Maryland Property & Casualty Insurance License, Practice Exams

A building worth $250,000 has a 90% coinsurance requirement and is insured for $225,000. A $20,000 loss occurs (no deductible). The insurer pays:

1. $22,500
2. $18,000
3. $20,000 ✓
4. $16,000

Why: Required = 90% × $250,000 = $225,000. Insurance carried equals the requirement, so the full $20,000 loss is paid.

Under MD Ins. § 25-405, amendments to the program of operation are voted on by Association members how?

1. On a weighted basis according to premiums written ✓
2. One equal vote per participating member insurer
3. By the Commissioner alone
4. By the Governing Committee only

Why: Insurance Article § 25-405(c)(3) requires votes to be cast and counted on a weighted basis in accordance with premiums written by each member.

A 'host liquor liability' exposure differs from a liquor liability business exposure in that host liquor liability:

1. Requires the host to post a surety bond with the state liquor control board and to name that board as an additional insured before alcohol is served
2. Applies to a business not in the alcohol business that serves alcohol (e.g., at a company party) and is often covered by the CGL ✓
3. Is uninsurable, since pouring alcohol is a voluntary, intentional act
4. Applies only to taverns, nightclubs, and package stores with a retail liquor license

Why: Host liquor liability (serving alcohol incidentally, not as a business) is generally NOT excluded by the CGL, unlike the liquor business exposure.

Homeowners Coverage C contains special limits of liability. The special limit on theft of jewelry, watches, and furs is commonly:

1. $2,500
2. $200
3. Unlimited
4. $1,000 to $1,500 ✓

Why: There is a special sublimit (commonly $1,500) for theft of jewelry, watches, and furs under Coverage C; higher amounts require scheduling.

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.

The policy period condition specifies:

1. The deductible that applies to each covered loss during the term
2. The territory within which a covered loss must occur for coverage to apply
3. The number of persons who may qualify as insureds under the contract
4. The dates and times during which coverage is effective ✓

Why: The policy period sets the effective and expiration dates/times defining when coverage applies.

On review, the Fund finds an applicant is not qualified for coverage. Under MD Ins. § 20-509, the Fund may:

1. Cancel coverage and refuse to issue a policy ✓
2. Be forced to issue the policy anyway
3. Hold the producer personally liable for claims
4. Refer the applicant for a Commissioner fine

Why: Section 20-509(e)(1) permits the Fund to cancel coverage and refuse to issue a policy if the applicant is not qualified.

The Extended Non-Owned Coverage for Named Individual endorsement is used to:

1. Add a second owned vehicle to the Declarations at a reduced multi-car rate
2. Add comprehensive and collision coverage to any borrowed, non-owned auto the named individual drives, subject to the owner's deductible
3. Provide liability coverage to a named individual who regularly uses a non-owned vehicle (e.g., a furnished company car) ✓
4. Cover a resident teenage driver's first vehicle until they obtain a separate policy

Why: This endorsement removes the regular-use exclusion and extends liability (and optionally medical/UM) to a named individual using a non-owned auto regularly, such as a furnished or available company car.

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 large, financially strong corporation chooses to retain its own workers' compensation risk and pay benefits directly, with state approval. This arrangement is called:

1. Experience rating
2. Monopolistic funding
3. Assigned risk
4. Self-insurance ✓

Why: Qualified self-insurance allows financially sound employers, with state approval and security/bonding, to pay WC benefits directly rather than buying a policy.

An insured runs a small in-home daycare for several children. The appropriate way to address the liability and incidental property exposure is the:

1. Mortgage clause, which extends the policy's protection to everyone lawfully on the premises
2. Home Day Care / business pursuits-type endorsement ✓
3. Inflation guard endorsement, raising the limits as the number of children enrolled grows
4. Personal Injury endorsement, which covers bodily injury to children left in the insured's care

Why: A home day care endorsement (a form of permitted incidental occupancy/business endorsement) addresses the liability and limited property exposure of running a daycare from the home.

Functional replacement cost valuation pays to replace damaged property with:

1. Less costly but functionally equivalent materials ✓
2. Identical materials only, matched to the original in every respect
3. The market value of the property immediately before the loss occurred
4. Property of greater value than that which was damaged or destroyed

Why: Functional replacement cost permits using modern, less expensive materials that serve the same function as obsolete originals.

