Montana Property & Casualty Insurance License, Practice Exams

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.

Which dwelling form provides coverage on a named-perils basis using the broad form list of perils?

1. DP-2 (Broad Form) ✓
2. DP-4 (Comprehensive Form)
3. DP-3 (Special Form)
4. DP-1 (Basic Form)

Why: The DP-2 Broad Form insures on a named-perils basis using the expanded broad-form list of perils. DP-1 uses basic perils and DP-3 uses open perils on the dwelling.

If a claims-made insured switches carriers and the new policy uses the same retroactive date, the insured generally:

1. Loses all coverage for prior occurrences unless a tail is bought on the expiring policy
2. Must buy a supplemental extended reporting period from the prior carrier at extra cost
3. Maintains continuity of coverage for prior occurrences without buying a tail ✓
4. Must accept a self-insured retention twice the size of the one on the expiring policy

Why: Keeping the same retroactive date with the new carrier preserves continuity, so a tail on the expiring policy is typically unnecessary.

A Montana producer takes premium money knowing the insurer will not put the coverage on risk. Which limb of MCA 33-1-1202 is that, and what else sits beside it?

1. Subsection (4), which also requires that the producer have converted the premium to the producer's own use; merely accepting money for coverage which is not placed is a breach of the fiduciary duty in 33-17-1102 rather than an act of insurance fraud under this part.
2. Subsection (1), because the premium is taken for the purpose of obtaining money; the section contains no separate provision about premiums, the taking of a premium for coverage that will not exist being treated as the presentation of a misleading statement to the insured.
3. Subsection (7), counterfeit insurance documents, on the footing that a producer who takes premium money knowing that coverage will not be provided must necessarily give the insured some document evidencing a policy which the insurer has not in fact issued to that person.
4. Subsection (4): accepting premium money knowing that coverage will not be provided. Beside it sits subsection (3), presenting or causing to be presented to or by an insurer, purported insurer, producer or administrator a materially false or altered application of insurance. ✓

Why: MCA 33-1-1202(4): ACCEPTS PREMIUM MONEY KNOWING THAT COVERAGE WILL NOT BE PROVIDED. (3): PRESENTS OR CAUSES TO BE PRESENTED TO OR BY AN INSURER, PURPORTED INSURER, PRODUCER, OR ADMINISTRATOR, AS DEFINED IN 33-17-102, A MATERIALLY FALSE OR ALTERED APPLICATION OF INSURANCE. Note the words TO OR BY - the section reaches an application put forward BY a producer as well as one presented TO an insurer.

In Business Income coverage, the 'period of restoration' begins:

1. 72 hours after the time of direct physical loss ✓
2. At the time of direct physical loss caused by a covered peril
3. When the policy is purchased
4. When the business reopens

Why: Business income payments are subject to the standard 72-hour waiting period in the ISO form (CP 00 30): although measured from the direct physical loss, coverage does not begin paying until 72 hours after the loss.

Compared with a loss payable clause, a standard mortgage clause gives the mortgagee:

1. No rights of its own, so it must sue the insured to collect
2. Independent rights, including payment even if the insured's own claim is denied for certain acts ✓
3. The same derivative rights a loss payee has, so denial of the insured's claim also bars payment
4. Only the right to take salvage after the insurer pays

Why: A standard (union) mortgage clause grants the mortgagee independent rights, so it may still be paid even if the insured's claim is voided by certain acts.

Because the standard policy's Part One does not apply in monopolistic fund states (where coverage comes from the state fund), what does the policy still commonly provide for those states via endorsement?

1. Part One statutory benefits for those states
2. Vocational rehabilitation and retraining benefits
3. Stop Gap / Employers Liability coverage ✓
4. Other States Insurance listing the monopolistic states

Why: In monopolistic states, the state fund provides statutory benefits but not employers liability; a stop gap (Employers Liability) endorsement fills that gap.

What penalty does MCA 33-18-1005 impose for violating a cease and desist order?

1. A civil penalty not to exceed $1,000, each day of violation being a separate violation, with the total not to exceed A $10,000 aggregate; the Attorney General or the county attorney petitions the District Court to recover it. ✓
2. A civil penalty not to exceed $10,000 for each violation, with no aggregate ceiling, each day being treated as a separate violation so that a continuing breach becomes progressively more expensive for the person concerned.
3. A fine not to exceed $25,000 imposed by the commissioner under 33-1-317, the cease and desist provisions carrying no separate penalty of their own and being enforced through the general penalty section of the code.
4. A civil penalty not to exceed $1,000 for the whole of a continuing violation however long it lasts, the section deliberately declining to multiply the penalty by the number of days in order to keep it proportionate to the conduct.

Why: MCA 33-18-1005: (1) any person who VIOLATES A CEASE AND DESIST ORDER issued pursuant to 33-18-1004 IS SUBJECT TO A CIVIL PENALTY NOT TO EXCEED $1,000. EACH DAY OF VIOLATION CONSTITUTES A SEPARATE VIOLATION. THE TOTAL PENALTY MAY NOT EXCEED A $10,000 AGGREGATE. Upon the department's request, THE ATTORNEY GENERAL OR THE COUNTY ATTORNEY of the county where the violation occurred SHALL PETITION THE DISTRICT COURT to impose, assess and recover it. (2) such an action IS NOT A BAR to enforcement by injunction or other remedies. (3) MONEYS COLLECTED SHALL BE DEPOSITED IN THE STATE GENERAL FUND.

A loss payable clause in a property policy primarily protects:

1. The state guaranty association, which is reimbursed first out of any loss payment
2. A secured creditor or lender with an interest in covered personal property ✓
3. A bailee holding the property for repair, giving it a direct claim on the proceeds
4. The named insured alone, to the exclusion of any lender

Why: A loss payable clause directs claim payments to a designated party (such as a lender) holding an interest in the covered property.

Under MCA 33-1-1202(1), what is the first way a person commits administrative or civil insurance fraud?

1. By knowingly making a false statement to an insurer with intent to defraud it, the section requiring proof of an intention to deceive as well as of the falsity of the statement and of the materiality of the fact to which the statement relates in the claim concerned.
2. By presenting, or causing to be presented, to any insurer, purported insurer, producer, or administrator any written or oral statement containing false, incomplete, or misleading information material to or in support of a claim, for the purpose of obtaining money. ✓
3. By presenting a claim for a loss that did not occur, the first subsection being directed at wholly fabricated claims and the later subsections at claims which are genuine but inflated or supported by documents which have been altered after they were first issued.
4. By presenting a statement containing false information to an insurer, whether or not the person sought any money or benefit by doing so, the subsection reaching the false statement itself and leaving the person's purpose to go to the penalty rather than to liability.

Why: MCA 33-1-1202(1): a person commits the act of administrative or civil insurance fraud when the person, FOR THE PURPOSE OF OBTAINING ANY MONEY OR BENEFIT, PRESENTS OR CAUSES TO BE PRESENTED TO ANY INSURER, PURPORTED INSURER, PRODUCER, OR ADMINISTRATOR, AS DEFINED IN 33-17-102, ANY WRITTEN OR ORAL STATEMENT, INCLUDING COMPUTER-GENERATED DOCUMENTS, CONTAINING FALSE, INCOMPLETE, OR MISLEADING INFORMATION CONCERNING ANY FACT OR THING MATERIAL TO, AS PART OF, OR IN SUPPORT OF A CLAIM FOR PAYMENT OR OTHER BENEFIT PURSUANT TO AN INSURANCE POLICY. Note INCOMPLETE as well as false, and ORAL as well as written.

