinary circumstances.

Several businesses pool their funds to collectively cover one another's losses without buying commercial insurance. This best illustrates risk:

1. Transfer to an insurer
2. Reduction
3. Avoidance
4. Sharing ✓

Why: Risk sharing or pooling spreads the cost of losses among a group of similarly exposed parties.

Bodily injury caused by a defect in a product after it has left the insured's possession is subject to which aggregate limit?

1. General Aggregate Limit
2. Products-Completed Operations Aggregate Limit ✓
3. Damage to Premises Rented Limit
4. Personal and Advertising Injury Limit

Why: Products and completed operations losses are capped by the separate Products-Completed Operations Aggregate.

Under §10089, the minimum earthquake coverage offered must include contents coverage in an amount not less than which of the following?

1. 25 percent of the covered dwelling loss, or not less than $10,000, at the insured's election
2. 50 percent of the policy limit on the dwelling
3. A flat $10,000, with no tie to the dwelling loss
4. 10 percent of the covered dwelling loss, or not less than $5,000 ✓

Why: Section 10089(a)(2) requires minimum contents coverage of either not less than 10 percent of the covered dwelling loss, or not less than $5,000, as elected by the insurer.

An agent or broker licensed in California who advertises insurance on the internet and transacts insurance in the state must, under Section 1726, display on the website home page (or a prominent link) all of the following EXCEPT:

1. A complete and itemized schedule disclosing the specific commission amounts that the agent or broker earns on each separate line of insurance offered on the website ✓
2. The person's California insurance license number
3. The agent's or broker's full name, shown on the website exactly as it was filed with the commissioner and that has not been disapproved by the commissioner under the fictitious-name provisions of Section 1724.5
4. The word "insurance"

Why: Sec. 1726(a) requires the filed name, state of domicile/principal place of business, California license number, and the word 'insurance'; a commission schedule is not required.

Under §10095, each member insurer participates in the FAIR Plan's writings, expenses, profits, and losses in what proportion?

1. In proportion to its total admitted assets as shown on the annual statement filed with the commissioner for the preceding calendar year
2. In proportion to the number of licensed agents it appoints in the state
3. In proportion to its basic-property premiums written during the second preceding calendar year relative to all insurers in the program ✓
4. Equally with every other member insurer, whatever its size or premium volume, under a flat per-company assessment set by the governing committee

Why: Section 10095(c) provides that an insurer participates in proportion to its premiums written during the second preceding calendar year relative to the aggregate premiums written by all insurers in the program.

A licensee receives a written inquiry from the commissioner relating to a consumer complaint. To 'promptly reply' and avoid possible discipline, the written response must be received by the commissioner no later than:

1. 45 days after the inquiry was mailed or otherwise communicated
2. 10 days after the inquiry was mailed or otherwise communicated
3. 21 days after the inquiry was mailed or communicated ✓
4. 30 days after the inquiry was mailed or otherwise communicated to the applicant or licensee

Why: Sec. 1736.5(b) defines 'promptly reply' as a written response received by the commissioner no later than 21 days after the inquiry was mailed or otherwise communicated.

Under the current Vehicle Code, what is the minimum property damage liability limit for a California auto policy issued or renewed on or after January 1, 2025?

1. $25,000
2. $5,000
3. $10,000
4. $15,000 ✓

Why: Veh. Code §16056(a)(2) requires a property damage limit of not less than $15,000 for policies issued or renewed on or after January 1, 2025.

Under the PAP, a "temporary substitute auto" used while the covered auto is being repaired is treated as:

1. A non-owned auto, which the pap leaves entirely uninsured
2. Excluded outright once the covered auto goes into the shop
3. A covered auto, picking up the coverages that applied to the disabled vehicle ✓
4. Covered for Part A liability only, never for damage to the substitute itself

Why: A temporary substitute for a covered auto out of service (for repair, breakdown, etc.) is covered with the same coverages as the vehicle it replaces.