Under MD Ins. § 27-303, refusing to pay a claim for an arbitrary or capricious reason based on all available information is:

1. Allowed if the adjuster documents the file
2. Permitted for first-party property claims
3. An unfair claim settlement practice ✓
4. A defense reserved for the insurer at trial

Why: Section 27-303(2) makes it an unfair claim settlement practice to refuse to pay a claim for an arbitrary or capricious reason based on all available information.

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

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

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

A tangible condition such as icy steps or faulty wiring is an example of a:

1. Moral hazard
2. Morale hazard
3. Physical hazard ✓
4. Speculative hazard

Why: A physical hazard is a tangible characteristic of property, persons, or operations that increases the chance of loss.

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.

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.

A producer who handles premium funds belonging to the insurer and the insured holds those funds in a:

1. Fiduciary capacity ✓
2. Personal capacity
3. Reciprocal capacity
4. Speculative capacity

Why: A producer holding others' money, such as premiums, acts in a fiduciary capacity and must handle those funds with trust and care.

An adjuster denies a claim but refuses the insured's request for any explanation of the basis. Under MD Ins. § 27-303, this conduct is:

1. Allowed because denials need no explanation
2. Permitted until litigation is filed
3. An unfair claim settlement practice ✓
4. A privileged internal work product

Why: Section 27-303(6) makes it a violation to fail to provide promptly on request a reasonable explanation of the basis for a denial of a claim.

A 'stated amount' is most commonly used to value:

1. Specialized or unusual vehicles/equipment where ACV is hard to determine ✓
2. Owner-occupied dwellings written on a homeowners form, where the limit is set by a replacement cost estimator
3. General damages for pain and suffering in a bodily injury claim
4. Liability limits for bodily injury and property damage

Why: Stated amount coverage is used for specialty vehicles or equipment, with the insurer paying the lesser of the stated amount or ACV at loss.

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

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

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

The Terrorism Risk Insurance Act (TRIA) functions as:

1. A federally funded program that pays terrorism losses directly to victims once private coverage is exhausted
2. A federal backstop that shares the cost of losses from certified acts of terrorism with insurers ✓
3. A state residual market pool that assigns terrorism risks among the insurers admitted in that state
4. A private reinsurance company chartered by Congress

Why: TRIA created a federal program in which the government shares insured losses from certified acts of terrorism, providing a backstop above an insurer's deductible.

A P&C applicant with recent U.S. armed-forces experience qualifies under a military provision. Under MD Ins. § 10-111, the application must be filed within...?

1. 30 days after discharge
2. 90 days after discharge
3. 1 year after discharge ✓
4. 2 years after discharge

Why: Insurance Article § 10-111(b) requires an applicant who has armed-forces experience and qualifies under the military provision to file the application within 1 year after the date of discharge.

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.

Under the PAP, "occupying" means:

1. Seated behind the wheel with the engine running and the transmission in gear
2. Driving the vehicle on a public road open to traffic
3. In, upon, getting in, on, out, or off a vehicle ✓
4. Holding title to or leasing the vehicle

Why: "Occupying" is defined as in, upon, getting in, on, out, or off of a vehicle, which is broader than merely riding inside it.

Under a BOP, a small office building owner wants liability coverage for slip-and-fall injuries to visitors. This is provided by:

1. Section iii conditions
2. Section I property
3. Section ii liability ✓
4. An inland marine floater

Why: Bodily injury to third parties on the premises is covered under Section II (Liability) of the BOP, similar to commercial general liability.

Under MD Ins. § 19-508, overdue PIP benefit payments bear interest at what rate?

1. 1% per month simple interest
2. 1.5% per month simple interest ✓
3. 2% per month simple interest
4. 1.5% per year simple interest

Why: Section 19-508(c) provides that overdue benefit payments bear simple interest at the rate of 1.5% per month.

Garage coverage (now largely the Auto Dealers Coverage Form) is designed for:

1. Homeowners who keep a detached garage or workshop, insuring the structure and the tools stored inside it
2. Long-haul trucking fleets, replacing the Motor Carrier Coverage Form for carriers hauling freight for hire
3. Businesses in the auto sales/service trade, covering their operations and inventory exposures ✓
4. Individual motorcycle owners insuring a bike for pleasure use

Why: Garage/Auto Dealers coverage addresses the unique liability and physical damage exposures of dealers, repair shops, and service stations, including dealers' inventory.