What fines does MCA 61-6-304(1) set for convictions under the Montana compulsory insurance sections?

1. A first offence is punishable by a fine of not less than $100 or more than $250; a second conviction by a fine of $250; and a third or subsequent conviction by a fine of $350 or by imprisonment in the county jail for not more than 30 days, or both, together with the surrender of the driver's license of the offender to the department.
2. A first offence is punishable by a fine of not less than $250 or more than $500, a second and every subsequent conviction by the same fine, there being no separate scale for a repeat offender, and no term of imprisonment may be imposed for a violation of the compulsory insurance sections however many times the offender has been convicted.
3. A first offence is punishable by a fine of not less than $250 or more than $500. A second conviction is punishable by a fine of $350. A third or subsequent conviction is punishable by a fine of $500 or by imprisonment in the county jail for not more than 10 days, or both of them. ✓
4. A first offence is punishable by a fine of $500; a second conviction by a fine of $350 and the surrender of the offender's driver's license; and a third or subsequent conviction by imprisonment in the county jail for not less than 10 days, a fine not being available to the sentencing court on a third or subsequent conviction under these sections.

Why: MCA 61-6-304(1): CONVICTION OF A FIRST OFFENSE UNDER 61-6-301 OR 61-6-302 IS PUNISHABLE BY A FINE OF NOT LESS THAN $250 OR MORE THAN $500. A SECOND CONVICTION IS PUNISHABLE BY A FINE OF $350. A THIRD OR SUBSEQUENT CONVICTION IS PUNISHABLE BY A FINE OF $500 OR BY IMPRISONMENT IN THE COUNTY JAIL FOR NOT MORE THAN 10 DAYS, OR BOTH. (4): AN OFFENDER IS CONSIDERED TO HAVE BEEN PREVIOUSLY CONVICTED FOR THE PURPOSES OF SENTENCING IF LESS THAN 5 YEARS HAVE ELAPSED BETWEEN THE COMMISSION OF THE PRESENT OFFENSE AND A PREVIOUS CONVICTION.

When is a person who assumes to act as an agent responsible to third persons as a principal under MCA 28-10-701 and 702?

1. A person who assumes to act as an agent gives no warranty of authority, a third person being bound to satisfy itself of the agent's authority, and is responsible as a principal only where the agent enters into a written contract in the name of a principal who does not exist or who afterwards refuses to ratify the contract made in that name.
2. A person who assumes to act as an agent warrants the authority assumed, and is responsible as a principal whenever the principal turns out not to be bound by the transaction, whatever the agent believed about the authority at the time and whether or not credit was given to the agent personally in the transaction with the third person.
3. A person who assumes to act as an agent warrants the authority assumed, and is responsible as a principal when credit is given to the agent personally with the agent's consent, or when the agent's acts are wrongful in their nature. An agent who enters into a written contract in the principal's name is never personally responsible on that contract.
4. A person who assumes to act as an agent warrants to all who deal with that person the authority assumed, and is responsible as a principal only where credit is given to the agent personally with consent, where the agent signs in the principal's name without believing in the authority, or where the acts are wrongful. ✓

Why: MCA 28-10-701: A PERSON WHO ASSUMES TO ACT AS AN AGENT WARRANTS TO ALL WHO DEAL WITH THE PERSON IN THAT CAPACITY THAT THE PERSON HAS THE AUTHORITY THAT THE PERSON ASSUMES. MCA 28-10-702: A PERSON WHO ASSUMES TO ACT AS AN AGENT IS RESPONSIBLE TO THIRD PERSONS AS A PRINCIPAL FOR ACTS IN THE COURSE OF THE AGENCY IN ANY OF THE FOLLOWING CASES AND IN NO OTHER: (1) WHEN, WITH THE AGENT'S CONSENT, CREDIT IS GIVEN TO THE AGENT PERSONALLY IN A TRANSACTION; (2) WHEN THE AGENT ENTERS INTO A WRITTEN CONTRACT IN THE NAME OF THE PRINCIPAL WITHOUT BELIEVING IN GOOD FAITH THAT THE AGENT HAS AUTHORITY TO DO SO; OR (3) WHEN THE AGENT'S ACTS ARE WRONGFUL IN THEIR NATURE. MCA 28-10-703 adds that an agent who receives something for the principal that ANOTHER PERSON IS ENTITLED TO POSSESS SHALL, ON DEMAND, SURRENDER IT TO THAT PERSON, and IS RESPONSIBLE FOR IT IF, AFTER DEMAND, THE AGENT DELIVERS IT TO THE PRINCIPAL.

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.

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

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

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

What may the Montana commissioner do after a hearing at which administrative or civil insurance fraud is established, and what must the commissioner do?

1. May impose a penalty under 33-1-317 and may order restitution where the commissioner thinks it just to do so, the question of restitution being a discretionary one which turns on the loss the insurer has suffered and on the means of the person who committed the fraud.
2. May impose any penalty provided for in 33-1-317 or require the person to pay the costs of the proceeding, and, in addition to any other penalties, shall require restitution to the insurer or any other person for all financial loss sustained as a result of the fraud. ✓
3. May impose a fine of not more than $25,000 for each act of fraud and revoke every licence the person holds under the code, restitution being a matter for the district court in a civil action brought by the insurer rather than for the commissioner in the administrative forum.
4. May require the person to pay the costs of the proceeding, that being the only financial consequence the part provides for, and must refer the matter to the prosecuting authority so that the criminal penalties may be sought in the proper court in the county concerned.

Why: MCA 33-1-1211(1): IF, AFTER A HEARING CONDUCTED UNDER 33-1-701, THE COMMISSIONER DETERMINES THAT A PERSON HAS COMMITTED ADMINISTRATIVE OR CIVIL INSURANCE FRAUD, THE COMMISSIONER MAY (a) IMPOSE ANY PENALTY PROVIDED FOR IN 33-1-317; OR (b) REQUIRE THE PERSON TO PAY THE COSTS OF THE PROCEEDING. (2): IN ADDITION TO ANY OTHER PENALTIES, THE COMMISSIONER SHALL REQUIRE A PERSON WHO COMMITS ADMINISTRATIVE OR CIVIL INSURANCE FRAUD TO MAKE RESTITUTION TO THE INSURER OR TO ANY OTHER PERSON FOR ALL FINANCIAL LOSS SUSTAINED AS A RESULT OF THE INSURANCE FRAUD. Restitution is SHALL; the penalty and the costs are MAY.

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.

Which of the following is a possible result of the underwriting process?

1. Acceptance with modified terms or higher premium
2. Rejection of the risk
3. All of the above ✓
4. Acceptance of the risk as applied for

Why: Underwriting can result in accepting the risk as is, accepting with modifications/conditions, or rejecting the application.

By when must a claim be filed with the Montana association, and what is expressly excluded?

