Colorado Property & Casualty Insurance License, Practice Exams

Good standing for the examination exemption may be evidenced by a certification from the prior state or by:

1. The NAIC producer database records ✓
2. An affidavit from the applicant
3. A letter from the applicant's former employer
4. A criminal background check

Why: C.R.S. § 10-2-403(1)(a)(II)(B) accepts the producer database records maintained by the national association of insurance commissioners or its affiliates, showing the producer is or was licensed in good standing for the line requested. The alternative at (II)(A) is a certification from the prior state itself. Note the exemption covers prelicensing EDUCATION as well as the examination.

The implied warranty of 'no deviation' means:

1. The cargo cannot be repacked or transshipped en route
2. The premium cannot be adjusted once the voyage begins
3. The vessel must not depart from the customary or agreed route without necessity ✓
4. The vessel must sail under the flag of registry named in the declarations

Why: The warranty against deviation requires the vessel to follow the customary or agreed-upon route; unjustified departure can void coverage.

Which statement about no-fault auto insurance CONCEPTS is generally correct?

1. No-fault systems let injured parties recover certain economic losses from their own insurer regardless of fault ✓
2. No-fault means no one pays for accident losses until a court or arbitration panel first assigns fault to one of the drivers
3. No-fault eliminates the need for liability coverage entirely, so states adopting it repeal their financial responsibility laws
4. No-fault applies only to property damage claims, with every bodily injury claim still settled through the tort system

Why: Under no-fault concepts, an injured person's own insurer pays specified personal injury/economic losses regardless of who caused the accident, with limits on lawsuits.

A producer who recommends a product the client does not need solely to earn a larger commission has most clearly breached the duty of:

1. Suitability and fair dealing ✓
2. Salvage and abandonment rights
3. Coinsurance and loss sharing
4. Subrogation and recovery rights

Why: Recommending unsuitable products for the producer's own gain violates the ethical duties of suitability and fair dealing owed to the client.

Which marine coverage would insure a bank's exposure for valuable customer securities documents lost in a fire on premises?

1. Ocean marine freight coverage on the shipowner's earnings
2. Ocean marine cargo insurance on goods in transit
3. Hull and machinery coverage
4. Valuable Papers and Records floater ✓

Why: The Valuable Papers and Records inland marine floater covers the cost to reconstruct or replace important documents and records destroyed by a covered peril.

A mutual insurer is owned by its:

1. Policyholders ✓
2. Reinsurers
3. Producers
4. Stockholders

Why: A mutual insurer is owned by its policyholders, who may receive policy dividends from divisible surplus.

The PAP towing and labor costs coverage pays for labor:

1. For accident-related medical transport
2. Only when performed at the place of disablement ✓
3. Anywhere repairs are needed regardless of location
4. For routine maintenance at the shop

Why: Towing and labor costs coverage pays towing plus labor, but only labor performed at the place where the vehicle was disabled.

The Valuable Papers and Records floater covers:

1. Cost to research, replace, or restore lost documents and records ✓
2. Money and securities kept in the insured's office safe
3. Computer hardware and the media stored in it
4. The insured's legal liability for losing a client's documents

Why: Valuable Papers and Records coverage pays the cost to research, reconstruct, or replace damaged or destroyed written, printed, or otherwise inscribed documents and records.

Under the PAP, if the named insured dies, coverage is typically extended to:

1. No one, because the policy terminates immediately on the date of the named insured's death
2. The surviving spouse if a resident and the legal representative while acting as such, for a limited period ✓
3. Any heir named in the will, for an unlimited period, because ownership of the covered auto passes through the estate
4. Only the funeral director or other party holding custody of the vehicle until the estate is settled in probate

Why: Part F's death provision continues coverage for the surviving resident spouse and the deceased's legal representative (and certain custodians) for a limited time.

An applicant was declined by a different carrier last month. May a Colorado insurer refuse cover on that basis alone?