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.

Under MD Transp. § 17-107, a person who knows or has reason to know a vehicle is not covered by the required security may not do what?

1. Drive the vehicle ✓
2. Sell the vehicle
3. Register a different vehicle
4. Apply for a MAIF policy

Why: Transportation Article § 17-107(a) prohibits driving, or knowingly permitting another to drive, a vehicle known to lack the required security.

A lender requires flood insurance as a condition of a mortgage because the property is in a Special Flood Hazard Area. This requirement comes from:

1. The federal Do-Not-Call rules
2. State law, which conditions the recording of every mortgage on proof of flood insurance before the closing may occur
3. TRIA's make-available requirement
4. Federal flood law requiring federally regulated lenders to mandate flood coverage in high-risk zones ✓

Why: Federal law requires lenders regulated or insured by the federal government to require flood insurance on properties located in Special Flood Hazard Areas.

Under MD Ins. § 27-613, an insurer may cancel a private passenger auto policy midterm for which reason?

1. The insured filed a single not-at-fault comprehensive-coverage claim
2. The vehicle was garaged in a new zip code
3. The named insured's license was revoked for driving-record reasons ✓
4. The insured added an anti-theft device

Why: Section 27-613(b)(3) permits midterm cancellation only for material misrepresentation/fraud, a threat to public safety, an increased hazard, nonpayment, or license/registration revocation of a covered driver for driving-record reasons.

A large corporation sets aside its own funds in a formal program to pay for its own anticipated losses rather than buying insurance. This is:

1. Coinsurance
2. Reinsurance
3. Reciprocal insurance
4. Self-insurance ✓

Why: Self-insurance is a formal retention program in which an entity sets aside funds to pay its own losses instead of transferring the risk.

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.

When a home is insured for less than 80% of replacement cost, a partial loss is settled at the GREATER of:

1. Replacement cost or $1,000, whichever is more
2. Actual cash value or the coinsurance-formula amount ✓
3. Market value or full replacement cost
4. Agreed value or the stated amount

Why: If the 80% requirement is not met, the policy pays the larger of the property's actual cash value or the amount produced by the coinsurance proportion formula.

The implied warranty of seaworthiness in ocean marine requires that:

1. The cargo be insured separately from the hull under a policy placed with a different underwriter
2. The voyage follow the shortest available route between the loading port and the destination
3. The vessel be reasonably fit for the intended voyage and properly crewed and equipped ✓
4. The vessel be of recent construction and classed with a recognized society such as Lloyd's Register

Why: Seaworthiness is an implied warranty that the vessel is reasonably fit, properly equipped, and adequately crewed to undertake the intended voyage.

Builders Risk coverage typically ends when:

1. The first building inspection by the local code official is completed and signed off
2. The general contractor receives final payment from the project owner for the work
3. The building is accepted/occupied, or the policy expires (whichever first) ✓
4. Coverage continues indefinitely because the form has no termination provision at all

Why: Builders Risk coverage typically terminates when the property is accepted by the owner, occupied, or the policy expires/is cancelled, whichever happens first.

Under MD Ins. § 27-501, an auto insurer may not cancel or refuse to renew based on a claim, violation, or accident that occurred more than:

1. 1 year before the policy or renewal
2. 2 years before the policy or renewal
3. 5 years before the policy or renewal
4. 3 years before the policy or renewal ✓

Why: Section 27-501(d)(1) bars terminating auto coverage because of a claim, traffic violation, or accident that occurred more than 3 years before the effective date of the policy or renewal.

The primary purpose of underwriting is to:

1. Settle claims quickly so that the insured is restored without delay
2. Investigate suspected fraud after a loss has already been reported
3. Select and classify risks to determine acceptability and proper pricing ✓
4. Sell as many policies as possible to spread the insurer's fixed costs

Why: Underwriting is the process of evaluating, selecting, classifying, and pricing risks to maintain a profitable book of business.

Transportation expenses coverage under PAP Part D typically reimburses the insured for:

1. Rental/temporary transportation costs after a covered loss, subject to a daily and total maximum ✓
2. Lost wages for the days the insured cannot drive to work while the auto is repaired
3. Towing and labor at the scene of any mechanical breakdown, whether or not a loss occurred
4. The full daily cost of a rental car until the insured chooses to return it

Why: Transportation expenses coverage pays temporary transportation (e.g., rental) costs following a covered Part D loss, subject to per-day and per-occurrence limits.