1. A claim must be filed within one year of the order of liquidation, and claims for losses incurred but not reported are covered because the association stands in the insurer's shoes and the insurer would have had to meet them had it remained solvent for the policy period.
2. A claim must be filed within 36 months of the date on which the claimant knew of the loss, whenever the order of liquidation was made; the court's own bar date governs the liquidation but not the association, which continues to accept claims after that date has passed.
3. A claim must be filed before the later of 36 months after the order of liquidation or the final date set by the court, the claimant having the benefit of whichever period ends last; losses incurred but not reported are excluded only where the policy is a claims-made one.
4. A covered claim may not include a claim filed with the association or a liquidator for losses incurred but not reported, and may not include a claim filed after the earlier of 36 months after the order of liquidation or the final date set by the court for filing claims. ✓

Why: MCA 33-10-105(2)(a): EXCEPT AS PROVIDED IN SUBSECTION (2)(b), A COVERED CLAIM MAY NOT INCLUDE A CLAIM FILED WITH THE ASSOCIATION OR A LIQUIDATOR FOR PROTECTION UNDER THE INSURED'S POLICY FOR LOSSES INCURRED BUT NOT REPORTED AND MAY NOT INCLUDE A CLAIM FILED WITH THE ASSOCIATION AFTER THE EARLIER OF (i) 36 MONTHS AFTER THE DATE OF THE ORDER OF LIQUIDATION; OR (ii) THE FINAL DATE SET BY THE COURT FOR THE FILING OF CLAIMS AGAINST THE LIQUIDATOR OR RECEIVER OF AN INSOLVENT INSURER. THE EARLIER, not the later.

The maximum NFIP contents coverage available to a residential policyholder is:

1. $250,000
2. $50,000
3. $500,000
4. $100,000 ✓

Why: Residential contents coverage under the NFIP is capped at $100,000, separate from the building limit.

An 'impairment rating' in workers' compensation is used primarily to:

1. Decide which state's compensation law governs a multistate claim
2. Measure the degree of permanent loss of function for benefit determination ✓
3. Set the employer's premium classification code from its payroll
4. Calculate the experience modification factor applied to the employer's manual premium

Why: An impairment rating, often expressed as a percentage, measures the extent of permanent physical impairment and is used to determine permanent disability benefits.

What makes an organisation a FRATERNAL BENEFIT SOCIETY under MCA 33-7-105?

1. Any non-profit membership organisation that provides life or health benefits to its members, the lodge system and the ritualistic forms of work having been removed from the definition as obsolete requirements in this State.
2. Any mutual insurer without capital stock whose policyholders elect its directors, the definition turning on the absence of shareholders and on policyholder control rather than on any fraternal or lodge characteristic of the body.
3. A society, order or supreme lodge without capital stock, run solely for its members and beneficiaries and not for profit, on a lodge system with ritualistic forms of work and a representative form of government. ✓
4. An incorporated society without capital stock that is exempt from federal income tax under section 501(c)(8) of the Internal Revenue Code, the state definition following the federal classification of such a body for this purpose.

Why: MCA 33-7-105: ANY INCORPORATED OR UNINCORPORATED SOCIETY, ORDER, OR SUPREME LODGE, WITHOUT CAPITAL STOCK, including a society exempted under 33-7-126(1)(b), THAT IS CONDUCTED SOLELY FOR THE BENEFIT OF ITS MEMBERS AND THEIR BENEFICIARIES AND NOT FOR PROFIT, THAT IS OPERATED ON A LODGE SYSTEM WITH RITUALISTIC FORMS OF WORK, THAT HAS A REPRESENTATIVE FORM OF GOVERNMENT, AND THAT PROVIDES BENEFITS IN ACCORDANCE WITH THIS CHAPTER, IS A FRATERNAL BENEFIT SOCIETY. All five elements are required.

A Montana producer follows the insurer's instructions in obtaining an insurance score and is sued over it. What does MCA 33-18-610 provide?

1. An insurer shall indemnify, defend, and hold insurance producers harmless from all liability, fees and costs arising out of the producer's use of credit information for an insurer, if the producer follows the insurer's instructions or procedures and with applicable law. ✓
2. The producer is immune from suit altogether, the section conferring on a producer who uses credit information the same immunity that the privacy chapter confers on a person who discloses personal information in accordance with that chapter's requirements.
3. The insurer must indemnify the producer only where the producer follows the insurer's written instructions and the insurer has been found liable in the same proceeding, the producer otherwise bearing its own costs of defending the claim brought against it.
4. The producer is entitled to be reimbursed its legal costs but not any judgment against it, and only where the consumer's claim is dismissed; the section also gives the consumer a new statutory cause of action against the insurer in place of the claim against the producer.

Why: MCA 33-18-610: AN INSURER SHALL INDEMNIFY, DEFEND, AND HOLD INSURANCE PRODUCERS HARMLESS FROM AND AGAINST ALL LIABILITY, FEES, AND COSTS ARISING OUT OF OR RELATING TO THE ACTIONS, ERRORS, OR OMISSIONS OF AN INSURANCE PRODUCER THAT OBTAINS OR USES CREDIT INFORMATION OR INSURANCE SCORES FOR AN INSURER, IF THE INSURANCE PRODUCER FOLLOWS THE INSTRUCTIONS OF OR PROCEDURES ESTABLISHED BY THE INSURER AND COMPLIES WITH ANY APPLICABLE LAW OR REGULATION. THIS SECTION MAY NOT BE CONSTRUED TO PROVIDE A CONSUMER OR OTHER INSURED WITH A CAUSE OF ACTION THAT DOES NOT EXIST IN THE ABSENCE OF THIS SECTION.

What does MCA 33-18-210(9) say about sex and marital status, and what does it allow?

1. An insurer may not charge a different rate to men and to women for the same coverage, rating by sex being abolished for every line written in this State, and may not vary a rate by marital status except where its filed experience shows a difference in expected loss.
2. An insurer may not refuse coverage because of sex, but marital status remains an ordinary underwriting variable for property and casualty business and may be used to decline a risk as well as to rate it, provided the insurer applies its rule uniformly across the class.
3. An insurer may not refuse to insure, refuse to continue to insure, or limit coverage because of an individual's sex or marital status, but it may take marital status into account to define who is eligible for dependents' benefits. ✓
4. An insurer may not refuse to insure because of sex or marital status, and may not take marital status into account for any purpose whatever, the subsection admitting no exception and overriding any eligibility provision in a group policy delivered in this State.

Why: MCA 33-18-210(9): AN INSURER MAY NOT REFUSE TO INSURE, REFUSE TO CONTINUE TO INSURE, OR LIMIT THE AMOUNT OF COVERAGE AVAILABLE TO AN INDIVIDUAL BECAUSE OF THE SEX OR MARITAL STATUS OF THE INDIVIDUAL. HOWEVER, AN INSURER MAY TAKE MARITAL STATUS INTO ACCOUNT FOR THE PURPOSE OF DEFINING PERSONS ELIGIBLE FOR DEPENDENTS' BENEFITS.

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.

Which best describes "non-owned autos" in commercial auto?

1. New and used autos held in a dealer's showroom inventory for sale, which Symbol 9 picks up while they sit on the display lot
2. Rental cars the named insured hires under short-term agreements while its own fleet units are in the shop being repaired
3. Autos used in the business but not owned, leased, or borrowed by the named insured — typically employees' own vehicles ✓
4. Autos titled to the named insured but assigned to a single employee for that employee's exclusive use during the workweek

Why: Non-owned autos (Symbol 9) are vehicles not owned/hired by the insured but used in its business, most often employees' personal autos.