1. No; refusing solely because another insurer declined is an unfair practice ✓
2. Yes, if the earlier declination was for a material misrepresentation
3. Yes, provided the insurer documents the earlier declination in the file
4. No, unless the two insurers are under common ownership

Why: 10-3-1104(1)(f)(XVII) forbids refusing to insure a person solely because another insurer refused to write, cancelled or refused to renew a policy naming that person. The subparagraph does preserve one thing: an insurer may still terminate an excess policy where the insured fails to maintain the required underlying insurance.

A products liability claim alleges a manufactured part injured a user three years after sale. This is covered under the CGL as:

1. Premises and operations, because the part injured the user away from the insured's premises
2. Damage to premises rented to the insured, subject to the fire damage sublimit
3. Coverage B, because selling a defective part is an advertising injury offense
4. Products and completed operations, subject to that separate aggregate ✓

Why: Injury from a sold product is a products liability claim subject to the Products-Completed Operations Aggregate.

Suitability in insurance sales means a producer should:

1. Always place the client with whichever carrier pays the highest commission on that line
2. Recommend products appropriate to the client's needs and circumstances ✓
3. Offer only the one product line the producer knows best, whatever the client actually owns
4. Avoid asking about the client's finances, since gathering that detail creates a fiduciary duty

Why: Suitability requires that recommendations fit the client's actual needs, financial situation, and objectives rather than the producer's compensation.

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.

Personal property is covered worldwide under a Homeowners policy, but property usually at another residence is limited to:

1. The full 100% of the Coverage C limit
2. No coverage at all once off premises
3. The Coverage B other structures limit
4. The greater of 10% of Coverage C or $1,000 ✓

Why: Personal property usually kept at a residence other than the insured location is limited to the greater of 10% of Coverage C or $1,000.

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.

An insurance agency must register with the commissioner the name of every natural person who:

1. Is employed by the agency in any capacity whatsoever
2. Holds an ownership interest of any size in the agency
3. Is acting as and licensed as a producer for it ✓
4. Receives commission income from the agency's business

Why: C.R.S. § 10-2-406(2)(a) reaches every member, officer, director, stockholder, owner or employee who is BOTH acting as and licensed as an insurance producer. Both limbs matter: an owner who never sells is outside it, and so is an employee who is unlicensed. A fee under § 10-2-413 is payable for each registration.

Mobile agricultural machinery and equipment under a farm policy refers to:

1. Livestock such as dairy cattle, hogs, and horses kept for breeding or sale
2. Harvested grain and seed held in silos and storage bins on the premises
3. The farm dwelling and its attached structures
4. Tractors, combines, and similar equipment used in farming operations ✓

Why: Mobile agricultural machinery (tractors, combines, harvesters) is a category of covered farm personal property, often insured for direct physical loss.

The Automatic Increase in Insurance (inflation guard) endorsement on a dwelling policy does what?

1. Converts an actual cash value dwelling policy to replacement cost settlement at the next renewal
2. Periodically increases the Coverage A limit to keep pace with inflation ✓
3. Automatically adds theft coverage on the dwelling once the limit has risen above its original amount
4. Lowers the premium each year in which no claim is filed

Why: The inflation guard / automatic increase endorsement raises the dwelling limit at set intervals to help the amount of insurance keep up with rising construction costs.

Electronic equipment such as a permanently installed aftermarket sound/navigation system not factory-installed is, under the unendorsed PAP, generally:

1. Subject to exclusion or limitation unless added by endorsement ✓
2. Paid under Part B medical payments rather than Part D physical damage
3. Covered in full under Part D, just like factory-installed equipment
4. Always replaced with a new unit of like kind

Why: The PAP limits or excludes certain non-factory permanently installed electronic equipment; broader coverage requires an endorsement.

