Iowa Property & Casualty Insurance License, Practice Exams

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.

A 10-year-old roof has a replacement cost of $12,000 and an estimated life of 20 years with straight-line depreciation. Its ACV is approximately:

1. $1,200
2. $10,800
3. $6,000 ✓
4. $12,000

Why: At 50% depreciation (10 of 20 years), ACV = $12,000 − $6,000 = $6,000.

The CGL excludes bodily injury 'expected or intended from the standpoint of the insured.' This is the:

1. Expected or intended injury exclusion ✓
2. Pollution exclusion, which also removes expected or intended injury
3. Contractual liability exclusion
4. Employer's liability exclusion

Why: The expected or intended injury exclusion removes coverage for intentional harm, preserving the fortuity principle.

Iowa Code 321.20B leaves some of its detail to be filled in by rule. Who makes those rules?

1. The commissioner of insurance alone adopts every rule under the section, the subject matter being insurance; the department of transportation's part is confined to receiving the registration receipts that peace officers forward to it after removing them from vehicles stopped on the highways of this state without proof of coverage.
2. The department adopts rules regarding the contents of a financial liability coverage card to be issued pursuant to the section; and the director of transportation and the commissioner of insurance shall adopt rules pursuant to chapter 17A to administer the section. ✓
3. The director of transportation alone adopts every rule under the section, the section sitting in the motor vehicle chapter rather than in the insurance title; the commissioner of insurance has no rulemaking function in respect of it, and the contents of a financial liability coverage card are prescribed by each insurer for itself.
4. No rules are made under the section, which is complete in itself; the contents of a financial liability coverage card are set out in the section, and the administrative machinery is operated by the county treasurers of the counties in which the affected vehicles are registered without any rules being needed for the purpose.

Why: Iowa Code 321.20B ends with a rulemaking provision that is unusual because it names TWO officials: by (9), THE DIRECTOR OF TRANSPORTATION AND THE COMMISSIONER OF INSURANCE SHALL ADOPT RULES PURSUANT TO CHAPTER 17A TO ADMINISTER THIS SECTION. That is a consequence of where the section sits - it is the compulsory motor vehicle coverage scheme, and it lives in chapter 321, the motor vehicle chapter, rather than in the insurance title. A narrower rulemaking power appears earlier, at 321.20B(2)(b): THE DEPARTMENT SHALL ADOPT RULES REGARDING THE CONTENTS OF A FINANCIAL LIABILITY COVERAGE CARD TO BE ISSUED PURSUANT TO THIS SECTION. So the card's contents are not left to the insurer, even though 321.20B(2)(a) itself lists several things every card must show. Nothing is asserted here about what chapter 17A provides.

A ship's captain orders cargo jettisoned to keep the vessel from sinking in a storm; the ship and remaining cargo are saved. The loss to the jettisoned cargo is handled as:

1. General average, shared by all interests ✓
2. A constructive total loss of the vessel, payable in full to the shipowner
3. An excluded loss, because the captain sacrificed the cargo on purpose
4. Particular average, borne solely by the owner of the jettisoned cargo

Why: Voluntarily sacrificing cargo to save the venture is a general average loss, shared proportionally among ship, cargo, and freight interests.

In a CLAIMS-MADE form, coverage is generally triggered when:

1. The claim is first made against the insured during the policy period (on or after the retroactive date) ✓
2. The general aggregate limit has been exhausted by earlier payments
3. The injury occurs, even if that happens after the policy has expired and no extended reporting period was bought
4. The full annual premium has been paid to the insurer

Why: A claims-made policy responds when the claim is first made during the policy period, provided the injury occurred on or after the retroactive date.

An Iowa officer issues a citation and removes a car's licence plates and registration receipt at the roadside. The driver asks whether she may drive the car home. Under Iowa Code 321.20B, may she?

1. No. Once the licence plates and the registration receipt have been removed the vehicle may not be driven on the highways of this state at all, and the driver must arrange for it to be towed from the place where it was stopped to wherever she wishes it to be taken.
2. Yes, for up to seventy-two hours after receiving the citation and for any purpose she chooses, the removal of the plates being a step taken against the vehicle's registration rather than against the driver's privilege to use it; and she need not keep the citation in the vehicle while driving it, the officer having already forwarded the registration receipt and the evidence of the violation to the county treasurer of the county in which the vehicle is registered, and the driver's own operating privileges being unaffected by the removal of the plates whether or not they are otherwise suspended.
3. Yes, but only if she first obtains from the county treasurer of the county in which the vehicle is registered a temporary permit authorising its removal, and only for the time the permit specifies; the section gives the driver no period of grace of its own after the citation has been issued to her.
4. Yes. The motor vehicle may be driven for a time period of up to forty-eight hours after receiving the citation solely for the purpose of removing it from the highways of this state, unless the driver's operating privileges are otherwise suspended; and after receiving the citation the driver shall keep the citation in the motor vehicle at all times while driving it as so provided, as proof of the privilege to drive it for that limited time and purpose. ✓

Why: Iowa Code 321.20B(4)(a)(3)(b) provides that THE MOTOR VEHICLE MAY BE DRIVEN FOR A TIME PERIOD OF UP TO FORTY-EIGHT HOURS AFTER RECEIVING THE CITATION SOLELY FOR THE PURPOSE OF REMOVING THE MOTOR VEHICLE FROM THE HIGHWAYS OF THIS STATE, UNLESS THE DRIVER'S OPERATING PRIVILEGES ARE OTHERWISE SUSPENDED. AFTER RECEIVING THE CITATION, THE DRIVER SHALL KEEP THE CITATION IN THE MOTOR VEHICLE AT ALL TIMES WHILE DRIVING THE MOTOR VEHICLE AS PROVIDED IN THIS SUBPARAGRAPH, AS PROOF OF THE DRIVER'S PRIVILEGE TO DRIVE THE MOTOR VEHICLE FOR SUCH LIMITED TIME AND PURPOSE. Four limits are packed into that. The period is forty-eight hours and it runs from RECEIVING THE CITATION. The purpose is SOLELY removal from the highways - not the driver's own errands, which is what the option allowing seventy-two hours for any purpose allows. The permission fails altogether if the driver's operating privileges are otherwise suspended. And the citation itself has to stay in the vehicle, taking the place of the registration receipt the officer has removed. No permit from the county treasurer is required.

Symbol 1 in the Business Auto Coverage Form means:

1. Any auto ✓
2. Non-owned autos only
3. Owned autos only
4. Hired autos only

Why: Symbol 1 represents "Any Auto" and provides the broadest scope; it is most commonly used for liability coverage.

Under the Business Auto Coverage Form, an employee operating a covered owned auto on company business is:

1. An insured only if a manager or officer named in the declarations
2. Covered only for physical damage losses
3. Never an insured; only the named insured entity is
4. An insured while using a covered auto with permission ✓

Why: Employees and other permissive users are insureds while operating a covered (owned/hired) auto within the scope of permission.

Under TRIA, the federal government's share of insured terrorism losses applies only after the insurer pays:

1. The full amount of every certified loss, with federal reimbursement available only to reinsurers
2. Nothing, since federal sharing begins at the first dollar
3. A flat $1,000 retention for each certified event
4. An insurer deductible based on a percentage of its prior-year premiums ✓

Why: Under TRIA, each insurer retains a deductible (a percentage of its prior-year direct earned premium) before the federal government shares in the remaining certified losses.

Under the ISO Commercial General Liability Coverage Form, which coverage part responds to bodily injury and property damage liability arising out of the insured's premises and operations?

1. Supplementary Payments
2. Coverage B
3. Coverage C
4. Coverage A ✓

Why: Coverage A insures bodily injury and property damage liability. Coverage B is personal and advertising injury; Coverage C is medical payments.

An applicant for Iowa homeowners insurance is buying a house she has never owned. The insurer declines the risk solely because the previous owner made two fire claims on it. Under Iowa Code 507B.4, is that permitted?

1. Yes. The loss history attaches to the property rather than to its owner, and an insurer may decline a risk on the strength of the property's own record of losses at that address, whoever happened to own the property at the time those particular losses occurred.
2. No, and there is no exception: an insurer declining to insure a property not previously owned by the applicant based solely on a previous owner's loss history is a listed unfair trade practice in every case.
3. No, unless the insurer can provide evidence that the previous owner did not repair damage to the property; declining to insure a property not previously owned by the applicant based solely on a previous owner's loss history is otherwise a listed unfair trade practice. ✓
4. Yes, provided the insurer first gives the applicant written notice of the previous owner's loss history and an opportunity to comment on it before the application is finally declined.

Why: Iowa Code 507B.4(3)(l), HISTORY OF A PROPERTY, makes it an unfair trade practice to DECLINE TO INSURE A PROPERTY NOT PREVIOUSLY OWNED BY AN APPLICANT FOR PERSONAL LINES PROPERTY AND CASUALTY INSURANCE, BASED SOLELY ON THE LOSS HISTORY OF A PREVIOUS OWNER OF THE PROPERTY, UNLESS THE INSURER CAN PROVIDE EVIDENCE THAT THE PREVIOUS OWNER DID NOT REPAIR DAMAGE TO THE PROPERTY. Three conditions have to line up before the paragraph bites: the property must be one the applicant did not previously own, the coverage must be personal lines property and casualty insurance, and the decision must rest SOLELY on the previous owner's loss history - so an insurer relying on the state of the building as it finds it today is elsewhere. The exception is expressly written into the paragraph, which is why the option saying there is no exception overstates it, and its logic is repair: what the insurer must show is not that losses happened but that the damage was left unrepaired. No notice-and-comment procedure appears anywhere in the paragraph.

A retail employee sues the company for sexual harassment and wrongful termination. Which policy is designed to respond?

1. Workers Compensation and Employers Liability
2. CGL Coverage A, Bodily Injury Liability
3. Commercial Property, Special Form
4. Employment Practices Liability (EPLI) ✓

Why: Harassment and wrongful termination are employment practices claims handled by EPLI, not the CGL.