Of what must the Montana commissioner be satisfied before issuing or renewing a premium finance company licence, and when may one be revoked?

1. That the person is competent and trustworthy and intends to act in good faith; has a good business reputation and qualifying experience; and, if a corporation, is incorporated or authorized here. Revocation follows fraud, misrepresentation, untrustworthiness or breach. ✓
2. That the applicant has a net worth of at least $100,000 and has filed a surety bond in favour of the people of Montana; and a licence may be revoked only on a conviction of the licensee for an offence involving dishonesty in the conduct of the financing business.
3. That the applicant is competent and trustworthy, that being the whole of the test; the commissioner has no power to inquire into the applicant's experience or reputation, and a licence may be revoked only where the licensee has been shown untrustworthy after an inquiry.
4. That the applicant has passed the premium finance examination and holds a current Montana producer licence; and a licence may be revoked where the company has violated the chapter, misrepresentation in the application going to a refusal to renew rather than to revocation.

Why: MCA 33-14-202(2): THE COMMISSIONER SHALL ISSUE OR RENEW A LICENSE WHEN SATISFIED THAT THE PERSON TO BE LICENSED (a) IS COMPETENT AND TRUSTWORTHY AND INTENDS TO ACT IN GOOD FAITH IN THE CAPACITY INVOLVED BY THE LICENSE APPLIED FOR; (b) HAS A GOOD BUSINESS REPUTATION AND HAS HAD EXPERIENCE, TRAINING, OR EDUCATION THAT QUALIFIES THE APPLICANT IN THE BUSINESS FOR WHICH THE LICENSE IS APPLIED; AND (c) IF A CORPORATION, IS A CORPORATION INCORPORATED UNDER THE LAWS OF THE STATE OR IS A FOREIGN CORPORATION AUTHORIZED TO TRANSACT BUSINESS IN THE STATE. (1): the commissioner MAY MAKE A BACKGROUND EXAMINATION, and a denied applicant MAY DEMAND A HEARING under 33-1-701. MCA 33-14-203: the commissioner MAY REVOKE OR SUSPEND where (1) THE LICENSE WAS OBTAINED BY FRAUD; (2) THERE WAS MISREPRESENTATION IN THE APPLICATION; (3) THE HOLDER HAS OTHERWISE BEEN SHOWN UNTRUSTWORTHY OR INCOMPETENT; or (4) THE COMPANY HAS VIOLATED ANY PROVISIONS OF THIS CHAPTER.

What penalty does MCA 33-17-411 allow against a nonresident producer?

1. A fine by the commissioner of up to $50,000 for each violation; and, at the commissioner's discretion, revocation or suspension of the Montana nonresident licence for a period of up to 5 years. ✓
2. A fine of up to $5,000 for each violation, which is the ceiling the code applies to insurance producers and adjusters generally, together with revocation or suspension of the nonresident licence for such period as the commissioner considers appropriate in the circumstances of the case.
3. A fine of up to $25,000 for each violation and revocation of the licence, suspension not being available against a nonresident because the commissioner cannot supervise a licensee outside the State during a period of suspension imposed under this part of the chapter as enacted.
4. No fine at all, the commissioner's remedy against a nonresident being confined to reporting the conduct to the producer's home state regulator, which alone may impose a monetary penalty on a person licensed as a resident within its own jurisdiction under its law.

Why: MCA 33-17-411: A NONRESIDENT INSURANCE PRODUCER WHO VIOLATES A CONDITION OF THE PRODUCER'S MONTANA LICENSE OR A PROVISION OF THIS PART IS SUBJECT TO A FINE BY THE COMMISSIONER OF UP TO $50,000 FOR EACH VIOLATION AND MAY, AT THE DISCRETION OF THE COMMISSIONER, HAVE THE MONTANA NONRESIDENT LICENSE REVOKED OR SUSPENDED FOR A PERIOD OF UP TO 5 YEARS. Note how far this exceeds the $5,000 per violation ceiling 33-1-317 sets for producers generally.

Which MCA 33-1-206 paragraph covers loss caused by the breakage or leakage of sprinklers and water pipes, and what else does that paragraph insure?

1. Paragraph (1)(g), boiler and machinery, which reaches the breakage or leakage of sprinklers, hoses and pumps as an accident to apparatus, and which extends to water entering through leaks or openings in buildings, damage to the extinguishing equipment itself being excluded because the equipment is the cause and not the subject of the loss.
2. Paragraph (1)(h), leakage and fire extinguishing equipment, which insures loss or damage to property caused by the breakage or leakage of sprinklers, hoses, pumps, water pipes or containers, but not loss caused by water entering through leaks or openings in buildings, which is a flood or surface water peril outside the casualty definitions.
3. Paragraph (1)(h), leakage and fire extinguishing equipment. It insures loss or damage to any property or interest caused by breakage or leakage of sprinklers, hoses, pumps and other extinguishing equipment, water pipes or containers, or by water entering through leaks or openings in buildings, and loss or damage to the equipment itself. ✓
4. Paragraph (1)(f), glass, which the code reads as covering the fittings and fixed apparatus of a building, including sprinklers, hoses and water pipes, together with the lettering and ornamentation on the glass itself and any water damage which follows from the breakage of the insured glass or of the apparatus attached to it.

Why: MCA 33-1-206(1)(h): LEAKAGE AND FIRE EXTINGUISHING EQUIPMENT IS INSURANCE AGAINST LOSS OR DAMAGE TO ANY PROPERTY OR INTEREST CAUSED BY THE BREAKAGE OR LEAKAGE OF SPRINKLERS, HOSES, PUMPS, AND OTHER FIRE EXTINGUISHING EQUIPMENT OR APPARATUS, WATER PIPES, OR CONTAINERS OR BY WATER ENTERING THROUGH LEAKS OR OPENINGS IN BUILDINGS AND INSURANCE AGAINST LOSS OR DAMAGE TO THE SPRINKLERS, HOSES, PUMPS, AND OTHER FIRE EXTINGUISHING EQUIPMENT OR APPARATUS. MCA 33-1-206(1)(f), GLASS, IS INSURANCE AGAINST LOSS OR DAMAGE TO GLASS, INCLUDING ITS LETTERING, ORNAMENTATION, AND FITTINGS.

Under the liberalization clause, if the insurer broadens coverage during the policy term without additional premium:

1. The broadened form applies only to policies written on or after its effective date
2. The insured must request an endorsement and pay additional premium to obtain it
3. The broadened coverage automatically applies to the existing policy ✓
4. The policy is rewritten at the next renewal

Why: The liberalization clause automatically extends any coverage-broadening change to existing policies at no extra cost.

When may the Montana commissioner waive the requirement that a form also be approved by the insurer's state of domicile, and what follows?

1. The commissioner may waive the requirement only where the state of domicile does not review forms of that kind at all, and the insurer must then file with the commissioner a certificate from the domiciliary official to that effect before the Montana filing will be accepted for review.
2. The commissioner may not waive it; approval by the state of domicile is a statutory condition of delivery in Montana for every form to which the section applies, and the only relief is the general exemption power over documents to which the section cannot practicably apply.
3. The commissioner may waive it if the requirement is considered unnecessary to protect Montana insurance consumers; the insurer must then notify the commissioner in writing within 10 days of any disapproval, denial or withdrawal of approval by its domicile state. ✓
4. The commissioner may waive it at the insurer's written request on a showing of hardship, and the insurer must then file the domiciliary approval within 60 days of obtaining it, failing which the Montana approval lapses and the form may no longer be used in this State.