Fair dealing and good faith in claims handling require an insurer and producer to:

1. Avoid all direct contact with the insured once defense counsel has been retained on the claim file
2. Pay only the largest claims in full and settle the smaller ones for a fraction of their value
3. Delay payment on every claim as long as the statute of limitations allows, to preserve reserves
4. Treat the insured honestly, investigate fairly, and not unreasonably deny valid claims ✓

Why: The duty of good faith and fair dealing requires honest, prompt, and fair treatment of insureds and reasonable handling of valid claims.

A dispute arises between an insurer and its policyholder. Whom does the producer who solicited the application represent?

1. The insured, as the party who paid the premium in full
2. Both parties equally, subject to a duty of impartiality
3. Neither party, unless a written agency agreement says otherwise
4. The insurer, and not the insured or any beneficiary ✓

Why: 10-2-401(1) settles this as a matter of law: a producer who solicits or negotiates an application on behalf of an insurer "shall be regarded as representing the insurer and not the insured or any beneficiary" in any controversy between them. It does not turn on who paid, or on what the paperwork says.

A manufacturer being held liable for injury caused by a defective product, without the injured party needing to prove negligence, is an example of:

1. Comparative negligence
2. Strict liability ✓
3. Contributory negligence
4. Vicarious liability

Why: Strict liability in product cases holds the manufacturer responsible for defective products regardless of the level of care exercised.

Injuries to civilian federal government employees (such as a postal or federal agency worker) are covered under:

1. FELA, since the employer is federal
2. The Defense Base Act, for postal routes
3. The Federal Employees' Compensation Act (FECA) ✓
4. The LHWCA, for federal facilities

Why: FECA provides workers' compensation benefits to civilian employees of the federal government for job-related injuries and illnesses.

The maximum amount an insurer will pay for any one accident, regardless of the number of claimants, is the:

1. Per-person limit
2. Aggregate limit
3. Split limit
4. Per-accident limit ✓

Why: A per-accident limit is the most the insurer pays for all damages from one accident combined.

Under a valued policy, the amount paid in the event of a total loss is:

1. The replacement cost of the property at the time of the loss
2. The amount stated (agreed) in the policy regardless of actual value ✓
3. The salvage value of whatever remains after the loss has occurred
4. The actual cash value at the time of loss, being replacement cost less depreciation

Why: A valued policy pays the agreed-upon amount stated in the policy upon total loss, common for fine art and antiques.

Most workers' compensation laws impose a 'waiting period' before income (indemnity) benefits begin. The purpose is to:

1. Give the employer time to contest compensability
2. Delay medical benefits until a doctor files a report
3. Let the state audit the employer's payroll records
4. Avoid paying wage benefits for very short, minor absences ✓

Why: The waiting period (commonly a few days) means no wage-loss benefits are paid for minor, brief absences; medical benefits, however, usually begin immediately.

A policy may be issued without medical payments coverage only if the named insured rejects it:

1. Orally, with a contemporaneous note made in the claim file
2. In writing and witnessed by the appointed producer
3. On a rejection form the commissioner has prescribed
4. In writing, or in the medium the application was taken in ✓

Why: C.R.S. 10-4-635(1)(b) allows the named insured to reject medical payments coverage in writing or in the same medium in which the application for the policy was taken. By contrast, the UM rejection in 10-4-609(1)(a)(II) must be in writing.

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.

What does the boycott, coercion and intimidation provision require before conduct becomes an unfair method of competition?

1. Actual proof that a competitor withdrew from the market
2. An agreement or concerted action tending to restrain trade or create a monopoly ✓
3. A finding by the commissioner after a contested hearing
4. That the conduct was directed at a domestic rather than foreign insurer

Why: C.R.S. s 10-3-1104(1)(d) targets "entering into any agreement to commit, or by any concerted action committing" any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance. A tendency is enough; actual market damage need not be proved.