Under MD Ins. § 9-301, the definition of 'account' for the guaranty subtitle includes which of the following?

1. A workers' compensation account and a motor vehicle insurance account ✓
2. A separate life insurance account and an annuity account
3. A health account and a dental account
4. A surplus lines account and a reinsurance account

Why: Section 9-301(b) defines 'account' as the title insurance account, the motor vehicle insurance account, the workers' compensation account, or the account for all other insurance to which the subtitle applies.

The Basic Extended Reporting Period under the ISO claims-made CGL is automatically provided and typically lasts:

1. A flat 12 months after expiration to report any claim, with no extra window for reported losses
2. 60 days for any claims, plus 5 years for claims from occurrences already reported during the policy ✓
3. Nothing at all unless the insured pays an extra premium and asks for the tail in writing
4. An unlimited reporting window that runs until the insurer withdraws it by 30 days' notice

Why: The basic ERP is automatic and free: a 60-day tail to report any claims, plus a 5-year tail for occurrences reported during the policy period.

An employer headquartered in one state sends a crew temporarily into another state not listed on the policy. Which Part of the policy is designed to provide coverage in states not listed in Part One?

1. Part Two — Employers Liability
2. Part Three — Other States Insurance ✓
3. Part One — Workers Compensation
4. Part Four — Your Duties If Injury Occurs

Why: Part Three (Other States Insurance) extends coverage to operations in states listed in the Part Three item, providing benefits if the insured incurs WC obligations in a state not shown in Part One.

Under MD Ins. § 10-115, a renewed producer license expires on the last day of the month tied to the holder's...?

1. license issue date
2. last appointment date
3. date of employment
4. month of birth ✓

Why: Insurance Article § 10-115(d) provides that a renewed license expires on the last day of the month in which the holder was born.

Under MD Ins. § 2-213, a full stenographic record of a hearing is made when a party requests it, and the cost is borne by...?

1. the Insurance Administration
2. the losing party at the hearing
3. the State's general fund
4. the party that requested it ✓

Why: Insurance Article § 2-213(e)(1) provides that, on timely written request by a party, the Commissioner has a full stenographic record made by a competent reporter at the expense of that party.

A building with exterior walls, floors, and roof made of combustible wood materials is classified as:

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

Why: Frame construction has combustible exterior walls (typically wood), giving it the highest fire-rate classification and risk.

The voluntary and intentional giving up of a known right is called:

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

Why: A waiver is the intentional and voluntary relinquishment of a known legal right.

Under MD Ins. § 10-116, which producer is exempt from the continuing education requirement?

1. one holding only a limited line credit license ✓
2. one holding a P&C license selling flood coverage
3. one holding both life and health licenses
4. one holding a personal lines P&C license

Why: Insurance Article § 10-116(b)(3) exempts from continuing education individuals who hold only a limited lines license for limited line credit insurance.

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.

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

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

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

The standard CGL excludes liability for professional services. An architect, accountant, or doctor would address this gap with:

1. Raising the CGL general aggregate to $4 million at renewal
2. Professional Liability / Errors & Omissions coverage ✓
3. An umbrella following form over the CGL
4. Coverage C medical payments with a higher per-person limit

Why: Professional services are excluded under the CGL and must be insured with a Professional Liability/E&O policy.

Under the BPP, money stolen from a register is not covered. The correct coverage to address this exposure is:

1. The Special Causes of Loss form
2. A commercial crime policy ✓
3. Ordinance or Law
4. Builders Risk

Why: Money and securities are excluded under property forms; theft of money is properly insured under a commercial crime policy.

A commercial umbrella policy provides which three basic functions?

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

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

A peril is best described as:

1. A condition that increases the chance of loss
2. The reduction in value of property
3. The legal obligation to pay for a loss
4. The cause of a possible loss, such as fire or theft ✓

Why: A peril is the direct cause of a loss, such as fire, windstorm, or theft. A hazard increases the likelihood of a peril causing loss.

A Named Non-Owner policy is appropriate for a person who:

1. Operates a livery or taxi service and needs liability coverage for the passengers carried for a fee
2. Wants comprehensive coverage only on a classic car kept in storage and never driven on public roads
3. Owns several commercial trucks and wants a single policy covering the entire fleet's liability exposure
4. Does not own an auto but regularly drives borrowed or rented vehicles and needs liability coverage ✓

Why: A named non-owner policy provides liability (and related) coverage to an individual who does not own a vehicle but drives others' or rented cars.