Why: MCA 33-1-501(1)(c): THE APPROVAL OF an insurance policy or annuity contract form, certificate, enrollment form, application form, or other related insurance form BY THE STATE OF DOMICILE MAY BE WAIVED BY THE COMMISSIONER IF THE COMMISSIONER CONSIDERS THE REQUIREMENTS OF SUBSECTION (1)(a) UNNECESSARY FOR THE PROTECTION OF MONTANA INSURANCE CONSUMERS. IF THE REQUIREMENT IS WAIVED, AN INSURER SHALL NOTIFY THE COMMISSIONER IN WRITING WITHIN 10 DAYS OF DISAPPROVAL, DENIAL, OR WITHDRAWAL OF APPROVAL OF A FORM BY THE STATE OF DOMICILE.

What is the difference between an ACTUAL agency and an OSTENSIBLE agency under MCA 28-10-103(1)?

1. An agency is actual when the agent holds a written appointment from the principal, and ostensible when the agent is employed by the principal without any writing, so that the agency, though real, appears to third persons only from the way in which the principal in fact permits the agent to carry on the business of the principal.
2. An agency is actual when the agent is really employed by the principal. An agency is ostensible when the principal intentionally or by want of ordinary care causes a third person to believe another to be the principal's agent when that person is not really employed by the principal. ✓
3. An agency is actual when the agent is really employed by the principal. An agency is ostensible when the agent, intentionally or by want of ordinary care, causes a third person to believe that the agent is employed by the principal, the belief being created by the conduct of the agent rather than by anything the principal has done or failed to do.
4. An agency is actual when the agent is really employed by the principal and ostensible when a third person reasonably believes the agent to be employed. A third person's reasonable belief is enough on its own, and it is not necessary to show any act or omission on the part of the principal which caused or allowed that belief to arise.

Why: MCA 28-10-103(1): AN AGENCY IS EITHER ACTUAL OR OSTENSIBLE. AN AGENCY IS ACTUAL WHEN THE AGENT IS REALLY EMPLOYED BY THE PRINCIPAL. AN AGENCY IS OSTENSIBLE WHEN THE PRINCIPAL INTENTIONALLY OR BY WANT OF ORDINARY CARE CAUSES A THIRD PERSON TO BELIEVE ANOTHER TO BE THE PRINCIPAL'S AGENT WHEN THAT PERSON IS NOT REALLY EMPLOYED BY THE PRINCIPAL. It is THE PRINCIPAL'S act or want of care that makes an ostensible agency, not the agent's and not the third person's belief standing alone.

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.

What is a LOW-VOLUME INSURER, and what is PROOF OF FINANCIAL RESPONSIBILITY, under MCA 61-6-102?

1. A low-volume insurer is an insurer that provides motor vehicle liability policies for fewer than 100 vehicles in this state. Proof of financial responsibility is proof of the ability to respond in damages for liability on account of accidents occurring at any time, whether before or after the effective date of the proof, arising out of the use of a motor vehicle.
2. A low-volume insurer is an insurer that provides motor vehicle liability policies for fewer than 500 vehicles in this state. Proof of financial responsibility is proof of ability to respond in damages for liability on account of accidents occurring after the effective date of the proof, arising out of the ownership, maintenance, or use of a motor vehicle. ✓
3. A low-volume insurer is an insurer that writes fewer than 500 motor vehicle liability policies in this state in any calendar year, the test being policies rather than vehicles. Proof of financial responsibility means a certificate of insurance filed with the department under 61-6-133, no other method of giving proof being recognized by this part.
4. A low-volume insurer is an insurer whose motor vehicle premium written in this state is less than five hundred thousand dollars a year. Proof of financial responsibility is proof of the ability to respond in damages arising out of the ownership, maintenance or use of a motor vehicle, including accidents occurring before the effective date of the proof.

Why: MCA 61-6-102(5): LOW-VOLUME INSURER MEANS AN INSURER THAT PROVIDES MOTOR VEHICLE LIABILITY POLICIES FOR FEWER THAN 500 VEHICLES IN THIS STATE. (9): PROOF OF FINANCIAL RESPONSIBILITY MEANS PROOF OF ABILITY TO RESPOND IN DAMAGES FOR LIABILITY ON ACCOUNT OF ACCIDENTS OCCURRING SUBSEQUENT TO THE EFFECTIVE DATE OF THE PROOF OF FINANCIAL RESPONSIBILITY, ARISING OUT OF THE OWNERSHIP, MAINTENANCE, OR USE OF A MOTOR VEHICLE. (10): STATE MEANS ANY STATE, TERRITORY, OR POSSESSION OF THE UNITED STATES, THE DISTRICT OF COLUMBIA, OR ANY PROVINCE OF THE DOMINION OF CANADA. (11): SUSPENSION MEANS THE WITHDRAWAL, BY ACTION OF THE DEPARTMENT, OF A MOTOR VEHICLE'S REGISTRATION FOR A PERIOD OF TIME PRESCRIBED BY DEPARTMENT RULE.

Who may appoint an agent and who may be an agent under MCA 28-10-104, and what acts may an agent perform under MCA 28-10-105?

1. Any person having capacity to contract, including a minor who has reached the age of sixteen, may appoint an agent, and only a person having capacity to contract may be an agent. An agent may be authorized to do any act the principal might do, without exception, including an act to which the principal is bound to give personal attention.
2. Any person having capacity to contract, except a minor, may appoint an agent, and only a person of full age and capacity may be an agent, since an agent binds the principal by the agent's own contracts. An agent may be authorized to do any acts that the principal might do if the authority is conferred by an instrument in writing.
3. Any person having capacity to contract, except a minor, may appoint an agent, and any person may be an agent. An agent may be authorized to do any acts that the principal might do, except those to which the principal is bound to give personal attention. ✓
4. Any person, whether or not having capacity to contract, may appoint an agent, the want of capacity being cured by the agent's own capacity, and any person may be an agent. An agent may be authorized to do any acts the principal might do except those which the law requires to be done in the presence of a notary public of this state.

Why: MCA 28-10-104: ANY PERSON HAVING CAPACITY TO CONTRACT, EXCEPT A MINOR, MAY APPOINT AN AGENT, AND ANY PERSON MAY BE AN AGENT. The agent needs no contractual capacity. MCA 28-10-105(1): AN AGENT MAY BE AUTHORIZED TO DO ANY ACTS THAT THE PRINCIPAL MIGHT DO, EXCEPT THOSE TO WHICH THE PRINCIPAL IS BOUND TO GIVE PERSONAL ATTENTION. (2): EVERY ACT THAT, ACCORDING TO THIS CODE, MAY BE DONE BY OR TO ANY PERSON MAY BE DONE BY OR TO THE AGENT OF THE PERSON FOR THAT PURPOSE UNLESS A CONTRARY INTENTION CLEARLY APPEARS.

A building has $400,000 ACV and 80% coinsurance. The insured carries $240,000 and suffers a total loss. Ignoring deductible, the insurer pays:

1. $240,000 ✓
2. $400,000
3. $180,000
4. $320,000

Why: Required = 80% x $400,000 = $320,000. Penalty factor = $240,000/$320,000 = 0.75, but recovery is also capped at the $240,000 policy limit, so the most paid is $240,000.