Premiums belonging to insurers and unearned premiums belonging to insureds, received by a producer, must be treated:

1. As the producer's own funds once commission is earned
2. In a fiduciary capacity ✓
3. As a trust only if the sum exceeds $1,000
4. According to the producer's agency agreement

Why: C.R.S. § 10-2-704(1)(a) imposes a fiduciary capacity on both categories - premiums owed to insurers and unearned premiums owed to insureds. The commissioner may make rules on their treatment. The practical consequence is subsection (3): no commingling with the producer's personal funds or with any funds except those directly connected with the insurance business.

Intentional injury caused by an insured is treated under Section II how?

1. Covered under Coverage F only
2. Fully covered
3. Excluded ✓
4. Covered under Coverage D

Why: Bodily injury or property damage expected or intended by the insured is excluded under Section II liability coverage.

On notice of an accident to which MedPay may apply, the insurer must reserve $5,000 of that coverage for:

1. The insured's chosen treating physician and any referrals made
2. Any provider that submits a claim within the first 30 days
3. Trauma care by ambulances, trauma physicians and trauma centres ✓
4. Rehabilitation and physical therapy following discharge

Why: C.R.S. 10-4-635(2)(b) requires the insurer, on notice of an accident from a provider or the insured, to reserve five thousand dollars of the medical payments coverage for trauma care provided by a licensed air ambulance, licensed ambulance, trauma physician or trauma center, paid in a set order of priority.

Under the NFIP Write-Your-Own (WYO) program:

1. FEMA sells flood policies directly to consumers, with no agent involvement
2. Mortgage lenders issue flood policies to their borrowers at closing
3. Participating private insurers underwrite flood on their own paper, keep the premium, and retain the entire underwriting risk
4. Private insurers sell and service NFIP policies under their own names while the federal government backs the risk ✓

Why: Under the WYO program, participating private insurers issue and service standard NFIP policies in their own names, but the federal government bears the underwriting risk.

A home's replacement cost is $250,000, insured for $200,000 (80% would be $200,000). A covered partial roof loss costs $20,000 (ignore deductible). The settlement is:

1. $16,000
2. $18,000
3. $20,000 ✓
4. $10,000

Why: Because the carried amount ($200,000) meets the 80% requirement ($200,000), the partial loss is paid in full at replacement cost: $20,000.

Which of the following is one of the four required elements of a legally enforceable contract?

1. Aleatory exchange
2. Subrogation
3. Indemnification
4. Consideration ✓

Why: The required elements of a contract are offer and acceptance, consideration, competent parties, and legal purpose.

Which endorsement would increase the Coverage C limit available for items used in a home business beyond the small special limit?

1. Inflation guard, which raises the special limit on business property annually
2. Personal injury endorsement, which broadens Coverage C to include property used in any trade or profession
3. Mortgage clause, which extends Coverage C to the lender's business equipment
4. A home business / permitted incidental occupancy or business property endorsement ✓

Why: Because business property on premises has a low special limit, a home business or permitted incidental occupancy endorsement is used to increase business property and add appropriate liability.

A Colorado insured sues a nonadmitted insurer on a surplus line policy. Service of process may be made on the commissioner, and the insurer then has:

1. 20 days to plead, answer or defend
2. 30 days to plead, answer or defend
3. 40 days to plead, answer or defend ✓
4. 60 days to plead, answer or defend

Why: Forty days from service on the commissioner, under C.R.S. § 10-5-114(2). The commissioner must forthwith mail the process to the person the insurer designated, by prepaid certified mail with return receipt requested, and on that service the court has in personam jurisdiction. Subsection (1) puts the action in the district court of the county where the cause of action arose.

'Premises and operations' exposure under the CGL refers to:

1. Liability arising out of the insured's premises and ongoing business operations ✓
2. Liability for defective work discovered after the job is finished and accepted
3. Liability the insured takes on by signing a hold-harmless agreement
4. Liability for goods the insured manufactures and sells to the public

Why: Premises and operations covers liability from the insured's location and its ongoing (in-progress) operations.