Which statement about strict liability is TRUE?

1. It arises only out of the employer-employee relationship
2. It requires proof the defendant intended the harm
3. Fault need not be proven; liability attaches due to the nature of the activity ✓
4. The plaintiff must still prove the defendant failed to use reasonable care under the circumstances

Why: Strict liability imposes responsibility without requiring proof of negligence, based on the inherently dangerous nature of the activity or product defect.

A recreational vehicle (motorhome) used for travel is most appropriately insured under:

1. A homeowners policy, which extends its personal property limit to vehicles used for travel
2. A crop-hail policy endorsed for hail damage to the roof
3. A surety bond guaranteeing the loan on the chassis
4. A specialized RV/motorhome policy combining auto and dwelling-type coverages ✓

Why: RVs require specialized policies that blend automobile coverages (liability, physical damage) with personal-property and living-quarters coverages.

Which loss would be covered under HO-3 on the dwelling but NOT on personal property, due to the difference in covered perils?

1. A fire loss originating in the home's attached garage
2. An accidental, non-named-peril physical loss to the structure ✓
3. A lightning strike that damages the roof
4. A windstorm loss to the siding and shingles

Why: HO-3 covers the dwelling open-peril, so an accidental loss not on the named-perils list is covered for the structure but not for Coverage C personal property, which is named-peril only.

An approved Iowa continuing education provider runs a classroom course and also sells a self-study course with an examination at the end. One classroom attendee arrives an hour late; one self-study candidate returns an examination with no affidavit attached. What do the provider's responsibilities under IAC 191 chapter 11 require in relation to instructors, records, absent students and self-study examinations?

1. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least four years from the end of the year in which the course is offered. It is responsible for both the attendance of the students and their attention, and must refuse to award credit for time periods when the student was absent. It must verify that each self-study examination contains an affidavit from the producer that the examination was independently proctored and completed without outside assistance, and must refuse credit to a producer who fails to submit a properly completed examination or who fails to answer at least 70 percent of the questions correctly. ✓
2. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least four years from the end of the year in which the course is offered. It is responsible for the attendance of the students, attention being a matter for the student, and may award full credit to a student who was present for part of a course provided the student signed the attendance record on entry, since the attendance record is a record of entrance rather than a minute-by-minute account of presence and the rules leave the provider a discretion to disregard a short absence. It must verify that each self-study examination contains an affidavit from the producer and must refuse credit to a producer who fails to answer at least 70 percent of the questions correctly.
3. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least two years from the end of the year in which the course is offered, the four-year period in the chapter belonging to the producer's own certificates of completion rather than to the provider's records. It is responsible for both the attendance of the students and their attention, and must refuse to award credit for time periods when the student was absent. It must verify that each self-study examination contains an affidavit from the producer that the examination was independently proctored and completed without outside assistance, and must refuse credit to a producer who fails to answer at least 70 percent of the questions correctly.
4. The provider must ensure each classroom course is conducted by a qualified and competent instructor, and must obtain and maintain an attendance record for each course for at least four years from the end of the year in which the course is offered. It is responsible for both the attendance of the students and their attention, and must refuse to award credit for time periods when the student was absent. The affidavit that the examination was independently proctored and completed without outside assistance is a document the producer files with the division rather than with the provider, so the provider's only duty on a self-study examination is to mark it and to refuse credit to a producer who fails to answer at least 70 percent of the questions correctly.

Why: The first four subrules of IAC 191-11.10 put four duties on a provider. 11.10(1): A CE PROVIDER MUST ENSURE THAT EACH CLASSROOM COURSE IS CONDUCTED BY A QUALIFIED AND COMPETENT INSTRUCTOR. 11.10(2): A CE PROVIDER MUST OBTAIN AND MAINTAIN AN ATTENDANCE RECORD FOR EACH COURSE FOR AT LEAST FOUR YEARS FROM THE END OF THE YEAR IN WHICH THE COURSE IS OFFERED. UPON REQUEST BY THE DIVISION, A CE PROVIDER MUST SUBMIT COPIES OF ATTENDANCE RECORDS. Four years, not two - and this is a different four years from the producer's under 11.4(1)'b', which runs FOR FOUR YEARS AFTER THE END OF THE YEAR OF ATTENDANCE and applies to THE ORIGINAL CERTIFICATES OF COMPLETION. Two people, two documents, two identical periods measured from two different events. 11.10(3): A CE PROVIDER OF AN APPROVED COURSE IS RESPONSIBLE FOR BOTH THE ATTENDANCE OF THE STUDENTS AND THEIR ATTENTION. A CE PROVIDER MUST REFUSE TO AWARD CE CREDIT FOR TIME PERIODS WHEN THE STUDENT WAS ABSENT. BOTH attendance AND attention, and MUST REFUSE rather than may - so a discretion to overlook a late arrival is the opposite of the rule, and the attendance record defined in 11.2 as a sign-in at THE TIME OF ENTRANCE TO THE COURSE does not answer for the hour missed. 11.10(4): A CE PROVIDER MUST VERIFY THAT EACH EXAMINATION SUBMITTED FOR A SELF-STUDY COURSE CONTAINS AN AFFIDAVIT FOLLOWING THE NAIC CE GUIDELINES FROM THE PRODUCER THAT THE EXAMINATION WAS INDEPENDENTLY PROCTORED AND THAT THE EXAMINATION WAS COMPLETED WITHOUT ANY OUTSIDE ASSISTANCE. A CE PROVIDER MUST REFUSE TO AWARD CE CREDIT TO PRODUCERS WHO FAIL TO SUBMIT A PROPERLY COMPLETED EXAMINATION OR WHO FAIL TO CORRECTLY ANSWER AT LEAST 70 PERCENT OF THE QUESTIONS ON THE EXAMINATION. The affidavit goes to the PROVIDER, not to the division, which matches 11.3(4)'b'(1), where the producer SUBMITS AN AFFIDAVIT TO THE CE PROVIDER. There are two independent grounds for refusal here and the candidate in the stem has fallen at the first: a missing affidavit means the examination is not properly completed, whatever the score. The 70 percent is the same single threshold the producer's rule sets in 11.3(4)'b'(2), stated once from each side; it is the score required on a self-study continuing education examination and nothing else in these rules turns on it. The affidavit must follow THE NAIC CE GUIDELINES.

Symbol 2 in the Business Auto Coverage Form designates:

1. Hired autos only
2. Any auto
3. Specifically described autos
4. Owned autos only ✓

Why: Symbol 2 covers all owned autos, both those owned now and those acquired later, depending on category symbols used.

Rating that relies on the underwriter's individual judgment when little statistical data exists is called:

1. Class rating
2. Loss-cost rating
3. Judgment rating ✓
4. Experience rating

Why: Judgment rating is used for unique or hard-to-classify risks where the underwriter sets the rate based on experience and judgment.

Coverage C of the BPP applies to:

1. Outdoor signs attached to the building, which are covered without a limit
2. The insured's own stock and merchandise held for sale
3. Personal property of others in the insured's care, custody, or control ✓
4. The building foundation below the lowest basement floor

Why: Coverage C — Personal Property of Others covers property of others in the insured's care, custody, or control while at the described premises.

An Iowa examination has just been completed. Under Iowa Code 507.10, what are the three periods that then run, in order?

1. 30 days following completion for the examiner in charge to file the verified written report, 30 days for the company examined to make a written submission or rebuttal, and a further 30 days after that period ends for the commissioner to enter an order adopting or rejecting the report.
2. 60 days to file the verified report, not more than 30 days for the company to make a written submission or rebuttal, and 20 days after that period ends for the commissioner to enter an order. ✓
3. 60 days following completion for the examiner in charge to file the verified written report and 60 days for the company examined to make a written submission or rebuttal, but no outside period for the order, which the commissioner enters once the review of the work papers is complete.
4. 90 days following completion for the verified written report, 30 days for the company examined to make a written submission or rebuttal, and 20 days after that period ends for the order, any investigatory hearing being called on no less than ten days' notice to the company.

Why: Iowa Code 507.10(2) provides that NO LATER THAN SIXTY DAYS FOLLOWING COMPLETION OF THE EXAMINATION, THE EXAMINER IN CHARGE SHALL FILE WITH THE DIVISION A VERIFIED WRITTEN REPORT OF EXAMINATION, and that on receipt and after administrative review the division transmits it to the company WITH A NOTICE WHICH SHALL AFFORD THE COMPANY EXAMINED A REASONABLE OPPORTUNITY OF NOT MORE THAN THIRTY DAYS TO MAKE A WRITTEN SUBMISSION OR REBUTTAL. By (3), WITHIN TWENTY DAYS OF THE END OF THE PERIOD ALLOWED FOR THE RECEIPT OF WRITTEN SUBMISSIONS OR REBUTTALS the commissioner must consider the report, the submissions and relevant work papers and enter an order doing one of three things: ADOPT the report as filed or with modification, and if it shows the company operating in violation of law order any curative action; REJECT it and direct the examiners to reopen the examination; or CALL FOR AN INVESTIGATORY HEARING WITH NO LESS THAN TWENTY DAYS' NOTICE. An order adopting the report is a final administrative decision appealable under chapter 17A.

An Iowa claimant with a covered claim against the association also has a policy of her own that responds to the same loss, and a second claimant could recover from the guaranty association of two different states. What does Iowa Code 515B.9 require of each?