What does MCA 61-6-144 require of the commissioner of insurance and of insurers, and what appeal does it give?

1. The commissioner shall approve a plan for the equitable apportionment among insurers of applicants unable to procure policies through ordinary methods, and participation in the plan is voluntary, an insurer being free to decline to subscribe. A person aggrieved may within thirty days file a petition in the district court of the county in which the person resides.
2. The commissioner shall establish and operate the plan directly, without consultation with the insurance companies, and shall assign each applicant to an insurer in rotation. A ruling of the manager or committee operating the plan is final and is not appealable to the commissioner, though the commissioner's own order may be reviewed by the district court.
3. After consulting authorized auto liability insurers, the commissioner must approve a reasonable plan apportioning good-faith applicants unable to get cover by ordinary methods; all those insurers must subscribe; and rulings of the plan's manager or committee may be appealed to the commissioner. ✓
4. The commissioner shall approve a reasonable plan for the equitable apportionment among insurers of applicants who are unable to procure policies through ordinary methods, and all such companies shall subscribe. There is no appeal from a ruling of the manager or committee designated to operate the plan, and no review of the commissioner's order by any court.

Why: MCA 61-6-144: AFTER CONSULTATION WITH INSURANCE COMPANIES AUTHORIZED TO ISSUE AUTOMOBILE LIABILITY POLICIES IN THIS STATE, THE COMMISSIONER OF INSURANCE SHALL APPROVE A REASONABLE PLAN OR PLANS FOR THE EQUITABLE APPORTIONMENT AMONG SUCH COMPANIES OF APPLICANTS FOR SUCH POLICIES AND FOR MOTOR VEHICLE LIABILITY POLICIES WHO ARE IN GOOD FAITH ENTITLED TO BUT ARE UNABLE TO PROCURE SUCH POLICIES THROUGH ORDINARY METHODS. WHEN ANY SUCH PLAN HAS BEEN APPROVED, ALL SUCH INSURANCE COMPANIES SHALL SUBSCRIBE THERETO AND PARTICIPATE THEREIN. ANY APPLICANT, ANY PERSON INSURED UNDER ANY SUCH PLAN, AND ANY INSURANCE COMPANY AFFECTED, MAY APPEAL TO THE COMMISSIONER OF INSURANCE FROM ANY RULING OR DECISION OF THE MANAGER OR COMMITTEE DESIGNATED TO OPERATE SUCH PLAN. ANY PERSON AGGRIEVED HEREUNDER BY ANY ORDER OR ACT OF THE COMMISSIONER OF INSURANCE MAY, WITHIN 10 DAYS AFTER NOTICE THEREOF, FILE A PETITION IN THE DISTRICT COURT OF LEWIS AND CLARK COUNTY FOR A REVIEW THEREOF. THE COURT SHALL SUMMARILY HEAR THE PETITION AND MAY MAKE ANY APPROPRIATE ORDER OR DECREE.

A Homeowners insured suffers theft of firearms. The special Coverage C limit for theft of firearms is commonly:

1. $2,500 ✓
2. $200
3. $5,000
4. $1,500

Why: Theft of firearms is subject to a special sublimit (commonly $2,500) under Coverage C; collections worth more should be scheduled.

What limits do MCA 28-10-213 to 215 place on ratification?

1. An unauthorized act may be made valid retroactively against third persons whether or not they consent, the whole purpose of ratification being to relate the authority back to the time of the act. A ratification is valid whether or not the principal could have conferred authority at the time of ratifying, and a ratification once made may never be rescinded.
2. No unauthorized act can be made valid retroactively to the prejudice of third persons without their consent. A ratification is not valid unless the principal has power to confer the authority at the time of ratifying, and it may be rescinded only when made without consent required in a contract or with imperfect knowledge of the material facts. ✓
3. No unauthorized act can be made valid retroactively to the prejudice of third persons without their consent, and a ratification is not valid unless the principal had power to confer authority for the act at the time the act was done rather than at the time of ratifying it. A ratification may be rescinded at will by the principal at any time.
4. No unauthorized act can be made valid retroactively to the prejudice of third persons. A ratification is not valid unless the principal has power to confer authority at the time of ratifying, and a ratification may be rescinded whenever the principal afterwards discovers any fact about the transaction which was not known at the time of ratifying it.

Why: MCA 28-10-213: no unauthorized act can be made valid retroactively to the prejudice of third persons without their consent. MCA 28-10-214: a ratification is not valid unless, at the time of ratifying the act done, the principal has power to confer authority for such an act. MCA 28-10-215: a ratification may be rescinded when made without such consent as is required in a contract or with an imperfect knowledge of the material facts of the transaction ratified, but not otherwise. The principal's power is tested at the time of ratifying, not at the time of the act.

Which of the following may the Montana commissioner do under MCA 33-1-1203(1)?

1. Investigate a suspected fraud only on the written complaint of an insurer or of a person aggrieved by it, the commissioner having no power to begin an inquiry on the commissioner's own motion and no power at all where a law enforcement agency is already investigating.
2. Initiate independent inquiries and investigations on reason to believe that fraud may be, has been, or is being committed; respond to notice or complaints from law enforcement or government; and review reports from any person, selecting those needing investigation. ✓
3. Investigate a suspected fraud and, on finding it proved, impose a criminal penalty on the person concerned, the part conferring on the commissioner a summary jurisdiction which is exercised without a hearing and is subject only to judicial review in the district court.
4. Investigate only those suspected frauds which are reported under 33-1-1205, the commissioner's function under the part being to receive and act on the reports insurers are required to make rather than to look for fraud which has not been reported to the office.

Why: MCA 33-1-1203(1): the commissioner MAY (a) INITIATE INDEPENDENT INQUIRIES AND CONDUCT INDEPENDENT INVESTIGATIONS WHEN THE COMMISSIONER HAS REASON TO BELIEVE THAT INSURANCE FRAUD MAY BE, HAS BEEN, OR IS CURRENTLY BEING COMMITTED; (b) RESPOND TO NOTICE OR COMPLAINTS GENERATED BY FEDERAL, STATE, COUNTY, AND LOCAL LAW ENFORCEMENT OFFICERS, OTHER ENTITIES WITH LAW ENFORCEMENT RESPONSIBILITIES, OR GOVERNMENTAL AGENCIES OR UNITS; and (c) REVIEW AND RESPOND TO NOTICES OR REPORTS OF INSURANCE FRAUD SUBMITTED BY ANY PERSON, SELECT THE INCIDENTS OF SUSPECTED FRAUD THAT IN THE COMMISSIONER'S JUDGMENT REQUIRE FURTHER AND MORE DETAILED INVESTIGATION, AND CONDUCT THE INVESTIGATIONS.

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

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

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

The implied warranty of 'no deviation' means:

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

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

What is the evidential status of an examination's findings under MCA 33-1-408(5)?

1. Findings of fact made pursuant to an examination are conclusive in any later proceeding between the department and the company, the company being unable to contest them once the report has been adopted by the commissioner under this part.
2. Findings of fact made pursuant to an examination are inadmissible in any proceeding other than one brought by the commissioner, the working paper confidentiality provisions extending to the findings themselves as well as to the papers.
3. Findings of fact and conclusions made pursuant to an examination are prima facie evidence in any legal or regulatory action. ✓
4. Findings of fact have no special status and must be proved afresh in any action, the report being an administrative document rather than evidence of the matters it records about the company examined in this State.