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.

Which is NOT among the purposes section 10-4-502 states for part 5?

1. Paying covered claims under certain policies
2. Guaranteeing the solvency of member insurers ✓
3. Avoiding excessive delay in payment to claimants
4. Assisting detection and prevention of insolvencies

Why: C.R.S. § 10-4-502 names four purposes: a mechanism to pay covered claims, avoiding excessive delay and financial loss to claimants or policyholders from an insurer's insolvency, assisting in the detection and prevention of insolvencies, and assessing the cost of that protection among insurers. Part 5 does work at prevention: § 10-4-513 makes the board notify the commissioner of a member that may be insolvent or in hazardous condition, and makes the commissioner report actions back. What it never does is GUARANTEE that any member stays solvent. Assisting detection is a duty to raise the alarm; guaranteeing solvency would be a promise no association could keep.

Which is expressly NOT a covered claim?

1. A claim for unearned premiums
2. A claim for incurred but not reported losses ✓
3. A first-party claim by an individual homeowner
4. A third-party liability claim against an insured

Why: C.R.S. § 10-4-503(4)(b)(III) excludes any claim for incurred but not reported losses. By contrast, § 10-4-503(4)(a) defines a covered claim as an unpaid claim, including one for unearned premiums, so a claim for unearned premiums can be a covered claim.

A "complying policy" under section 10-4-601(2) must provide the coverages and meet the terms and conditions part 6 requires. What further step does the definition demand?

1. The insurer certifies conformity and files that certification ✓
2. A resident producer countersigns the policy before delivery
3. The commissioner approves the policy form before it is issued
4. The named insured signs a statement acknowledging the limits

Why: C.R.S. 10-4-601(2) defines a complying policy as one that provides the coverages and is subject to the terms and conditions required by part 6, and is certified by the insurer, with a certification filed with the commissioner that the policy, contract or endorsement conforms to Colorado law and the commissioner's rules. The definition requires no producer countersignature, no prior form approval and no signed statement from the named insured; a signed statement that the insured has read and understood the policy and its limitations is a separate requirement of 10-4-640(3), for operator's policies only.

Renewing a policy has what effect on grounds for cancellation that existed beforehand?

1. It waives them entirely
2. It waives them unless rights were reserved in writing
3. It preserves them; renewal is no waiver or estoppel ✓
4. It preserves them for thirty days only

Why: C.R.S. s 10-4-110(5) states that renewal of a policy shall not constitute a waiver or estoppel with respect to grounds for cancellation which existed before the effective date of the renewal. The subsection requires no written reservation of rights and sets no time limit.

"Extended replacement cost coverage" pays a designated amount:

1. Above the policy limit, to replace the structure ✓
2. Below the limit, once depreciation is deducted
3. Equal to the limit, indexed for inflation
4. Toward the land on which the structure stood

Why: C.R.S. § 10-4-110.8(3)(d) makes it a designated amount ABOVE the policy limit, payable to replace a damaged structure if that is necessary under current building conditions. Do not fuse it with inflation protection coverage in paragraph (d.7), which adjusts the limit itself automatically as it goes along. One raises the ceiling after the loss; the other keeps the ceiling rising before it.

A building constructed with exterior walls of brick or masonry but with a combustible (wood) roof is generally classified as:

1. Joisted masonry (masonry) ✓
2. Frame construction
3. Fire-resistive construction
4. Modified fire-resistive

Why: Joisted masonry has masonry exterior walls but combustible floors or roof, making it more fire-resistant than frame but less than fire-resistive.

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.

An SR-22 is best described as:

1. A title document the state issues when a vehicle changes owners
2. A certificate filed with the state by the insurer verifying that an at-risk driver carries required liability coverage ✓
3. A no-fault accident report the driver must file with the motor vehicle department within 10 days of any crash causing injury
4. A high-risk auto liability policy sold through the state's assigned risk plan

Why: An SR-22 is a financial responsibility certificate the insurer files to confirm a high-risk driver maintains the state's required liability insurance.