1. The first may choose which policy to claim under, the association's obligation being treated as other insurance and contributing rateably with the other policy; the amount payable on the covered claim is reduced only by what she actually recovers under that other policy. The second must seek recovery first from the association of the place of residence of the insured in every case, the chapter drawing no distinction between a first party property claim, a workers' compensation claim and any other kind of claim which two guaranty associations might both be obliged to meet.
2. The first must exhaust all coverage provided by the other policy before the association pays, and any obligation of the association is not to be considered other insurance; the amount payable on the covered claim is reduced by the full applicable limits of that other policy. The second must seek recovery first from the association of the place of residence of the insured, save that a first party claim for damage to property with a permanent location goes first to the association of the location of the property; but sums recovered from another guaranty association or equivalent organization are not subtracted from the maximum liability of the association under the section which fixes what it must pay on a covered claim.
3. The first must exhaust all coverage provided by the other policy, whether primary, excess or pro rata, before the association pays, and any obligation of the association is not to be considered other insurance; the amount payable on the covered claim is reduced by the full applicable limits of that other policy, or by the total recovery where there are no applicable limits. The second must seek recovery first from the association of the place of residence of the insured, save that a first party claim for damage to property with a permanent location goes first to the association of the location of the property, and a workers' compensation claim to the association of the residence of the claimant. ✓
4. The first must exhaust all coverage provided by the other policy before the association pays, but a policy providing liability coverage to a person merely jointly and severally liable with the insured of the insolvent insurer need not be exhausted first; the amount payable is reduced by the full applicable limits of the other policy. The second must seek recovery first from the association of the place of residence of the insured, save that a workers' compensation claim goes first to the association of the residence of the claimant.

Why: Iowa Code 515B.9(1)(a) requires a person having a claim under another insurance policy which ALLEGES THE SAME DAMAGES OR ARISES FROM THE SAME FACTS, INJURY, OR LOSS that gives rise to a covered claim TO FIRST EXHAUST ALL COVERAGE PROVIDED BY THAT POLICY, WHETHER SUCH COVERAGE IS ON A PRIMARY, EXCESS, OR PRO RATA BASIS, and provides that ANY OBLIGATION OF THE ASSOCIATION SHALL NOT BE CONSIDERED OTHER INSURANCE. The association is the last resort, not a co-insurer, which is what the option treating the association as other insurance contributing rateably misses. By (1)(a)(1), ANY AMOUNT PAYABLE ON A COVERED CLAIM SHALL BE REDUCED BY THE FULL APPLICABLE LIMITS OF SUCH OTHER INSURANCE POLICY AND THE ASSOCIATION SHALL RECEIVE FULL CREDIT FOR SUCH LIMITS OR WHERE THERE ARE NO APPLICABLE LIMITS, THE CLAIM SHALL BE REDUCED BY THE TOTAL RECOVERY - the credit is for the LIMITS, not for what was actually paid, so a claimant who settles the other policy cheaply bears the difference. By (1)(a)(2), A POLICY PROVIDING LIABILITY COVERAGE TO A PERSON WHO MAY BE JOINTLY AND SEVERALLY LIABLE WITH, OR A JOINT TORTFEASOR WITH, THE PERSON COVERED UNDER THE POLICY OF THE INSOLVENT INSURER SHALL BE FIRST EXHAUSTED BEFORE ANY CLAIM IS MADE AGAINST THE ASSOCIATION - which is what the option excusing a joint tortfeasor's policy from exhaustion denies. Iowa Code 515B.9(2) then orders the guaranty associations themselves: A PERSON HAVING A CLAIM WHICH MAY BE RECOVERED UNDER MORE THAN ONE INSURANCE GUARANTY ASSOCIATION OR ITS EQUIVALENT SHALL SEEK RECOVERY FIRST FROM THE ASSOCIATION OF THE PLACE OF RESIDENCE OF THE INSURED. HOWEVER, IF THE CLAIM IS A FIRST PARTY CLAIM FOR DAMAGE TO PROPERTY WITH A PERMANENT LOCATION, RECOVERY SHALL BE FIRST SOUGHT FROM THE ASSOCIATION OF THE LOCATION OF THE PROPERTY. IF THE CLAIM IS A WORKERS' COMPENSATION CLAIM, RECOVERY SHALL BE FIRST SOUGHT FROM THE ASSOCIATION OF THE RESIDENCE OF THE CLAIMANT. Three rules, and the claim type chooses between them. The subsection closes: ANY SUMS RECOVERED FROM ANY OTHER GUARANTY ASSOCIATION OR EQUIVALENT ORGANIZATION SHALL BE SUBTRACTED FROM THE MAXIMUM LIABILITY OF THE ASSOCIATION UNDER SECTION 515B.5, SUBSECTION 1, PARAGRAPH A .

An Iowa company with a surplus to policyholders of twenty million dollars is offered a single risk on which its exposure would be four million dollars. Under Iowa Code 515.49, may it write the risk?

1. Yes without qualification. The limit in the section is a guideline for the commissioner in examining the company's solvency and does not restrict the risks a company may agree to write.
2. No in any circumstances. A company must not expose itself to loss on any one risk or hazard to an amount exceeding ten per cent of its surplus to policyholders, and reinsurance of the excess, however it may be arranged and with whatever company it is placed, does not affect the calculation of the ceding company's own exposure on the risk for the purposes of that statutory limit.
3. Yes, provided the company's exposure on the risk does not exceed twenty-five per cent of its surplus to policyholders, that being the limit the section sets for a single risk or hazard.
4. No, unless the excess above ten per cent of surplus to policyholders is reinsured in another good and reliable company licensed to sell insurance in this state, or reinsured by a qualifying group of individual unincorporated insurers, or reinsured with a company that has created a trust fund, made a deposit or obtained letters of credit on terms satisfactory to the commissioner. ✓

Why: Iowa Code 515.49 provides that A COMPANY SHALL NOT EXPOSE ITSELF TO LOSS ON ANY ONE RISK OR HAZARD TO AN AMOUNT EXCEEDING TEN PERCENT OF ITS SURPLUS TO POLICYHOLDERS UNLESS one of three things applies. (1) THE EXCESS IS REINSURED IN SOME OTHER GOOD AND RELIABLE COMPANY LICENSED TO SELL INSURANCE IN THIS STATE. (2) THE EXCESS IS REINSURED BY A GROUP OF INDIVIDUAL UNINCORPORATED INSURERS WHO ARE AUTHORIZED TO SELL INSURANCE IN AT LEAST ONE STATE OF THE UNITED STATES AND WHO POSSESS ASSETS WHICH ARE HELD IN TRUST FOR THE BENEFIT OF THE AMERICAN POLICYHOLDERS IN THE SUM OF NOT LESS THAN FIFTY MILLION DOLLARS, AND A CERTIFICATE OF SUCH REINSURANCE SHALL BE FURNISHED TO THE INSURED. (3) THE EXCESS IS REINSURED WITH A COMPANY WHICH HAS, WITH RESPECT TO THE CEDING INSURER, CREATED A TRUST FUND, MADE A DEPOSIT, OR OBTAINED LETTERS OF CREDIT, ON TERMS SATISFACTORY TO THE COMMISSIONER. Ten per cent of twenty million dollars is two million, so the four million dollar exposure is over the line and one of the three routes must be used for the excess. The measure is SURPLUS TO POLICYHOLDERS, not capital and not admitted assets, and the section is a real restriction rather than an examination benchmark. This is the same classification of risks that 515.48(10) refers to when it makes the commissioner designate where a newly approved kind of insurance falls.

Saying that a property insurance contract is personal means that it:

1. Can only be sold to individuals in their own names, and never to a partnership, corporation or other business entity
2. Covers only personal property such as furniture and clothing, and never the dwelling or other real property
3. Must be signed in person by the named insured before the coverage can attach
4. Insures a person, not the property itself, and generally cannot be transferred without the insurer's consent ✓

Why: A personal contract insures the individual against loss, not the property; it cannot be assigned to another party without the insurer's consent.

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.

Smoke damage under a Homeowners policy is typically:

1. Covered only under DP-1 and DP-2, since homeowners forms treat smoke as a pollution loss instead
2. A covered named peril, though smoke from agricultural smudging or industrial operations may be excluded ✓
3. Excluded entirely, because smoke residue is considered gradual damage rather than a sudden loss
4. Covered under Coverage E liability, which reimburses the insured for smoke damage to their contents

Why: Smoke is a covered peril, but smoke arising from agricultural smudging or industrial operations is commonly excluded.

A bookkeeper embezzles $50,000 from her employer over two years. Which form responds?

1. Liquor liability, since the thefts occurred during business hours
2. A fidelity bond / employee dishonesty coverage ✓
3. A performance bond guaranteeing the bookkeeper's work
4. CGL Coverage A, treating the missing funds as property damage

Why: Employee theft of employer funds is covered by a fidelity bond/employee dishonesty coverage, not the CGL.

An Iowa insurer is put into liquidation. A workers' compensation claimant, a policyholder owed unearned premium and a liability claimant with a two million dollar judgment all look to the association. Under Iowa Code 515B.5, what is each entitled to?

1. The workers' compensation claimant gets the full amount of the covered claim; the policyholder gets an amount in excess of one hundred dollars but not exceeding ten thousand dollars per policy for return of unearned premium; and the liability claimant gets an amount not exceeding the lesser of the policy limits or five hundred thousand dollars per claim for all covered claims for all damages arising out of any one or series of accidents, occurrences or incidents, regardless of the number of persons claiming or the number of applicable policies. ✓
2. The workers' compensation claimant gets an amount not exceeding five hundred thousand dollars, the same ceiling as any other covered claim; the policyholder gets an amount in excess of one hundred dollars but not exceeding ten thousand dollars per policy for return of unearned premium; and the liability claimant gets an amount not exceeding the lesser of the policy limits or five hundred thousand dollars per claim, that ceiling applying separately to each person making a claim out of the same occurrence rather than to the occurrence as a whole.
3. The workers' compensation claimant gets the full amount of the covered claim; the policyholder gets the full amount of the unearned premium, no floor or ceiling applying to a return of premium; and the liability claimant gets an amount not exceeding the lesser of the policy limits or one hundred thousand dollars per claim for all covered claims for all damages arising out of any one or series of accidents, occurrences or incidents.
4. The workers' compensation claimant gets the full amount of the covered claim; the policyholder gets an amount in excess of one hundred dollars but not exceeding ten thousand dollars per policy for return of unearned premium; and the liability claimant gets an amount not exceeding five hundred thousand dollars per claim even where the policy limits are lower, the statutory ceiling replacing the policy limits rather than capping them.