Why: MCA 33-1-408(5): this part may not be construed to limit the commissioner's authority to terminate or suspend an examination in order to pursue other legal or regulatory action. FINDINGS OF FACT AND CONCLUSIONS MADE PURSUANT TO AN EXAMINATION ARE PRIMA FACIE EVIDENCE IN ANY LEGAL OR REGULATORY ACTION. Prima facie - not conclusive, and not inadmissible.

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

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

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

A Montana employer deducts part of the workers' compensation premium from its workers' wages. What does MCA 39-71-406 provide?

1. It is unlawful for the employer to deduct or obtain any part of any premium required by this chapter from the wages or earnings of its workers, and making or attempting to make any premium deduction is a misdemeanor. ✓
2. The employer may deduct up to one half of the premium from the wages or earnings of its workers where each worker has agreed to the deduction in writing before it is made, and a deduction made without that written agreement is unlawful and is a misdemeanor punishable by a fine of fifty dollars for each citation issued by the department.
3. It is unlawful for the employer to deduct any part of the premium from the wages of its workers, and a deduction made in breach of this section is recoverable by the worker from the employer in a civil action together with a penalty of twice the amount deducted, no criminal liability being imposed on an employer by this section of the chapter.
4. The deduction is unlawful only where the employer is bound by compensation plan No. 2 or No. 3, an employer enrolled under plan No. 1 being self-insured and paying no premium as such, and the making of an unlawful deduction is a ground on which the department may revoke the employer's authority to self-insure under this chapter.

Why: MCA 39-71-406: IT IS UNLAWFUL FOR THE EMPLOYER TO DEDUCT OR OBTAIN ANY PART OF ANY PREMIUM REQUIRED TO BE PAID BY THIS CHAPTER FROM THE WAGES OR EARNINGS OF THE EMPLOYER'S WORKERS, AND THE MAKING OR ATTEMPT TO MAKE ANY PREMIUM DEDUCTION IS A MISDEMEANOR. The ATTEMPT is an offence as well as the deduction itself.

A witness disobeys the commissioner's subpoena. What does MCA 33-1-315 provide, and who pays the witness costs?

1. The commissioner may hold the witness in contempt and impose the fine that section 33-1-317 allows, without recourse to any court; and witness fees and mileage are borne by the State in every case as part of the cost of the examination.
2. The commissioner shall refer the matter to the attorney general for prosecution as a misdemeanour; and witness fees and mileage are paid by the person who requested the witness's attendance, whether that is the commissioner or the person examined.
3. The commissioner shall institute proceedings in the District Court to compel obedience or punish the refusal; and witness fees, mileage and expenses must be paid by the person being examined if that person is found to have been in violation. ✓
4. The commissioner shall institute proceedings in the district court, and witness fees and mileage are paid by the person being examined in every case, whether or not any violation is afterwards found against that person by the commissioner.

Why: MCA 33-1-315(3): if a witness FAILS TO OBEY A SUBPOENA or REFUSES TO TESTIFY or to produce documents, THE COMMISSIONER SHALL INSTITUTE PROCEEDINGS IN THE DISTRICT COURT TO COMPEL OBEDIENCE or to PUNISH THE WITNESS for neglect or refusal. (4) WITNESS FEES AND MILEAGE, if claimed, are allowed ON THE SAME BASIS AS FOR TESTIMONY IN A DISTRICT COURT, and fees, mileage and the actual expenses of securing attendance MUST BE ITEMIZED AND PAID BY THE PERSON BEING EXAMINED IF THE PERSON IS FOUND TO HAVE BEEN IN VIOLATION OF THE LAW as to the matter concerned. (5) a KNOWING failure to attend, answer or produce is subject to 33-1-317 and 33-1-318.

Under the PAP, the maximum the insurer pays for a covered physical damage loss is generally:

1. The original purchase price shown on the bill of sale, with no reduction for depreciation or deductible
2. A flat amount scheduled in the Declarations for each auto, paid in full whatever the vehicle is worth at the time of loss
3. The lesser of the actual cash value or the amount to repair/replace, minus deductible ✓
4. Replacement cost for a new vehicle of like make and model, with no deductible

Why: Part D limits payment to the lesser of the ACV of the stolen/damaged property or the cost to repair or replace it, less the deductible.

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

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

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

A boatowners or yacht policy typically combines which two coverage parts?

1. Life insurance on the vessel's owner and health coverage for the crew aboard
2. Crop coverage for waterfront acreage and flood coverage for the dock
3. Workers compensation for the crew and a surety bond guaranteeing the marina's slip fees
4. Hull (physical damage) and protection & indemnity (liability) ✓

Why: Yacht and boatowners policies pair hull coverage for physical damage to the vessel with protection and indemnity (liability) coverage.

A self-insured retention (SIR) under an umbrella policy is:

1. The deductible stated in the underlying policy, which the umbrella insurer collects a second time before it will pay any loss
2. An extra aggregate limit that restores the underlying policy's limits each time paid claims have exhausted them for the term
3. A premium discount for keeping underlying limits in place
4. The amount the insured must pay out of pocket before the umbrella responds to a loss not covered by underlying insurance ✓

Why: The SIR is the insured's retained amount for losses covered by the umbrella but not by underlying insurance.

When two policies cover the same loss and an 'other insurance' clause requires each to pay a share proportional to its limit, this is:

1. Nonconcurrency
2. Primary and excess
3. Pro rata (proportional) sharing ✓
4. Contribution by equal shares

Why: Pro rata sharing divides the loss among insurers in proportion to each policy's limit relative to total coverage.

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.

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.

How does MCA 61-6-102(3) define a judgment for the purposes of the Montana financial responsibility law?

1. Any judgment final by expiry of the appeal time or by affirmation on appeal, rendered by a court of competent jurisdiction of any state or of the United States, on a cause of action arising out of the ownership, maintenance or use of a motor vehicle, or on an agreement of settlement for damages. ✓
2. Any judgment rendered by a court of competent jurisdiction of this state upon a cause of action arising out of the ownership, maintenance or use of a motor vehicle, whether or not the time for appeal has expired, a judgment of the court of another state or of the United States being enforceable here only after it has been separately domesticated.
3. Any final judgment for damages because of bodily injury to or death of a person arising out of the ownership, maintenance or use of a motor vehicle. A judgment for damages because of injury to or destruction of property is not within the term, and neither is a cause of action founded upon an agreement of settlement rather than upon the underlying wrong.
4. Any judgment, whether or not final, rendered against the owner or operator of a motor vehicle, including a judgment for damages for care and loss of services and for the loss of use of property, upon which execution has been issued and returned wholly or partly unsatisfied by the sheriff of the county in which the judgment debtor resides.