A Businessowners Policy (BOP) is best described as:

1. A package policy combining property and liability for small to medium businesses ✓
2. A monoline liability policy sold separately from any property coverage the insured buys
3. A policy available only to large manufacturers with multiple plant locations nationwide
4. An ocean marine form covering cargo shipped internationally by vessel and aircraft

Why: A BOP is a prepackaged policy combining property and liability coverage designed for eligible small and medium-sized businesses.

NFIP flood insurance provides which type of loss settlement for personal property (contents)?

1. Replacement cost
2. Agreed value
3. Stated amount
4. Actual cash value ✓

Why: Contents under the NFIP are always settled on an actual cash value basis, while only the building under certain conditions may be settled at replacement cost.

Under farm property coverage, livestock such as cattle and horses are usually covered:

1. Only while in transit aboard an ocean vessel to an export market
2. For every cause of loss on an open-perils basis, with no per-animal limit applied
3. On a named-peril basis (e.g., death by lightning, accidental shooting), often with per-animal limits ✓
4. Under the dwelling coverage of the farm form, which is extended to animals kept in the barn and the adjoining pasture

Why: Farm livestock is typically insured on a named-peril basis (lightning, fire, certain accidents) and is frequently subject to per-animal and aggregate limits.

In the Dwelling Policy program, which form provides ONLY basic named perils such as fire, lightning, and extended coverage perils?

1. HO-3
2. DP-2
3. DP-1 ✓
4. DP-3

Why: DP-1 is the Basic Form, providing the narrowest set of named perils. DP-2 broadens the list and DP-3 is open-peril.

Under MD Ins. § 10-111, an individual applying for a resident producer license submits to the Commissioner...?

1. a notarized character affidavit
2. a fidelity and surety bond
3. a criminal history expungement
4. a completed uniform application ✓

Why: Insurance Article § 10-111(a)(1) requires an individual applying for a resident producer license to submit to the Commissioner a uniform application and declare that its statements are true, correct, and complete.

Many Homeowners policies suspend certain coverages, such as vandalism and freezing, after the dwelling has been vacant for more than:

1. 30 days
2. 90 days
3. 60 days ✓
4. 15 days

Why: A common provision suspends or restricts coverage for vandalism, glass breakage, and freezing once the dwelling has been vacant for more than 60 consecutive days.

Which payment is included as a Supplementary Payment under PAP Part A and does NOT reduce the limit of liability?

1. Punitive damages assessed against the insured for reckless driving, paid on top of the stated limit
2. Up to a stated daily amount for loss of earnings to attend a trial at the insurer's request ✓
3. The bodily injury damages awarded to a third party by the court
4. Property damage to the insured's own vehicle in the same accident

Why: Supplementary payments include a stated daily amount for loss of earnings to attend hearings or trials at the insurer's request, paid in addition to the limit.

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.

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

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

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

A covered employee sustains an accidental personal injury on the job. Under MD Lab. & Empl. § 9-501, the result is that:

1. The employee must first sue in court
2. The employer must provide compensation ✓
3. Compensation depends on employer fault
4. Only medical bills over $1,000 are paid

Why: Section 9-501(a) requires each employer of a covered employee to provide compensation for an accidental personal injury sustained by that employee.

Under MD Ins. § 19-215, an insurer that issues a homeowner's policy containing an anti-concurrent causation clause must provide the policyholder with what?

1. An annual notice describing the ACC clause ✓
2. A separate flood policy
3. A premium refund each year
4. A signed waiver of the exclusion

Why: Insurance Article § 19-215(a) requires a clear annual notice describing the anti-concurrent causation clause.

Under 18 U.S.C. § 1033, a person who has been convicted of a felony involving dishonesty or breach of trust is prohibited from engaging in the business of insurance unless:

1. They pay a civil fine to the state insurance department and complete an ethics course
2. They obtain written consent from the appropriate insurance regulatory official ✓
3. Ten years have passed since the sentence and any supervised release were completed
4. They retake the state producer licensing examination and pass it before reapplying

Why: Section 1033 bars such felons from the business of insurance affecting interstate commerce unless they obtain written consent from the appropriate state insurance regulator (under 1033(e)).