Why: Iowa Code 515B.5(1)(a) obliges the association TO PAY COVERED CLAIMS EXISTING PRIOR TO THE FINAL ORDER OF LIQUIDATION AND ARISING WITHIN THIRTY DAYS AFTER THE FINAL ORDER OF LIQUIDATION, OR BEFORE THE POLICY EXPIRATION DATE IF LESS THAN THIRTY DAYS AFTER THE FINAL ORDER OF LIQUIDATION, OR BEFORE THE INSURED REPLACES THE POLICY OR CAUSES ITS CANCELLATION, IF THE INSURED DOES SO WITHIN THIRTY DAYS OF THE FINAL ORDER OF LIQUIDATION - thirty days appearing three times in one sentence on three different events, and whichever comes first cutting the coverage off. The obligation is then satisfied by paying: (1) THE FULL AMOUNT OF A COVERED CLAIM FOR BENEFITS UNDER A WORKERS' COMPENSATION INSURANCE COVERAGE. (2) AN AMOUNT IN EXCESS OF ONE HUNDRED DOLLARS BUT NOT EXCEEDING TEN THOUSAND DOLLARS PER POLICY FOR A COVERED CLAIM FOR THE RETURN OF UNEARNED PREMIUM. (3) AN AMOUNT NOT EXCEEDING THE LESSER OF THE POLICY LIMITS OR FIVE HUNDRED THOUSAND DOLLARS PER CLAIM FOR ALL COVERED CLAIMS FOR ALL DAMAGES ARISING OUT OF ANY ONE OR SERIES OF ACCIDENTS, OCCURRENCES, OR INCIDENTS, REGARDLESS OF THE NUMBER OF PERSONS MAKING CLAIMS OR THE NUMBER OF APPLICABLE POLICIES. Three distinctions carry the item. Workers' compensation is paid IN FULL and is the only category that is - the option capping it at five hundred thousand dollars applies the general ceiling to it. The unearned premium payment has BOTH a floor and a ceiling, so a small return of premium is not paid at all. And the third limit is THE LESSER OF the policy limits or five hundred thousand dollars, so a lower policy limit still governs; and it is per occurrence rather than per claimant. Iowa Code 515B.5(1)(b) adds the underlying principle: the association is NOT OBLIGATED TO PAY A CLAIMANT AN AMOUNT IN EXCESS OF THE OBLIGATION UNDER THE POLICY OF THE INSOLVENT INSURER, REGARDLESS OF WHETHER SUCH CLAIM IS BASED ON CONTRACT OR TORT.

What is the primary purpose of a coinsurance clause in commercial property insurance?

1. To set the deductible as a fixed percentage of the building limit shown in the declarations
2. To encourage insureds to carry insurance close to the property's full value ✓
3. To exclude windstorm and earthquake from the causes of loss form
4. To require the insurer to share each loss with its reinsurers under a quota share treaty

Why: Coinsurance encourages insureds to insure to value; if they underinsure below the required percentage, the loss payment is reduced proportionally.

Two members of the same affiliated group are named insureds on one surplus lines policy, and on a different risk all of an insured's exposure sits outside the state where it has its principal place of business. How does Iowa Code 515I.2 fix the home state in each?

1. For the affiliated group, the home state is that of the member first named on the policy. Where one hundred percent of the insured risk is located out of the state of the insured's principal place of business or principal residence, the home state is the state in which the risk is located, or, where the risk is spread across more than one state, the state in which the greatest part of the risk by insured value is located when the coverage is placed with the eligible surplus lines insurer.
2. For the affiliated group, the home state is that of the member with the largest percentage of premium attributed to it under the policy. Where one hundred percent of the insured risk is located out of the state of the insured's principal place of business or principal residence, the home state remains the state of the principal place of business or residence, the location of the risk going only to whether a diligent search must be made under section 515I.9 and never to the identity of the home state itself.
3. For the affiliated group, the home state is that of the member with the largest percentage of premium attributed to it under the policy, determined as the state of that member's principal place of business. Where more than fifty percent of the insured risk is located out of the state of the insured's principal place of business or principal residence, the home state is the state in which the greatest percentage of the risk is located.
4. For the affiliated group, the home state is that of the member with the largest percentage of premium attributed to it under the policy, determined as the state of that member's principal place of business. Where one hundred percent of the insured risk is located out of the state of the insured's principal place of business or principal residence, the home state is the state to which the greatest percentage of the insured's taxable premium for that policy is allocated. ✓

Why: Iowa Code 515I.2(10) defines HOME STATE in two paragraphs. Paragraph (a), EXCEPT AS PROVIDED IN PARAGRAPH B, gives EITHER OF THE FOLLOWING: (1) THE STATE IN WHICH AN INSURED MAINTAINS ITS PRINCIPAL PLACE OF BUSINESS OR, IN THE CASE OF AN INDIVIDUAL, THE INDIVIDUAL'S PRINCIPAL RESIDENCE. (2) IF ONE HUNDRED PERCENT OF THE INSURED RISK IS LOCATED OUT OF THE STATE DESCRIBED IN SUBPARAGRAPH (1), THE STATE TO WHICH THE GREATEST PERCENTAGE OF THE INSURED'S TAXABLE PREMIUM FOR THAT INSURANCE POLICY OR CONTRACT IS ALLOCATED. Two things are exact and both are examinable: the trigger is ONE HUNDRED PERCENT, not a majority, and what the fallback follows is TAXABLE PREMIUM, not where the risk sits. Paragraph (b) provides that IF MORE THAN ONE INSURED FROM AN AFFILIATED GROUP IS A NAMED INSURED ON A SINGLE SURPLUS LINES INSURANCE POLICY OR CONTRACT, the home state is that OF THE MEMBER OF THE AFFILIATED GROUP THAT HAS THE LARGEST PERCENTAGE OF PREMIUM ATTRIBUTED TO IT UNDER SUCH INSURANCE POLICY OR CONTRACT, AS DETERMINED PURSUANT TO PARAGRAPH A, SUBPARAGRAPH (1) - so it is that member's principal place of business, and the subparagraph (2) fallback is not carried into paragraph (b). The definition carries the whole chapter, because 515I.13A applies chapter 515I ONLY TO TRANSACTIONS WHEN THIS STATE IS THE HOME STATE OF THE APPLICANT OR THE INSURED, and because 515I.3(2)(a) and 515I.10 both make the premium tax follow the home state.

An Iowa insurer wants to renew a commercial umbrella policy only if the insured raises the limits on an underlying policy, and in a separate file wants to cancel an umbrella policy outright. What does Iowa Code 515.129 require in each case?

1. It may condition renewal on requirements relating to the underlying policies, but a conditional renewal notice is never a notice of nonrenewal, so if the requirements are not met the insurer must then send a separate notice of nonrenewal on the ordinary period. A cancellation notice must include the reason and is not effective unless mailed by certified mail or delivered to the named insured and any loss payee at least ten days before the effective date of the cancellation of that policy.
2. It may condition renewal on requirements relating to the underlying policies; if those requirements are not satisfied as of the expiration date or thirty days after mailing or delivery of the notice, whichever is later, the conditional renewal notice is deemed an effective notice of nonrenewal. A cancellation notice must include the reason and is not effective unless mailed by certified mail or delivered to the named insured and any loss payee at least ten days before the effective date. ✓
3. It may not condition renewal on anything to do with the underlying policies, the umbrella insurer's only remedy for a change below it being cancellation on one of the conditions listed in subsection 3. A cancellation notice must include the reason and is not effective unless mailed by ordinary mail or delivered to the named insured at least thirty days before the effective date, a loss payee having no right to the notice.
4. It may condition renewal on requirements relating to the underlying policies; if those requirements are not satisfied as of the expiration date of the umbrella policy or sixty days after mailing or delivery of the conditional renewal notice, whichever is earlier, that notice is deemed an effective notice of nonrenewal, and the insured loses the benefit of the longer of the two periods. A cancellation notice need not include the reason, the reason being furnished only on the written request of the named insured, and is effective if mailed by certified mail to the named insured at least ten days before the effective date.

Why: Iowa Code 515.129(5) provides that AN INSURER SHALL NOT FAIL TO RENEW AN UMBRELLA OR EXCESS INSURANCE POLICY EXCEPT BY NOTICE TO THE INSURED AS PROVIDED IN THIS SECTION; HOWEVER, AN INSURER MAY CONDITION RENEWAL OF AN UMBRELLA OR EXCESS INSURANCE POLICY UPON REQUIREMENTS RELATING TO THE UNDERLYING POLICY OR POLICIES. IF THE REQUIREMENTS ARE NOT SATISFIED AS OF THE EXPIRATION DATE OF THE UMBRELLA OR EXCESS INSURANCE POLICY, OR THIRTY DAYS AFTER MAILING OR DELIVERY OF THE NOTICE, WHICHEVER IS LATER, THE CONDITIONAL RENEWAL NOTICE SHALL BE DEEMED TO BE AN EFFECTIVE NOTICE OF NONRENEWAL. WHICHEVER IS LATER, not earlier - the insured gets the longer of the two. The subsection does not apply IF THE INSURER HAS OFFERED TO RENEW OR IF THE INSURED FAILS TO PAY A PREMIUM DUE OR ANY ADVANCE PREMIUM REQUIRED BY THE INSURER FOR RENEWAL. Iowa Code 515.129(4) fixes the cancellation notice: NOT EFFECTIVE UNLESS MAILED BY CERTIFIED MAIL OR DELIVERED TO THE NAMED INSURED AND ANY LOSS PAYEE AT LEAST TEN DAYS PRIOR TO THE EFFECTIVE DATE OF CANCELLATION, and A NOTICE OF CANCELLATION SHALL INCLUDE THE REASON. Certified mail is what distinguishes the umbrella section from 515.127(4), which asks only that the notice be mailed or delivered. Iowa Code 515.129(6) requires FORTY-FIVE DAYS by certified mail or delivery for a nonrenewal, with the same option of continuing FOR THE REMAINDER OF THE NOTICE PERIOD PLUS AN ADDITIONAL THIRTY DAYS at the existing rate. And 515.129(7) closes the section off: SECTIONS 515.127 AND 515.128 ARE NOT APPLICABLE TO UMBRELLA OR EXCESS INSURANCE POLICIES EXCEPT AS PROVIDED IN SUBSECTION 3.