A homeowner with a finished basement suffers a flood. Under the NFIP, coverage for the finished walls and basement personal property is:

1. Generally excluded or sharply limited ✓
2. Fully covered at replacement cost
3. Covered after a 60-day wait
4. Covered only if contents coverage is doubled

Why: The NFIP generally excludes finished improvements and most personal property located in a basement, providing only limited coverage for certain mechanical equipment.

In a Homeowners policy, neglect by the insured to use reasonable means to save property at and after a loss is:

1. A duty the insurer must prove it waived before denying any part of the claim
2. A covered cause of loss under the additional coverage for property removed from danger
3. Part of Coverage F, payable up to $1,000
4. An exclusion, meaning resulting additional damage is not covered ✓

Why: Neglect is listed among the exclusions; the insured must take reasonable steps to protect property, and damage from failing to do so is not covered.

In commercial trucking, a non-trucking ("bobtail") liability policy covers an owner-operator's tractor when it is:

1. Being used without a trailer or not in the business of the motor carrier (e.g., personal use) ✓
2. Parked at the motor carrier's terminal under load while awaiting the dispatcher's next assignment
3. Hauling a loaded trailer under dispatch for the motor carrier identified in the operating lease
4. Carrying placarded hazardous materials that require the carrier to make a federal MCS-90 filing

Why: Non-trucking/bobtail liability covers the tractor when used outside the motor carrier's business, filling the gap when the carrier's policy does not apply.

The CAN-SPAM Act primarily regulates:

1. In-person sales presentations at a consumer's home or workplace, including the required cooling-off disclosure
2. The issuance and renewal of federal flood policies written by private carriers under the Write Your Own program
3. Commercial email messages, requiring honest headers, a valid opt-out, and a physical address ✓
4. Telephone solicitations, requiring callers to identify themselves and to check a national suppression list

Why: CAN-SPAM sets rules for commercial email, including truthful subject lines and sender information, a functioning opt-out, and inclusion of a valid postal address.

The doctrine of reasonable expectations holds that coverage should be interpreted according to:

1. What a reasonable insured would expect the coverage to provide ✓
2. The strict technical wording most favorable to the insurer
3. The producer's commission schedule
4. The insurer's loss ratio

Why: Under reasonable expectations, ambiguous policy terms are interpreted to honor the coverage a reasonable insured would expect, especially given contracts of adhesion.

A customer slips on a wet floor in the insured's store and is hurt. This is most clearly a claim under:

1. Employee Benefits Liability
2. Coverage A — Premises and Operations ✓
3. Coverage B — Personal and Advertising Injury
4. A surety bond

Why: A slip-and-fall on the insured's premises is a Coverage A bodily injury (premises and operations) claim.

The intentional relinquishment of a known right by the insurer is called a:

1. Abandonment
2. Subrogation
3. Estoppel
4. Waiver ✓

Why: A waiver is the voluntary giving up of a known right; estoppel may then prevent the insurer from asserting that right later.

A building worth $200,000 has an 80% coinsurance clause and is insured for $120,000. A $40,000 loss occurs (no deductible). The insurer pays:

1. $40,000
2. $24,000
3. $32,000
4. $30,000 ✓

Why: Required = 80% × $200,000 = $160,000. Payment = ($120,000 ÷ $160,000) × $40,000 = $30,000.

A limit expressed as 'per occurrence' refers to:

1. The most paid for all damages arising from a single event ✓
2. The most paid for any one injured person's bodily injury
3. The deductible applied to each claim
4. The annual maximum for all claims combined

Why: A per-occurrence limit caps the total amount payable for all damages arising out of a single covered event.

Which Causes of Loss form provides the narrowest coverage, listing named perils such as fire, lightning, windstorm, and vandalism?

1. Broad form
2. Open perils form
3. Basic form ✓
4. Special form

Why: The Basic Causes of Loss form covers a limited list of named perils and provides the narrowest protection of the three forms.