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 commissioner leaves office. What does section 10-1-108(3) require of the outgoing officeholder?

1. A closing audit of the division of insurance cash fund
2. Delivery of all furniture, papers and property to the qualified successor ✓
3. Personal certification of every examination still pending on the date of departure
4. Publication of a final report in a Denver daily newspaper

Why: C.R.S. s 10-1-108(3): the commissioner, on retiring from office, shall deliver to his or her qualified successor all furniture, papers and property pertaining to the commissioner's office. The duty runs to the qualified successor; the rest of subsection (3) concerns supplying blank statement forms to insurers.

"Law and ordinance coverage" covers increased costs associated with:

1. Fines levied by the local building authority
2. Legal fees in a dispute with the insurer
3. Enforcement of building ordinances and laws ✓
4. Permits for a structure built without approval

Why: C.R.S. § 10-4-110.8(3)(f) covers the increased costs of demolition, construction, renovation or repair associated with the enforcement of building ordinances and laws. It answers a specific problem: a house built lawfully in 1975 and destroyed today must be rebuilt to today's code, and the gap between the two is not what the policy limit was set against.

Where one household member's record would justify cancellation, the insurer must instead offer:

1. A premium reflecting that record
2. A policy with a raised deductible
3. Continuation excluding that person by name ✓
4. Referral to the assigned risk plan

Why: C.R.S. § 10-4-630(1) requires the insurer, in lieu of cancellation, nonrenewal or a premium increase, to offer to continue or renew while excluding the offending driver by name. The remedy is surgical rather than terminal.

Under section 10-4-1807(2)(b), the plan of operation for the FAIR plan must provide for coverage limits for commercial property owners not exceeding:

1. $750,000
2. $1 million
3. $2.5 million
4. $5 million ✓

Why: C.R.S. § 10-4-1807(2)(b) requires the FAIR plan's plan of operation to provide for coverage limits not to exceed seven hundred fifty thousand dollars for property and five million dollars for commercial property owners.

A standard unendorsed DP-1 Basic Form covers which core perils as its base coverage?

1. Theft and vandalism
2. Fire, lightning, and internal explosion ✓
3. Earthquake and flood
4. Liability and medical payments

Why: The most basic DP-1 base coverage is fire, lightning, and internal explosion; Extended Coverage perils such as windstorm and hail are added on top of this core.

Vandals break windows and damage interior walls. The insured has the Basic form. Is vandalism covered?

1. Only if the vandals also committed a theft or an attempted theft
2. No, vandalism and malicious mischief appear first in the Broad form
3. Yes, vandalism is a named peril in the Basic form ✓
4. Only under the Special form, because Basic lists no vandalism peril

Why: Vandalism (V&MM) is one of the named perils included in the Basic Causes of Loss form.

An experience modification factor (mod) below 1.00 (e.g., 0.85) indicates that an employer:

1. Has worse-than-average loss experience and pays a debit (surcharge)
2. Has better-than-average loss experience and receives a credit (discount) ✓
3. Is exempt from audit
4. Must purchase coverage from the assigned-risk pool

Why: A mod below 1.00 is a credit mod, reflecting better-than-expected losses and reducing premium; a mod above 1.00 is a debit mod that increases premium.

The Colorado Division of Insurance is established within which department?

1. The Department of Personnel and Administration
2. The Department of Regulatory Agencies ✓
3. The Department of Revenue, insurance taxation branch
4. The Department of Law, consumer protection unit

Why: C.R.S. s 10-1-103(1) establishes the division of insurance in the department of regulatory agencies. The department of personnel is mentioned in the same section, in subsection (2), only because the commissioner must obtain its executive director's approval before incurring office expenses; it does not house the division.