Under the NFIP, deductibles apply:

1. Only to contents coverage
2. Only after a federal disaster is declared
3. Only to building coverage
4. Separately to building and contents losses ✓

Why: The NFIP applies separate deductibles to building and to contents losses arising from the same flood event.

An Iowa insured and the company cannot agree on the actual cash value of a fire-damaged building. Under the appraisal clause of the standard fire policy, how is the disagreement resolved and who pays?

1. On the written demand of either, each selects a competent and disinterested appraiser and notifies the other of the appraiser selected within twenty days; the appraisers select an umpire, and failing for fifteen days to agree they may ask a judge of a court of record where the property is located to select one; an itemised written award of any two determines the amount; each appraiser is paid by the party selecting, and the expenses of appraisal and umpire are shared equally. ✓
2. On the written demand of the insured only, each party selects a competent and disinterested appraiser and notifies the other of the appraiser selected within twenty days; the company then selects the umpire; an award of the umpire alone, filed with the company, determines the amount of actual cash value and loss; and the company pays the whole cost of the appraisal, including the fees of both appraisers and of the umpire it selected, the whole of the appraisal being a cost of adjusting the claim.
3. On the written demand of either, each selects a competent and disinterested appraiser and notifies the other of the appraiser selected within thirty days; the appraisers select an umpire, and failing to agree upon one within thirty days the commissioner of insurance appoints the umpire; an itemised written award of any two of the three determines the amount of actual cash value and loss; and the party whose figure the award rejects pays the whole cost of the appraisal and of the umpire.
4. The disagreement is resolved by suit and by nothing else, the standard form prescribed for this state containing no appraisal clause at all; the insured must commence the action within twelve months next after inception of the loss, must plead the actual cash value claimed and prove it by expert evidence at trial, and each party bears its own costs of the action unless the court orders otherwise, no provision of the prescribed form allowing either party to compel a valuation out of court.

Why: The clause in Iowa Code 515.109(6)(a) headed APPRAISAL applies IN CASE THE INSURED AND THIS COMPANY SHALL FAIL TO AGREE AS TO THE ACTUAL CASH VALUE OR THE AMOUNT OF LOSS - value or quantum, not coverage, which is the limit of what an appraisal decides. THEN, ON THE WRITTEN DEMAND OF EITHER, EACH SHALL SELECT A COMPETENT AND DISINTERESTED APPRAISER AND NOTIFY THE OTHER OF THE APPRAISER SELECTED WITHIN TWENTY DAYS OF SUCH DEMAND. THE APPRAISERS SHALL FIRST SELECT A COMPETENT AND DISINTERESTED UMPIRE; AND FAILING FOR FIFTEEN DAYS TO AGREE UPON SUCH UMPIRE, THEN, ON REQUEST OF THE INSURED OR THIS COMPANY, SUCH UMPIRE SHALL BE SELECTED BY A JUDGE OF A COURT OF RECORD IN THE STATE IN WHICH THE PROPERTY COVERED IS LOCATED. THE APPRAISERS SHALL THEN APPRAISE THE LOSS, STATING SEPARATELY ACTUAL CASH VALUE AND LOSS TO EACH ITEM; AND, FAILING TO AGREE, SHALL SUBMIT THEIR DIFFERENCES, ONLY, TO THE UMPIRE. AN AWARD IN WRITING, SO ITEMIZED, OF ANY TWO WHEN FILED WITH THIS COMPANY SHALL DETERMINE THE AMOUNT OF ACTUAL CASH VALUE AND LOSS. EACH APPRAISER SHALL BE PAID BY THE PARTY SELECTING THE APPRAISER AND THE EXPENSES OF APPRAISAL AND UMPIRE SHALL BE PAID BY THE PARTIES EQUALLY. Four points repay attention: either party may demand it; only the DIFFERENCES go to the umpire; ANY TWO of the three can make the award, so the umpire never decides alone; and the court that selects an umpire is a court where the PROPERTY is located, not where the insurer is domiciled. Nothing in the clause is waived by the process: NO PROVISION, STIPULATION OR FORFEITURE SHALL BE HELD TO BE WAIVED BY ANY REQUIREMENT OR PROCEEDING ON THE PART OF THIS COMPANY RELATING TO APPRAISAL OR TO ANY EXAMINATION PROVIDED FOR HEREIN.

A Difference in Conditions (DIC) policy is generally purchased to:

1. Covers only automobile liability arising from vehicles the insured owns, hires, or borrows anywhere in the United States and Canada
2. Replaces the underlying property policy entirely, so the insured may cancel the primary form once the difference in conditions coverage is bound
3. Provides statutory workers compensation benefits in any state the insured has not listed on the information page of its own policy
4. Provide broad, all-risk coverage that fills gaps and covers perils excluded by underlying policies, such as flood and earthquake ✓

Why: DIC coverage supplements an insured's underlying property program by broadening perils and filling coverage gaps, frequently adding flood and earthquake.

Iowa Code 516A.2 says something about a decision of the Iowa Supreme Court on stacking. What does the general assembly declare?

1. That the decision is approved and confirmed, so that interpolicy stacking of uninsured or underinsured coverages is available to an insured in this state whatever the specific contract or policy language may say, antistacking provisions contained in a motor vehicle insurance policy being void as against the protection that this chapter gives to an insured who has been injured by an uninsured motorist.
2. That the decision is abrogated in its entirety, so that no stacking of uninsured or underinsured coverages of any kind, whether within one policy or across several policies, is available to any insured in this state in any circumstances whatever the policies concerned may provide about it.
3. That the decision stands, but that the commissioner of insurance may by rule permit an insurer to include antistacking provisions in a motor vehicle insurance policy where the insurer satisfies the commissioner that the premium charged for the coverage properly reflects the restriction the provisions impose.
4. That to the extent the decision provided for interpolicy stacking of uninsured or underinsured coverages in contravention of specific contract or policy language, the decision is abrogated; and that the enforcement of the antistacking provisions contained in a motor vehicle insurance policy does not frustrate the protection given to an insured under section 516A.1. ✓

Why: Iowa Code 516A.2(1)(b) provides that TO THE EXTENT THAT HERNANDEZ V. FARMERS INSURANCE COMPANY, 460 N.W.2D 842 (IOWA 1990), PROVIDED FOR INTERPOLICY STACKING OF UNINSURED OR UNDERINSURED COVERAGES IN CONTRAVENTION OF SPECIFIC CONTRACT OR POLICY LANGUAGE, THE GENERAL ASSEMBLY DECLARES SUCH DECISION ABROGATED AND DECLARES THAT THE ENFORCEMENT OF THE ANTISTACKING PROVISIONS CONTAINED IN A MOTOR VEHICLE INSURANCE POLICY DOES NOT FRUSTRATE THE PROTECTION GIVEN TO AN INSURED UNDER SECTION 516A.1. Two limits keep the option abrogating the decision in its entirety from being right. The abrogation is TO THE EXTENT THAT the decision provided for INTERPOLICY stacking - stacking across separate policies - and only where that was IN CONTRAVENTION OF SPECIFIC CONTRACT OR POLICY LANGUAGE. So a policy that says nothing about stacking is not touched by the paragraph, and stacking within a single policy is not what the paragraph is about. The second declaration is the operative one for a producer: an antistacking clause may be enforced without offending the chapter.

A producer wants to cold-call prospects by phone to sell insurance. Before calling, the producer should:

1. Mail each prospect a flood zone notice, which federal telemarketing rules accept in place of checking any list
2. Restrict all calling to the hours between 10 p.m. and 8 a.m., when consumers are most likely to be home
3. Rely on the agency's own internal contact list
4. Scrub the call list against the National Do-Not-Call Registry and honor registered numbers ✓

Why: Telemarketers must check the Do-Not-Call Registry and avoid calling registered numbers absent an applicable exception, to comply with federal telemarketing rules.

The PAP's out-of-state coverage provision does what when the insured travels to a state with higher required limits?

1. Cuts the limits back to the home state's compulsory minimums whenever the insured crosses a state line
2. Automatically adds collision and comprehensive coverage for any trip that lasts longer than 30 days
3. Suspends all coverage until the insured registers the auto in the visited state
4. Automatically increases the policy's liability limits to meet that state's compulsory minimums ✓

Why: The out-of-state provision raises the policy limits to the minimum amounts required by the other state's compulsory or financial responsibility law if they are higher.

A restaurant's walk-in freezer fails due to compressor breakdown, spoiling $8,000 of food. Which coverage best responds?

1. Business income coverage for the sales lost while the freezer was down
2. Spoilage endorsement (and/or equipment breakdown) ✓
3. Ordinance or Law coverage to rebuild the freezer to current code
4. Products liability of the compressor's maker

Why: Spoilage coverage (or equipment breakdown) addresses loss to perishable stock caused by refrigeration/equipment breakdown.

A trucking company hauling hazardous materials across state lines must meet federal minimum liability amounts that are:

1. Identical for every commodity hauled interstate
2. Generally higher than for non-hazardous freight due to greater public risk ✓
3. Set below the general freight minimum, since tankers run fewer miles
4. Waived entirely for carriers running fewer than five trucks

Why: Federal financial responsibility minimums are tiered by cargo hazard, with higher required limits for hazardous materials than for ordinary property.