Self-insurance is best defined as:

1. Buying a policy from an offshore carrier that is not licensed in the insured's home state, so no premium tax applies
2. Purchasing an umbrella policy to sit above the primary limits
3. An entity setting aside its own funds to pay for its own anticipated losses rather than transferring the risk ✓
4. Joining a state FAIR Plan so that the residual market, rather than the entity itself, absorbs the cost of each loss

Why: Self-insurance is a risk-retention technique in which an organization budgets and funds its own losses internally instead of transferring the risk to an insurer.

A commercial umbrella policy provides which three basic functions?

1. Excess limits over underlying coverage, broader 'drop-down' coverage for some gaps, and additional protection where no underlying exists (subject to an SIR) ✓
2. Replacement cost valuation, actual cash value settlement, and agreed value coverage on the insured's buildings and stock
3. Property, commercial auto, and crime coverage packaged in one form so the insured needs only a single policy
4. Surety bonds, fidelity bonds, and license and permit bonds, guaranteeing the insured's performance of its contracts and the honesty of the employees who handle its money

Why: Umbrellas provide excess limits over underlying policies, broader coverage that drops down for certain gaps, and coverage for losses not covered by underlying subject to a self-insured retention.

Every individual and organization licensee must file with the commissioner the true name and all fictitious names used. Under Section 1724.5, the commissioner may disapprove a name on which of these grounds?

1. The name has been in continuous use by the licensee since before October 1, 1961
2. The use of the name may mislead the public in any respect ✓
3. The name is shorter than the registered legal name of the controlling organization's parent company
4. The name does not contain the licensee's California license number in at least 12-point type

Why: Sec. 1724.5(b) lists, among grounds for disapproval, that use of the name may mislead the public in any respect.

Experience rating in workers' compensation works by comparing an individual employer's actual losses to:

1. The employer's payroll growth over the past three policy years
2. A benefit schedule published each year by the U.S. Labor Department
3. The expected (average) losses for employers in the same classifications ✓
4. The losses of employers in unrelated industries

Why: Experience rating compares an employer's actual loss experience to the average expected losses for similar employers, producing a credit or debit modification.

In most liability policies, defense costs are:

1. Paid in addition to the limit of liability ✓
2. Deducted from the limit of liability
3. Paid by the insured
4. Never covered

Why: Defense costs are typically paid in addition to (outside) the policy limits in standard liability forms, though some forms erode limits.

After all appointments on a permanent license are terminated and any required broker bond is canceled, what happens to the permanent license?

1. It is suspended for a full year before it may be reactivated
2. It is not canceled but becomes inactive and may be reactivated before it expires ✓
3. It is automatically canceled and must be reapplied for from the beginning
4. It converts to a certificate of convenience until a new appointment is filed

Why: Sec. 1704(b) provides that upon termination of all appointments the permanent license is not canceled but becomes inactive and may be reactivated before expiration by filing a new appointment or bond.

Every California auto liability policy subject to §11580.1 must, among other required provisions, afford insurance not only to the named insured but also to:

1. Any other person using the vehicle with the named insured's permission ✓
2. Anyone who comes into physical contact with the vehicle at the time of the loss
3. Only relatives who reside in the named insured's household
4. Only the drivers listed by name on the declarations page

Why: Ins. Code §11580.1(b)(4) requires the policy to extend coverage to any person using the covered vehicle with the named insured's express or implied permission and within the scope of that permission (the omnibus/permissive-user clause).

Under Section 4610, when an injured employee faces an imminent and serious threat to health, a utilization review decision must be made within:

1. 24 hours after the request, counting only regular business hours
2. 14 days after receipt of the request, the same limit that governs a routine prospective review
3. 72 hours after receipt of the necessary information ✓
4. Five working days from receipt of the request

Why: Section 4610(i)(3) requires expedited UR decisions not to exceed 72 hours after receipt of the information reasonably necessary to decide, where the employee faces an imminent and serious threat to health.