Under the BACF, the most common deductible structure for physical damage is:

1. A single annual aggregate deductible that applies to all covered autos combined and resets each policy year
2. A percentage of each auto's stated value applied to every comprehensive loss, in the manner of a windstorm deductible
3. No deductible at all, because business auto physical damage rates already carry a loading for small losses
4. A per-vehicle, per-loss deductible for comprehensive/specified causes and for collision ✓

Why: Business auto physical damage applies deductibles separately to each covered auto for each loss, with separate amounts often for comprehensive and collision.

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.

Under the CGL Supplementary Payments, the insurer will pay up to how much per day for the insured's loss of earnings while attending a trial at the insurer's request?

1. $1,000
2. $100
3. $250 ✓
4. $500

Why: Supplementary Payments include up to $250 per day for the insured's actual loss of earnings due to attendance at hearings or trials at the insurer's request.

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 a surety bond, the company that guarantees the principal's performance is the:

1. Surety ✓
2. Obligee
3. Indemnitor
4. Principal

Why: The surety is the entity guaranteeing that the principal will fulfill its obligation to the obligee.

The commissioner may review an insurer's anti-fraud plan for compliance:

1. Only on a complaint from a policyholder
2. In connection with a market conduct examination ✓
3. Only where fraud has already been detected
4. At the insurer's request for a compliance opinion

Why: C.R.S. § 10-1-128(5)(b) allows the commissioner to review a licensed insurance company's anti-fraud plan in connection with a market conduct examination, to determine whether it complies with paragraph (a).

A key feature of Coverage C — Medical Payments under the CGL is that it pays:

1. Regardless of the insured's legal liability, up to the medical expense limit ✓
2. Only after a court has found the insured legally liable for the injury
3. Only for the insured's own employees hurt on the job
4. Punitive damages awarded against the insured in addition to the medical bills incurred

Why: Medical Payments coverage is a goodwill, no-fault coverage paying medical expenses regardless of the insured's legal liability, within the medical expense limit.

Which CGL condition requires the insured to notify the insurer of an occurrence 'as soon as practicable'?

1. The Separation of Insureds condition, which treats each insured separately
2. The Premium Audit condition, which sets the final premium after the term ends
3. The Other Insurance condition governing pro rata sharing
4. The Duties in the Event of Occurrence, Offense, Claim or Suit condition ✓

Why: The duties condition requires prompt notice of an occurrence or claim and cooperation with the insurer.

A household operator's licence was suspended in the 180 days before a RENEWAL policy incepted. Can that ground a cancellation?

1. No; only suspensions in the current period count
2. No; renewal resets the relevant period
3. Yes; the 180-day look-back applies to renewals ✓
4. Yes, but only if the insured concealed it

Why: C.R.S. § 10-4-602(1)(b) reaches a suspension during the policy period or, for a renewal, during its period OR the one hundred eighty days immediately preceding its effective date. The look-back exists so a renewal cannot launder a recent suspension.

The Special Causes of Loss form is best characterized as:

1. An open-perils (all-risk) form covering risks of direct physical loss unless excluded ✓
2. A form that excludes theft, so a separate crime coverage part must be purchased for stolen stock
3. A named-peril form covering only fire and lightning, with all other causes added by endorsement
4. A liability form protecting the insured against third-party claims arising from the premises

Why: The Special form is open-perils: it covers risk of direct physical loss unless specifically excluded or limited, shifting the burden of proof to the insurer.

The section of a policy that contains the named insured, address, policy period, limits, and premium is the:

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

Why: The declarations page personalizes the policy with the insured's identifying information, coverage limits, and premium.

An insured has a claims-made CGL with a retroactive date of 1/1/2020. An injury occurred in 2019 but the claim is first made in 2024 while the policy is in force. The claim is:

1. Covered under the extended reporting period tail, which reaches back before the retroactive date
2. Covered, because a claims-made form responds to any claim first made during the policy period
3. Covered as a Supplementary Payment, since defense costs sit outside the retroactive date
4. Not covered, because the injury occurred before the retroactive date ✓

Why: Even though the claim is made during the policy period, the injury predates the retroactive date, so it is not covered.