PAP Part D — Coverage for Damage to Your Auto includes which two basic perils categories?

1. Uninsured and underinsured motorists, split between bodily injury and property damage
2. Fire and theft only, with every other cause of physical damage excluded
3. Collision and other than collision (comprehensive) ✓
4. Liability for bodily injury to others and medical payments for the insured's own injuries

Why: Part D physical damage coverage is divided into Collision and Other Than Collision (comprehensive) coverages.

In insurance terms, risk is best defined as:

1. The financial amount of a loss after it has occurred
2. The certainty that a loss will occur
3. The cause of a loss, such as fire
4. Uncertainty regarding the occurrence of a loss ✓

Why: Risk is the uncertainty about whether a loss will happen. Without uncertainty there is no insurable risk.

Several of the causes in Iowa Code 522B.11 have nothing to do with how the producer sells insurance. Which set of failures does the section list?

1. Failing to comply with an order imposing a child support obligation; failing to comply with an order for the payment of spousal support; failing to pay local property tax on the producer's business premises; and failing to maintain errors and omissions coverage in at least the amount fixed by rule of the commissioner.
2. Failing to comply with an order imposing a child support obligation; failing to comply with an order for repayment of loans to the college student aid commission; failing to pay federal income tax or comply with an order directing its payment; and failing to file an annual personal financial statement with the commissioner.
3. Failing to comply with any order of a court of this state, whatever its subject matter; failing to pay state income tax; failing or refusing to cooperate in an investigation by the commissioner; and failing to notify the commissioner of a change of legal name or address.
4. Failing to comply with an order imposing a child support obligation; failing to comply with an order for repayment of loans to the college student aid commission; failing to pay state income tax or comply with an order to pay it; and failing or refusing to cooperate in an investigation by the commissioner. ✓

Why: Iowa Code 522B.11(1) sets out four causes of this kind, and each is drawn narrowly. Paragraph (m) is FAILING TO COMPLY WITH AN ADMINISTRATIVE OR COURT ORDER IMPOSING A CHILD SUPPORT OBLIGATION. Paragraph (n) is FAILING TO COMPLY WITH AN ADMINISTRATIVE OR COURT ORDER RELATED TO REPAYMENT OF LOANS TO THE COLLEGE STUDENT AID COMMISSION. Paragraph (o) is FAILING TO PAY STATE INCOME TAX OR COMPLY WITH ANY ADMINISTRATIVE OR COURT ORDER DIRECTING PAYMENT OF STATE INCOME TAX - state, not federal, and the tax itself as well as an order about it. Paragraph (p) is FAILING OR REFUSING TO COOPERATE IN AN INVESTIGATION BY THE COMMISSIONER. Spousal support, property tax and errors and omissions coverage are not on the list, and the sweep across any court order of whatever subject matter is not what (m) to (o) say. A related cause sits at (q): being the subject of an order taking action against a registration as a broker-dealer, agent, investment adviser or investment adviser representative issued by a state securities administrator, by the federal securities and exchange commission, or by the financial industry regulatory authority.

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.

A business wants the broadest possible liability protection covering owned, hired, and non-owned autos under one symbol. Which symbol accomplishes this?

1. Symbol 8, hired autos only
2. Symbol 2, owned autos only
3. Symbol 1 (Any Auto) ✓
4. Symbol 7, scheduled

Why: Symbol 1, "Any Auto," is the broadest designation, covering owned, hired, and non-owned autos for liability.

The 'other insurance' condition in a property policy generally provides that the policy will pay:

1. The full loss regardless of other coverage, leaving the insured to collect again from each insurer
2. Its pro-rata share when other valid insurance exists on the same property ✓
3. Nothing at all if any other valid policy is in force
4. Double the loss amount, splitting the payment between the two insurers

Why: When more than one policy covers the same loss, the other insurance condition typically calls for pro-rata sharing based on each policy's limits.

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.

A dry cleaner damages a customer's coat. The dry cleaner wants to pay for it regardless of fault to keep goodwill. Best coverage:

1. Bailee's customer floater ✓
2. Installation floater
3. Accounts receivable
4. Contractors equipment floater

Why: A bailee's customer floater covers customers' goods in the bailee's care, often on a direct-damage basis regardless of the bailee's legal 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.

Under Iowa Code 507.4, whom may the Iowa commissioner appoint to conduct examinations, what powers do those people have, and how is their pay fixed?

1. Insurance examiners, at least one of whom shall be an experienced actuary and at least one an experienced and competent fire insurance accountant, who while conducting examinations possess such of the commissioner's powers as the commissioner delegates to them in writing for the particular examination, and whose time is divided between the division and any other employment they may hold; and assistants when advisable. The commissioner shall employ the rates of compensation fixed by the state merit system for comparable positions and may not depart from them.
2. Insurance examiners, whose qualifications the section leaves entirely to the commissioner's judgment, who while conducting examinations possess all the powers conferred upon the commissioner for such purposes; and assistants when advisable. The commissioner shall employ rates of compensation consistent with current standards in the industry for certified public accountants, attorneys and skilled insurance examiners, and may use rates suggested by the national association of insurance commissioners. Compensation is paid from appropriations for the purpose and is not reimbursed by the companies examined.
3. Insurance examiners, at least one of whom shall be an experienced actuary and at least one an experienced and competent fire insurance accountant, who while conducting examinations possess all the powers conferred upon the commissioner for such purposes and whose entire time is under the commissioner's control; and assistants when in the commissioner's judgment it is advisable. The commissioner shall employ rates of compensation consistent with current standards in the industry for certified public accountants, attorneys and skilled insurance examiners, and may use rates suggested by the national association of insurance commissioners. ✓
4. Insurance examiners, at least one of whom shall be an experienced actuary and at least one an experienced and competent fire insurance accountant, who while conducting examinations possess all the powers conferred upon the commissioner for such purposes and whose entire time is the commissioner's; and assistants when advisable. The commissioner shall employ rates of compensation consistent with current standards in the industry, and may use rates suggested by the national association of insurance commissioners. Examiners appointed under the section are subject to the merit system provisions of chapter 8A like other state employees.

Why: Iowa Code 507.4(1) provides that THE COMMISSIONER OF INSURANCE MAY APPOINT INSURANCE EXAMINERS, AT LEAST ONE OF WHOM SHALL BE AN EXPERIENCED ACTUARY, AND AT LEAST ONE OF WHOM SHALL BE AN EXPERIENCED AND COMPETENT FIRE INSURANCE ACCOUNTANT, AND WHO, WHILE CONDUCTING EXAMINATIONS, SHALL POSSESS ALL THE POWERS CONFERRED UPON THE COMMISSIONER OF INSURANCE FOR SUCH PURPOSES. THE ENTIRE TIME OF THE EXAMINERS SHALL BE UNDER THE CONTROL OF THE COMMISSIONER, AND SHALL BE EMPLOYED AS THE COMMISSIONER MAY DIRECT. Three things are in the text: the two named specialisms are minimum requirements, the examiner's powers are ALL the commissioner's powers for the purpose and arrive by operation of the statute rather than by delegation, and the examiner's ENTIRE TIME belongs to the commissioner. Iowa Code 507.4(2) provides that the commissioner MAY, WHEN IN THE COMMISSIONER'S JUDGMENT IT IS ADVISABLE, APPOINT ASSISTANTS TO AID IN CONDUCTING EXAMINATIONS, and that THE COMMISSIONER SHALL EMPLOY RATES OF COMPENSATION CONSISTENT WITH CURRENT STANDARDS IN THE INDUSTRY FOR CERTIFIED PUBLIC ACCOUNTANTS, ATTORNEYS, AND SKILLED INSURANCE EXAMINERS. THE COMMISSIONER MAY USE COMPENSATION RATES SUGGESTED BY THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS. The benchmark is the market, not the state pay scale, and the subsection makes the point explicit: INSURANCE EXAMINERS EMPLOYED UNDER THIS SECTION SHALL BE EXEMPT FROM THE MERIT SYSTEM PROVISIONS OF CHAPTER 8A, SUBCHAPTER IV, UNDER SECTION 8A.412, SUBSECTION 16 - so examiners are not subject to the merit system. Finally, COMPENSATION SHALL BE PAID FROM APPROPRIATIONS FOR SUCH PURPOSES UPON CERTIFICATION OF THE COMMISSIONER, WHICH SHALL BE REIMBURSED AS PROVIDED IN SECTIONS 507.8 AND 507.9. So the appropriation is a float that is reimbursed by the companies examined.

A statement that is guaranteed to be true and becomes part of the contract is a:

1. Concealment
2. Representation
3. Warranty ✓
4. Waiver

Why: A warranty is a statement that is guaranteed true and becomes part of the policy; its breach can void coverage.

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.

Under Iowa Code 515.51, how must an Iowa company's policies be executed, and what does the section say about group policies?

1. All policies except surety bonds may be made with or without the company's seal but must be subscribed by the president or another officer the directors designate and attested by the secretary or the secretary's designee; and a group motor vehicle or group homeowners policy must not be written or delivered in this state unless the policy is an individual policy or contract form. ✓
2. All policies including surety bonds must bear the company's seal and be subscribed by the president and attested by the secretary in person; and a group motor vehicle or group homeowners policy may be written or delivered in this state only with the prior written approval of the commissioner of insurance, given in advance for the particular group of persons to which the policy is to be issued.
3. All policies except surety bonds may be made with or without the company's seal and need not be subscribed by any officer where the form has been approved by the commissioner; and a group motor vehicle or group homeowners policy may be written and delivered freely in this state.
4. All policies may be made with or without the company's seal but must be subscribed by the president and attested by the secretary; and a group motor vehicle or group homeowners policy must not be written or delivered in this state at all, whatever form it takes.