A dockworker loading and unloading ships, injured while working on the pier and over navigable waters, is most likely covered by:

1. The Jones Act, since anyone whose work is performed over navigable water qualifies as a seaman
2. FELA, which Congress extended to cover cargo handling at any interstate terminal
3. The Black Lung Benefits Act, for dust in ship holds
4. The Longshore and Harbor Workers' Compensation Act (LHWCA) ✓

Why: The LHWCA provides no-fault workers' compensation benefits to longshore, harbor, and maritime workers (such as those loading/unloading vessels) who are not seamen.

When the conditions of compensation in Section 3600 concur, what does Section 3602 establish as the injured employee's remedy against the employer?

1. Workers' compensation as the sole and exclusive remedy, with limited statutory exceptions ✓
2. A tort suit against the employer, with workers' compensation available as a backup
3. A free choice between filing for workers' compensation and suing in tort
4. Remedies under the federal Employers' Liability Act instead of state law

Why: Section 3602(a) makes workers' compensation the sole and exclusive remedy against the employer, except as specifically provided (e.g., §§ 3706, 4558, and 3602(b)).

Private crop-hail insurance is distinguished from federal MPCI in that crop-hail:

1. Covers every natural peril capable of reducing a crop yield, including drought and excess moisture
2. Covers only the farm dwelling and its contents
3. Is administered by FEMA alongside the National Flood Insurance Program for agricultural producers
4. Is a private, narrowly focused policy covering primarily hail (and often fire) damage to crops ✓

Why: Crop-hail is sold by private insurers and typically covers hail (often with fire) on a per-acre basis, separate from the broad federal MPCI program.

A claims handler tells a claimant the deadline to sue is far shorter than it really is, hoping the claim will be abandoned. This violates which provision?

1. The provision on misleading a claimant as to the applicable statute of limitations ✓
2. The provision on directly advising a claimant not to retain an attorney
3. The provision on settling for less than advertised material indicated
4. The provision on failing to acknowledge claim communications promptly

Why: Section 790.03(h)(15) lists misleading a claimant as to the applicable statute of limitations.

Section I of a Businessowners Policy provides:

1. Liability coverage
2. Auto coverage
3. Common conditions
4. Property coverage ✓

Why: Section I of the BOP addresses property coverage (building and business personal property), while Section II addresses liability.

To insure a $25,000 diamond ring for all-risk coverage with no special sublimit and often no deductible, the best option is:

1. Increase the Coverage A dwelling limit so the ring falls within the larger amount of insurance
2. Add the inflation guard endorsement
3. Add a Scheduled Personal Property endorsement / Personal Articles Floater ✓
4. Rely on the unendorsed Coverage C jewelry limit

Why: Scheduling the ring on a Personal Articles Floater (scheduled personal property endorsement) provides broad coverage above the Coverage C jewelry sublimit, typically with no deductible.

A captive insurer is:

1. A consumer reporting agency that compiles claim histories for underwriting decisions
2. An insurer owned by, and primarily insuring the risks of, its parent organization ✓
3. An insurer restricted by its charter to writing flood coverage in participating communities
4. A state-run residual market that accepts applicants the voluntary market has declined

Why: A captive is an insurance company formed and owned by a parent company (or group) chiefly to insure the parent's own risks.

If an applicant neither fully qualifies for a permanent license nor is denied within one year of the commissioner's receipt of the application (or issuance of a certificate of convenience), what happens under Section 1670?

1. The applicant is granted a one-year extension as a matter of right
2. The certificate of convenience previously issued to the applicant is automatically converted into a permanent license for the lines originally requested
3. The application is automatically denied without prejudice to filing a new application, absent a good-cause determination by the commissioner ✓
4. The application remains pending indefinitely until acted upon

Why: Sec. 1670 provides that, absent a good-cause determination, the application is automatically denied without prejudice to filing a new application if not resolved within one year.

An agent makes false statements about a competing policy's dividends to convince a client to surrender her existing life insurance and buy a new one. Which unfair practice does this best illustrate?