Medical Payments coverage typically pays expenses incurred within what time frame after the accident?

1. Within 30 days
2. Indefinitely with no limit
3. Within 1 year
4. Within 3 years ✓

Why: PAP Part B generally pays covered medical and funeral expenses incurred within three years of the date of the accident.

The surplus lines premium tax is levied on:

1. Gross premiums, before any deduction
2. Net premiums, excluding federal and other state taxes ✓
3. Gross premiums, less the broker's commission
4. Net premiums, less any return premium and commission

Why: C.R.S. § 10-5-111(1) taxes net premiums, exclusive of sums collected to cover federal and other state taxes and examination fees, as shown by the statement filed with the commissioner. Commission is not among the exclusions, so a broker who nets out their own commission before calculating the tax has underpaid it.

A contractor's CGL would NOT cover which of the following because of the 'your work' exclusion?

1. Medical payments under Coverage C for a visitor hurt on the job site
2. The cost to repair the contractor's own defective workmanship on the completed project ✓
3. Property damage to a neighboring building when the contractor's crane collapses
4. Bodily injury to a passerby struck by debris that fell from the contractor's scaffolding on the site

Why: The 'your work' exclusion bars coverage for damage to the insured's own completed work; the CGL is not a warranty of workmanship.

A condominium unit owner wants to claim on the unit owners' association's policy. Section 10-4-110.8(5)(a) lets them do so:

1. Only with the executive board's written consent
2. Only after the association declines to claim itself
3. Only for damage occurring inside their own unit
4. To the same extent as if they were a named insured ✓

Why: C.R.S. § 10-4-110.8(5)(a) lets a unit owner in a common interest community claim against the association's policy to the same extent, and with the same effect, as a named insured. Three conditions gate it: written contact with the board or managing agent following any applicable association procedure, at least fifteen days for a written response plus a reasonable chance to inspect if asked, and subject matter falling within the association's insurance responsibilities.

A FAIR plan board member's term of office is:

1. One year
2. Two years
3. Three years ✓
4. Five years

Why: Three years under C.R.S. § 10-4-1805(1)(c), subject to service at the governor's pleasure, and a member may serve four terms under paragraph (d). Subparagraph (II) staggered the initial appointments deliberately, giving some first members one-year and two-year terms so the whole board would never turn over at once.

A civil wrong, other than breach of contract, for which the law provides a remedy is called a:

1. Tort ✓
2. Statute
3. Crime
4. Covenant

Why: A tort is a civil wrong (other than breach of contract) resulting in injury for which the courts provide a remedy.

A trucking company hauling another company's goods is liable for cargo damaged in a collision it caused. Which coverage responds to the carrier's liability?

1. Accounts receivable coverage for sums the shipper cannot collect
2. Builders risk coverage on a structure under construction
3. Motor truck cargo (carrier's) legal liability ✓
4. Hull coverage, which insures the vessel carrying the goods and the carrier's cargo liability

Why: Motor truck cargo legal liability (a transportation inland marine form) covers a carrier's legal liability for damage to cargo it transports.

To be eligible for a standard Personal Auto Policy, a private passenger auto generally must be:

1. Owned by a corporation that furnishes it to an employee as a company car for regular personal and family use
2. Rated at more than 10,000 pounds gross vehicle weight and titled in the name of a business rather than an individual
3. Owned by an individual or spouses (or co-owned individuals) and not used for business delivery ✓
4. Used primarily as a taxi or livery vehicle carrying passengers for a fare in a metropolitan area

Why: PAP eligibility generally requires the vehicle be owned by an individual or by a husband and wife (or resident individuals) and used for personal, not commercial livery, purposes.

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.