Why: Iowa Code 515.51 provides that ALL POLICIES OR CONTRACTS OF INSURANCE EXCEPT SURETY BONDS MADE OR ENTERED INTO BY THE COMPANY MAY BE MADE EITHER WITH OR WITHOUT THE SEAL OF THE COMPANY, BUT SHALL BE SUBSCRIBED BY THE PRESIDENT, OR SUCH OTHER OFFICER AS MAY BE DESIGNATED BY THE DIRECTORS FOR THAT PURPOSE, AND BE ATTESTED TO BY THE SECRETARY OR THE SECRETARY'S DESIGNEE OF THE COMPANY. Three things are permissive - the seal, the substitute officer, the secretary's designee - and the signature and attestation themselves are not. Surety bonds are carved out of the whole sentence. The last sentence is a separate rule altogether: A GROUP MOTOR VEHICLE OR GROUP HOMEOWNERS POLICY SHALL NOT BE WRITTEN OR DELIVERED WITHIN THIS STATE UNLESS SUCH POLICY IS AN INDIVIDUAL POLICY OR CONTRACT FORM. So the business may be produced on a group basis but the contract each person receives must be an individual one - which is not a prohibition on group marketing, as the option forbidding any such group policy would have it, and not a matter of the commissioner approving the group, as the option requiring prior written approval would.

An automobile assigned-risk plan is a type of:

1. A private umbrella program that adds excess limits above a driver's personal auto liability
2. A federal reinsurance pool backed by the Department of Transportation
3. Residual (shared) market that distributes hard-to-insure drivers among insurers ✓
4. A voluntary discount program for defensive-driving graduates

Why: Assigned-risk plans are auto residual markets that assign drivers who cannot obtain coverage voluntarily to insurers in proportion to their market share.

In a liability policy, an 'occurrence' is best described as:

1. Any intentional act by the insured that results in injury or damage
2. An accident, including continuous or repeated exposure to harmful conditions ✓
3. A scheduled loss of a kind specifically listed on the declarations page
4. A single instantaneous event, so that repeated exposure is excluded

Why: An occurrence is defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions, broadening coverage beyond a single sudden event.

The Ordinance or Law issue arises when:

1. Building codes require costlier reconstruction than the original structure after a covered loss ✓
2. The insured cancels the policy mid-term and the insurer computes the refund on a short-rate rather than pro rata basis
3. A home is sold and local recording statutes require the buyer to assume the seller's existing property policy
4. The mortgage is paid off and the lender's interest must be removed from the policy's loss payable clause

Why: Ordinance or law exposure occurs when updated building codes increase rebuilding costs; standard policies limit this coverage, and an endorsement can increase it.

Iowa Code 516A.2 limits how far the coverages required by the chapter must go. What is the general rule?

1. Nothing in the chapter shall be construed as requiring the forms of coverage provided under it to afford limits in excess of the liability limits of the policy in which they appear, so that an insured who buys liability limits above the statutory minimum automatically obtains uninsured and underinsured protection at the same level as that liability cover.
2. The chapter requires the forms of coverage provided under it to afford limits equal to the total of the limits of every automobile liability or motor vehicle liability policy under which the injured insured is insured, so that the protection rises with the number of policies the insured or the insured's household happens to have bought, and each of those policies responds in full up to its own stated limit whatever any of the others may pay towards the very same loss suffered by the injured insured.
3. Nothing in the chapter shall be construed as limiting the forms of coverage provided under it in any way, the minimum limits prescribed elsewhere in the Code being a floor and not a ceiling; where an insured is covered by several policies each of them responds in full and the insured may recover the aggregate of them all.
4. Nothing in the chapter shall be construed as requiring the forms of coverage provided under it, whether alone or in combination with similar coverage afforded under other automobile liability or motor vehicle liability policies, to afford limits in excess of those that would be afforded had the insured been involved in an accident with a motorist who was insured under a policy of liability insurance with the minimum limits for bodily injury or death prescribed in section 321A.1, subsection 11. ✓

Why: Iowa Code 516A.2(1)(a) states the ceiling: NOTHING CONTAINED IN THIS CHAPTER SHALL BE CONSTRUED AS REQUIRING FORMS OF COVERAGE PROVIDED PURSUANT HERETO, WHETHER ALONE OR IN COMBINATION WITH SIMILAR COVERAGE AFFORDED UNDER OTHER AUTOMOBILE LIABILITY OR MOTOR VEHICLE LIABILITY POLICIES, TO AFFORD LIMITS IN EXCESS OF THOSE THAT WOULD BE AFFORDED HAD THE INSURED THEREUNDER BEEN INVOLVED IN AN ACCIDENT WITH A MOTORIST WHO WAS INSURED UNDER A POLICY OF LIABILITY INSURANCE WITH THE MINIMUM LIMITS FOR BODILY INJURY OR DEATH PRESCRIBED IN SECTION 321A.1, SUBSECTION 11. The benchmark is what the insured would have had if the other motorist had carried the statutory minimum - no more. WHETHER ALONE OR IN COMBINATION WITH SIMILAR COVERAGE AFFORDED UNDER OTHER AUTOMOBILE LIABILITY OR MOTOR VEHICLE LIABILITY POLICIES is the phrase that answers the options adding together the limits of several policies: the chapter does not require the protection to be multiplied by the number of policies the insured happens to hold. Note that this is a rule about what the chapter requires, not a cap on what an insurer may sell; and note that the subsection opens with an exception, for a policy containing both underinsured and uninsured or hit-and-run coverage.

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.

Which exclusion applies under PAP Part A — Liability?

1. Damage to property owned by or being transported by the insured ✓
2. Bodily injury caused by a resident family member driving the covered auto
3. Bodily injury to a pedestrian struck by the insured
4. Liability arising from driving a friend's borrowed car

Why: Part A excludes property owned by, rented to, used by, or in the care of the insured, which is why the insured's own/handled property is not covered.

Medical Payments to Others (Coverage F) typically does NOT pay for injuries to:

1. The named insured or a resident relative ✓
2. A delivery person hurt on the walkway
3. A guest tripping on the stairs
4. A child injured at a party

Why: Coverage F excludes the named insured and regular residents of the household; it is intended for injuries to third parties, not the insureds themselves.

In an OCCURRENCE form, coverage is triggered by:

1. The date the claim is first reported to the insurer in writing, no matter when the bodily injury actually took place
2. The date bodily injury or property damage occurs during the policy period, regardless of when the claim is made ✓
3. The retroactive date shown in the Declarations
4. The date the policy is cancelled or nonrenewed

Why: An occurrence policy responds to injury or damage that takes place during the policy period, no matter when the claim is reported.

Personal watercraft, such as jet skis, are typically:

1. Insured under a crop-hail policy when stored on farm premises
2. Covered automatically for liability and physical damage under a homeowners policy with no dollar limit
3. Covered only by an NFIP flood policy while moored at a dock
4. Excluded or sharply limited under a homeowners policy and better insured under a watercraft or boatowners policy ✓

Why: Homeowners forms severely limit or exclude watercraft liability and physical damage, so personal watercraft are best covered by a separate watercraft policy.

An insured's son is away at college and keeps belongings in a dorm. Under the Homeowners policy, that property is:

1. Never covered once the student has been away from the residence premises for more than 45 consecutive days
2. Often covered as an insured's property at another residence, subject to the off-premises limit ✓
3. Covered only under Section ii liability for damage the son causes
4. Subject to no limits, since dormitory property is scheduled automatically

Why: A student who is an insured may have personal property at another residence covered subject to the off-premises 10%/$1,000 limitation, depending on form conditions.

In an insurance contract, the consideration given by the insured is:

1. The promise to pay covered claims that arise during the policy period
2. The certificate of authority that the insurer holds from its state of domicile
3. The policy document itself, once it has been delivered to the applicant
4. The payment of premium and the statements made in the application ✓

Why: The insured's consideration is the premium plus the representations made in the application; the insurer's consideration is its promise to pay covered losses.

An Iowa insurer writes credit insurance for a wholesaler that extends trade credit. Under Iowa Code 515.48, what deductions may the cover carry and in what order are they taken?

1. A deduction of an agreed percentage not exceeding thirty-three and one-third per cent representing anticipated profits, and a further deduction not exceeding ten per cent on losses on credits extended to risks with inferior ratings; the agreed deduction for normal loss is taken first from the gross covered loss sustained by the insured, and the coinsurance percentages are then deducted afterwards from what remains.
2. A deduction of an agreed percentage not exceeding ten per cent representing anticipated profits, and a further deduction not exceeding thirty-three and one-third per cent on losses on credits extended to risks with inferior ratings, and an agreed deduction for normal loss; the coinsurance percentages are deducted in advance of the agreed normal loss from the gross covered loss sustained. ✓
3. An agreed deduction for normal loss only; the section permits no coinsurance percentage in credit insurance, the whole of the loss above the agreed normal loss being payable to the insured wholesaler in every case.
4. A deduction of an agreed percentage not exceeding ten per cent representing anticipated profits only; the section fixes no separate deduction for credits extended to risks with inferior ratings, which are simply excluded from the cover altogether.