1. Rebating a portion of the premium or any other valuable consideration not specified in the insurance contract
2. Knowingly making a false entry in an insurer's book or statement with the intent to deceive an examiner
3. Misrepresentation made for the purpose of inducing a policyholder to lapse, forfeit, or surrender insurance ✓
4. Unfair discrimination between two individuals who are in the same class and have an equal expectation of life

Why: Section 790.03(a) prohibits making misrepresentations to a policyholder for the purpose of inducing the policyholder to lapse, forfeit, or surrender insurance (twisting).

Custom furnishings or equipment installed in a pickup or van (e.g., custom murals, special carpeting) under the unendorsed PAP are:

1. Covered automatically up to the actual cash value of the furnishings, with no endorsement needed
2. Covered in full with no dollar limit, because they are permanently attached to the vehicle
3. Generally excluded from Part D unless coverage is added by endorsement ✓
4. Covered only under Part A liability, and only if the equipment injures a passenger

Why: The PAP excludes custom furnishings or equipment in pickups and vans unless coverage is specifically added, often by endorsement.

For a property insurance policy, when must the insured generally have an insurable interest?

1. At the time of loss (typically), and arguably at policy inception ✓
2. Only at the time of the loss, and never at any earlier point
3. Never - insurable interest is a life insurance requirement and has no application to property
4. Only at the time the policy is purchased, and never afterwards

Why: In property insurance, insurable interest must exist at the time of loss because the policy indemnifies actual financial loss to the property. Many insurers also expect it at inception.

Glass breakage to a covered building under broad and special homeowners forms is generally:

1. Covered only under DP-1, which adds breakage of glass as an extended coverage peril on all dwelling forms
2. Part of Section ii liability, since broken glass creates a hazard to visitors on the premises
3. Excluded entirely unless a separate glass floater is purchased for the storm doors and windows
4. Covered, though restricted if the dwelling has been vacant beyond the allowed period ✓

Why: Breakage of glass is a covered additional coverage/peril under broad and special forms, but coverage may be suspended when the dwelling has been vacant beyond the stated period.

An insurance policy is a unilateral contract because:

1. Only the insured makes a legally enforceable promise
2. Only the insurer makes a legally enforceable promise ✓
3. Both parties make legally enforceable promises
4. Neither party makes any promise

Why: In a unilateral contract, only one party, the insurer, makes a legally enforceable promise; the insured is not legally obligated to pay future premiums.

A landlord owns a rental house and wants to insure the building and recover lost rents but does not need contents coverage. Which policy line fits best?

1. Homeowners HO-6 unit-owners form
2. Dwelling Policy with Coverage A and D ✓
3. A Personal Articles Floater scheduling the rental home's contents
4. Homeowners HO-4 contents broad form

Why: The Dwelling Policy is well suited to landlord/rental risks, providing Coverage A on the structure and Coverage D for lost fair rental value, without requiring contents coverage.

An 'additional insured' endorsement on a CGL is most commonly used to:

1. Move the retroactive date back several years, so that occurrences from earlier policy years become reportable under the current claims-made policy without buying a tail
2. Raise the each occurrence and the general aggregate limits carried by the named insured for one job, without having to rewrite the declarations page at each renewal
3. Extend the named insured's policy to cover another party (such as a landlord or project owner) for liability arising from the named insured's work ✓
4. Convert the policy from an occurrence trigger to a claims-made trigger midterm

Why: Additional insured endorsements extend coverage to specified third parties (landlords, GCs, owners) for liability connected to the named insured's operations.

Under the exclusive remedy doctrine, what does an employee generally give up in exchange for statutory workers' compensation benefits?

1. The right to be reinstated to the same job and shift once the treating physician issues a release
2. The right to employer-paid medical care
3. The right to two-thirds wage benefits
4. The right to sue the employer in tort for the work-related injury ✓

Why: The exclusive remedy doctrine means workers' compensation is the employee's sole remedy against the employer; the employee gives up the right to sue the employer in tort in exchange for guaranteed no-fault benefits.