Under MD Ins. § 19-509, a policy provision requiring a UM dispute to be submitted to binding arbitration is:

1. Required in every UM policy
2. Allowed if both parties agree
3. Mandatory for claims over $50,000
4. Prohibited and of no legal effect ✓

Why: Section 19-509(j) states that a provision requiring binding arbitration of a UM dispute is prohibited and of no legal effect.

An injured wage earner loses $1,000 in income after a covered accident. Under MD Ins. § 19-505, the PIP loss-of-income benefit payable is:

1. $700
2. $800
3. $1,000
4. $850 ✓

Why: Section 19-505(b)(2)(ii) pays 85% of income lost; 85% of $1,000 equals $850.

Under the MD Lab. & Empl. § 9-627 schedule, the loss of a thumb is compensated for how many weeks?

1. 40 weeks
2. 100 weeks ✓
3. 150 weeks
4. 75 weeks

Why: Section 9-627(b)(1) sets the scheduled period for loss of a thumb at 100 weeks.

"Your covered auto" under the PAP includes:

1. Any car the insured happens to drive, owned or not, anywhere in the world, so long as the owner has given permission
2. Only vehicles the insured leases under a written agreement of six months or longer, with owned autos added by endorsement
3. Vehicles shown in the Declarations, newly acquired autos, trailers owned, and temporary substitutes (per terms) ✓
4. Only the first auto listed in the Declarations, with later additions needing a new policy

Why: "Your covered auto" encompasses vehicles in the Declarations, certain newly acquired autos, owned trailers, and qualifying temporary substitute autos.

Under MD Ins. § 2-109, a person who willfully violates a regulation adopted under the article is...?

1. immune from penalty absent a separate statute
2. subject only to a written reprimand
3. subject to the penalty for the related provision ✓
4. referred automatically to a State's Attorney for prosecution

Why: Insurance Article § 2-109(f) makes a person that willfully violates a regulation adopted under the article subject to any applicable penalty for violation of the provision to which the regulation relates.

Under MD Ins. § 2-204, an order or notice of the Commissioner must be...?

1. recorded with the local land records
2. notarized by a State official
3. in writing and signed by the Commissioner or a designee ✓
4. approved by the relevant advisory board beforehand

Why: Insurance Article § 2-204(a) requires an order or notice of the Commissioner to be in writing and signed by the Commissioner or an individual the Commissioner authorizes.

An 'occurrence' is defined in the CGL as:

1. An accident, including continuous or repeated exposure to substantially the same general harmful conditions ✓
2. Any claim first made against the insured and reported during the policy period, whenever the conduct occurred
3. Only a sudden and abrupt event happening at one identifiable time and place, so gradual exposure never qualifies
4. An intentional act by the insured that produces unexpected harm

Why: The CGL defines occurrence as an accident, including continuous or repeated exposure to substantially the same harmful conditions.

If an insured carries 100/300 UM limits and is hit by a driver with 25/50 liability limits, underinsured motorists coverage may provide additional recovery of up to:

1. Nothing at all, because the at-fault driver carried liability limits that met the state minimum
2. The difference between the UM/UIM limit and the at-fault driver's coverage, per policy terms ✓
3. The full $300,000 per accident, paid on top of whatever the at-fault driver's insurer already paid
4. Only $25,000, because UIM recovery is capped at the at-fault driver's per-person liability limit

Why: UIM allows the insured to recover the gap between their UIM limit and the underinsured driver's limits, subject to how the state/policy coordinates the limits.

Under MD Ins. § 27-207, which practice is prohibited as an inducement to insurance?

1. Issuing capital stock or an advisory board contract promising profits ✓
2. Delivering the policy form required to be given to the insured
3. Paying a lawful commission to a licensed insurance producer
4. Returning an unearned premium after a midterm cancellation

Why: Insurance Article § 27-207 provides that a person may not issue or deliver company stock or other capital stock, benefit certificates, or an advisory board contract or similar contract that promises returns and profits as an inducement to insurance.

Theft coverage under the standard Dwelling Policy is:

1. Provided only for liability claims
2. Automatically included in all forms
3. Only available on DP-1
4. Not included unless added by endorsement ✓

Why: The Dwelling Policy does not include theft coverage by default; it must be added by a theft coverage endorsement.