Why: Iowa Code 515.48(8) authorises a company to INSURE OR GUARANTEE AND INDEMNIFY MERCHANTS, TRADERS, AND THOSE ENGAGED IN BUSINESS AND GIVING CREDIT FROM LOSS AND DAMAGE BY REASON OF GIVING AND EXTENDING CREDIT TO THEIR CUSTOMERS AND THOSE DEALING WITH THEM, WHICH BUSINESS SHALL BE KNOWN AS CREDIT INSURANCE. Paragraph (a) then says such insurance MAY COVER LOSSES, LESS A DEDUCTION OF AN AGREED PERCENTAGE, NOT TO EXCEED TEN PERCENT, REPRESENTING ANTICIPATED PROFITS, AND A FURTHER DEDUCTION NOT TO EXCEED THIRTY-THREE AND ONE-THIRD PERCENT, ON LOSSES ON CREDITS EXTENDED TO RISKS WHO HAVE INFERIOR RATINGS, AND LESS AN AGREED DEDUCTION FOR NORMAL LOSS. Paragraph (b) fixes the sequence: SUCH COINSURANCE PERCENTAGES SHALL BE DEDUCTED IN ADVANCE OF THE AGREED NORMAL LOSS FROM THE GROSS COVERED LOSS SUSTAINED BY THE INSURED. The two percentages are therefore attached to different things - ten per cent to anticipated profits, thirty-three and one-third per cent to inferior-rated credits - and the option putting thirty-three and one-third per cent on anticipated profits reverses them. Note that this is the only class in 515.48 that the statute names for the reader: WHICH BUSINESS SHALL BE KNOWN AS CREDIT INSURANCE.

Under the PAP, the limit of liability for Part A applies:

1. Separately to each claim with no per-accident cap, so every claimant injured in one collision may collect the full stated limit
2. As the most paid regardless of the number of insureds, claims, vehicles, or persons involved (per the limits shown) ✓
3. Per insured separately, so two insureds riding in one auto double the limit available for that accident
4. Doubled when two or more vehicles are listed on the same declarations page

Why: The Part A limit of liability is the most the insurer will pay for one accident regardless of the number of insureds, claims, vehicles, or persons (subject to split/CSL terms).

What minimum limits must an owner's policy of liability insurance carry under Iowa Code 321A.21, exclusive of interest and costs, with respect to each motor vehicle?

1. Twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and, subject to that limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and twenty-five thousand dollars because of injury to or destruction of property of others in any one accident, those being the limits generally required across the United States.
2. Twenty thousand dollars because of bodily injury to or death of one person and forty thousand dollars because of bodily injury to or death of two or more persons in any one accident; the section prescribes no minimum for injury to or destruction of the property of others, property damage cover being a matter for the contract between the insurer and the owner of the vehicle insured under the policy.
3. Twenty thousand dollars because of bodily injury to or death of one person in any one accident and, subject to that limit for one person, forty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and fifteen thousand dollars because of injury to or destruction of property of others in any one accident. ✓
4. Fifteen thousand dollars because of bodily injury to or death of one person in any one accident and, subject to that limit for one person, thirty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and twenty thousand dollars because of injury to or destruction of property of others in any one accident.

Why: Iowa Code 321A.21(2)(b) requires an owner's policy of liability insurance to INSURE THE PERSON NAMED IN THE POLICY AND ANY OTHER PERSON, AS INSURED, USING THE MOTOR VEHICLES WITH THE EXPRESS OR IMPLIED PERMISSION OF THE NAMED INSURED, AGAINST LOSS FROM THE LIABILITY IMPOSED BY LAW FOR DAMAGES ARISING OUT OF THE OWNERSHIP, MAINTENANCE, OR USE OF THE MOTOR VEHICLES WITHIN THE UNITED STATES OF AMERICA OR THE DOMINION OF CANADA, SUBJECT TO LIMITS EXCLUSIVE OF INTEREST AND COSTS, WITH RESPECT TO EACH SUCH MOTOR VEHICLE, TWENTY THOUSAND DOLLARS BECAUSE OF BODILY INJURY TO OR DEATH OF ONE PERSON IN ANY ONE ACCIDENT AND, SUBJECT TO SAID LIMIT FOR ONE PERSON, FORTY THOUSAND DOLLARS BECAUSE OF BODILY INJURY TO OR DEATH OF TWO OR MORE PERSONS IN ANY ONE ACCIDENT, AND FIFTEEN THOUSAND DOLLARS BECAUSE OF INJURY TO OR DESTRUCTION OF PROPERTY OF OTHERS IN ANY ONE ACCIDENT. Twenty, forty and fifteen thousand dollars: the twenty-five, fifty and twenty-five thousand dollar figures are not Iowa's limits. Three features of the wording are worth holding onto. The limits are EXCLUSIVE OF INTEREST AND COSTS. They apply WITH RESPECT TO EACH SUCH MOTOR VEHICLE. And the two-person figure is SUBJECT TO SAID LIMIT FOR ONE PERSON, so no single claimant recovers more than twenty thousand dollars out of the forty. By 321A.21(2)(a) the policy must also DESIGNATE BY EXPLICIT DESCRIPTION OR BY APPROPRIATE REFERENCE ALL MOTOR VEHICLES with respect to which coverage is granted.

The characteristic that requires certain acts, such as paying premium and providing proof of loss, before the insurer must pay a claim is that insurance is a contract of:

1. Aleatory nature
2. Conditional nature ✓
3. Indemnity
4. Adhesion

Why: Insurance is a conditional contract because both parties must meet certain conditions before the contract can be enforced.

Under the PAP "other insurance" provision for liability, when the insured uses a non-owned auto, the PAP generally provides:

1. No coverage at all, because a non-owned auto is not a covered auto under Part A
2. Coverage for half of the loss, prorated with the owner's policy by limits
3. Excess coverage over any other applicable insurance ✓
4. Primary coverage ahead of the owner's policy

Why: For a non-owned auto, the named insured's PAP liability coverage is excess over the vehicle owner's primary coverage.

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.

Compulsory automobile insurance laws differ from financial responsibility laws in that compulsory laws:

1. Do away with minimum liability limits entirely, leaving the amount of coverage to the driver
2. Require insurance to be in force before the vehicle can be registered or operated ✓
3. Take effect only after a driver has been in an accident or convicted of a serious violation
4. Apply only to commercial vehicles registered for business use, exempting private passenger autos

Why: Compulsory insurance laws require coverage to be in place before registration/operation, whereas financial responsibility laws may allow proof only after an incident.

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.

Directors and Officers (D&O) liability insurance primarily protects:

1. The company's products against claims that they failed to perform in the way the sales literature had promised buyers they would
2. Customers who slip and fall in the lobby of the corporate headquarters while they are waiting to meet with an officer of the firm
3. Employees who are hurt on the job, by paying for their medical treatment and lost wages until they are able to return to work
4. Corporate directors and officers (and often the entity) against claims alleging wrongful acts in managing the organization ✓

Why: D&O covers directors, officers, and frequently the entity for losses from alleged wrongful management acts.

An Iowa insured rejected the uninsured and hit-and-run coverage in writing when she first took out her policy with an insurer. The same insurer now issues her renewal. Under Iowa Code 516A.1, must the coverage be offered again?

1. No. Such coverage need not be provided in or supplemental to a renewal policy if the named insured has rejected the coverage in connection with a policy previously issued to the named insured by the same insurer. ✓
2. Yes. The requirement attaches to every policy delivered or issued for delivery in this state, and a renewal is a new policy; the coverage must therefore be provided again and rejected again in writing on a separate sheet of paper at each renewal of the policy for so long as the insured wishes to be without it.
3. No, provided the insurer sends the named insured a written reminder before each renewal that the coverage was rejected and may be reinstated on request; without that reminder the earlier rejection lapses and the coverage revives automatically at the renewal date of the policy concerned.
4. Yes, unless the earlier rejection was of all of the coverage; a rejection of only the uninsured and hit-and-run coverage, or of only the underinsured coverage, is spent when the policy it was given for comes to an end and must be repeated for the renewal policy that follows it.

Why: Iowa Code 516A.1(2) ends SUCH COVERAGE NEED NOT BE PROVIDED IN OR SUPPLEMENTAL TO A RENEWAL POLICY IF THE NAMED INSURED HAS REJECTED THE COVERAGE IN CONNECTION WITH A POLICY PREVIOUSLY ISSUED TO THE NAMED INSURED BY THE SAME INSURER. A rejection therefore carries forward, and the insured does not have to sign a fresh separate sheet every year. Two conditions are written into the sentence and both matter. The earlier rejection must have been made IN CONNECTION WITH A POLICY PREVIOUSLY ISSUED TO THE NAMED INSURED, and it must have been issued BY THE SAME INSURER - so a rejection given to one insurer does not travel with the insured to another. Nothing in the subsection requires a reminder at renewal, and nothing in it makes a partial rejection expire while a total one endures.

A loss resulting from physical damage that occurs immediately from the action of a peril is a:

1. Indirect loss
2. Net loss
3. Consequential loss
4. Direct loss ✓

Why: A direct loss is the immediate physical damage to property caused by a covered peril.

In commercial auto, motor carrier or trucking risks often need cargo coverage because the BACF/Motor Carrier liability form:

1. Pays the carrier's cargo liability claims under physical damage coverage once the trailer's deductible has been satisfied
2. Does not cover the carrier's liability for damage to the property (cargo) being hauled ✓
3. Covers cargo only for theft occurring while the tractor-trailer is parked at a secured terminal
4. Automatically covers cargo up to the liability limit shown in the declarations for each shipment

Why: Auto liability and physical damage forms cover the vehicle and third-party injury/damage, not the freight; motor truck cargo insurance is needed for hauled goods.

Business Income coverage is designed primarily to cover:

1. Theft of money and securities from the premises by employees or outsiders
2. Liability claims brought by customers injured on the insured's premises
3. Loss of net income and continuing expenses during a covered shutdown ✓
4. The cost to rebuild the damaged building

Why: Business Income covers the actual loss of net income plus continuing normal operating expenses (including payroll) during the period of restoration after a covered loss.

Under a Homeowners policy, loss to a covered building caused by freezing of plumbing is generally covered only if the insured:

1. Used reasonable care to maintain heat or shut off and drained the water ✓
2. Reported the burst pipe to the insurer within 24 hours of discovering the water
3. Lives in a climate where freezing is uncommon
4. Has paid the extra premium for a freezing endorsement

Why: Freezing losses are covered only if the insured maintained heat in the building or shut off the water supply and drained the systems; otherwise the loss is excluded.