Why: MCA 61-6-102(3): JUDGMENT MEANS ANY JUDGMENT THAT HAS BECOME FINAL BY EXPIRATION WITHOUT APPEAL OF THE TIME WITHIN WHICH AN APPEAL MIGHT HAVE BEEN PERFECTED OR BY FINAL AFFIRMATION ON APPEAL RENDERED BY A COURT OF COMPETENT JURISDICTION OF ANY STATE OR OF THE UNITED STATES UPON A CAUSE OF ACTION ARISING OUT OF THE OWNERSHIP, MAINTENANCE, OR USE OF ANY MOTOR VEHICLE, FOR DAMAGES, INCLUDING DAMAGES FOR CARE AND LOSS OF SERVICES, BECAUSE OF BODILY INJURY TO OR DEATH OF ANY PERSON OR FOR DAMAGES BECAUSE OF INJURY TO OR DESTRUCTION OF PROPERTY, INCLUDING THE LOSS OF USE OF PROPERTY, OR UPON A CAUSE OF ACTION ON AN AGREEMENT OF SETTLEMENT FOR DAMAGES.

What follows an order adopting an examination report under MCA 33-1-409(4)(a)?

1. It takes effect on signature and is not appealable, an adopted examination report being a finding of fact rather than a decision affecting rights, and the company being required only to acknowledge receipt in writing to the department.
2. It must be accompanied by findings and conclusions and served on the company by ordinary mail, and the company's chief executive officer files a single affidavit within 60 days confirming that the board has been informed of the report and the order.
3. It must be accompanied by findings and conclusions, is a final administrative decision that may be appealed, and must be served by certified mail; and within 30 days the company files affidavits by each of its directors that they received it. ✓
4. It is a preliminary decision that becomes final only if the company does not demand a hearing within 30 days, at which the company may contest the findings before an administrative law judge appointed for the purpose by the commissioner.

Why: MCA 33-1-409(4)(a): all orders adopting a report MUST BE ACCOMPANIED BY FINDINGS AND CONCLUSIONS resulting from the commissioner's consideration of the report, relevant workpapers and any submissions. AN ORDER MUST BE CONSIDERED A FINAL ADMINISTRATIVE DECISION AND MAY BE APPEALED PURSUANT TO TITLE 33, CHAPTER 1, PART 7, AND MUST BE SERVED UPON THE COMPANY BY CERTIFIED MAIL, TOGETHER WITH A COPY OF THE ADOPTED EXAMINATION REPORT. WITHIN 30 DAYS OF THE ISSUANCE OF THE ADOPTED REPORT, THE COMPANY SHALL FILE AFFIDAVITS EXECUTED BY EACH OF ITS DIRECTORS STATING UNDER OATH THAT THEY HAVE RECEIVED A COPY of the adopted report and related orders.

How does MCA 33-23-201(1) define an uninsured motor vehicle?

1. A land motor vehicle the owner or operator of which cannot be identified, or which is insured for bodily injury liability in an amount less than the limits carried by the injured person under the policy under which the uninsured motorist claim is made, the test being one of comparative limits rather than of the presence of any insurance at all.
2. A land motor vehicle which is not registered in this state and which is not insured or bonded for bodily injury liability at the time of the accident, a vehicle registered here being presumed insured for the purposes of this part because registration cannot lawfully be issued without proof of compliance with Title 61, chapter 6, part 1.
3. A land motor vehicle, or any other self propelled vehicle, the ownership, maintenance or use of which is not insured or bonded for bodily injury liability at the time the uninsured motorist claim is presented to the insurer, so that a later lapse or rescission of the other driver's liability policy brings the vehicle within the term.
4. A land motor vehicle, the ownership, maintenance or use of which is not insured or bonded for bodily injury liability at the time of the accident. ✓

Why: MCA 33-23-201(1), closing sentence: AN UNINSURED MOTOR VEHICLE IS A LAND MOTOR VEHICLE, THE OWNERSHIP, THE MAINTENANCE, OR THE USE OF WHICH IS NOT INSURED OR BONDED FOR BODILY INJURY LIABILITY AT THE TIME OF THE ACCIDENT. AT THE TIME OF THE ACCIDENT, not at the time of the claim, and the test is the presence of insurance or a bond, not the size of the limits.

What must the Montana commissioner do on finding sufficient evidence that an act of insurance fraud has been committed?

1. Institute an administrative proceeding under 33-1-701 and impose the penalties provided in 33-1-317, the criminal consequences of the conduct being a matter for the county attorney to take up independently if that officer learns of the matter from another source entirely.
2. Refer the matter to the attorney general alone, who decides whether it goes to a prosecuting authority or to a licensing board; the commissioner has no direct dealing with the licensing boards, which are informed by the attorney general where a licence is in question.
3. Inform the appropriate prosecuting authority and professional licensing boards - and, under subsection (2), cooperate to the extent allowed by law with insurance fraud investigators, related organizations of this and other states, and insurance commissioners of other states. ✓
4. Suspend or revoke any licence the person holds under the code and then inform the prosecuting authority, the licensing consequence being immediate and the criminal referral following once the licensing action has been completed and the time for appeal has expired.

Why: MCA 33-1-1204(3): IF THE COMMISSIONER DETERMINES THAT SUFFICIENT EVIDENCE OF THE COMMISSION OF AN ACT OF INSURANCE FRAUD EXISTS, THE COMMISSIONER SHALL INFORM THE APPROPRIATE PROSECUTING AUTHORITY AND PROFESSIONAL LICENSING BOARDS. (2): THE COMMISSIONER SHALL COOPERATE TO THE EXTENT ALLOWED BY LAW WITH INSURANCE FRAUD INVESTIGATORS, RELATED ORGANIZATIONS OF THIS AND OTHER STATES, AND INSURANCE COMMISSIONERS OF OTHER STATES.

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.

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

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

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

What must the submission form for a Montana surplus lines producer contain, and who may see it?

1. The premium, the tax and the name of the surplus lines insurer only; the diligent effort is recorded in the producer's own file, and the form is confidential because it discloses the terms on which a competitor has quoted for the risk concerned in the admitted market.
2. The producer's diligent efforts and their results, and an affirmation that the insured was told beforehand that the insurer is unauthorized here and that the guaranty fund will not pay its losses on insolvency; the form is open to public inspection. ✓
3. The producing producer's diligent efforts and an affirmation that the insured was advised of the insurer's unauthorized status; the form is confidential as between the producer and the commissioner and is exempt from public inspection under the privacy chapter of this title.
4. The name and address of the insured, the premium and the term of the policy, together with the commissioner's written approval of the placement; the form is open to public inspection, and the affirmation about the guaranty fund appears on the policy rather than on the form.

Why: MCA 33-2-303(2): the submission form for surplus lines insurance producers MUST INCLUDE (a) INFORMATION REGARDING THE PRODUCING PRODUCER'S DILIGENT EFFORTS TO PLACE THE COVERAGE WITH AUTHORIZED INSURERS AND THE RESULTS OF THE EFFORTS; and (b) THE PRODUCING INSURANCE PRODUCER'S AFFIRMATION THAT THE PRODUCER HAS EXPRESSLY ADVISED THE INSURED PRIOR TO PLACING THE INSURANCE THAT (i) THE SURPLUS LINES INSURER WITH WHOM THE INSURANCE IS PLACED IS NOT AUTHORIZED IN THIS STATE AND IS NOT SUBJECT TO THE SAME SUPERVISION AS AN AUTHORIZED INSURER; AND (ii) IN THE EVENT OF THE INSOLVENCY OF THE SURPLUS LINES INSURER, THE PROPERTY AND CASUALTY GUARANTY FUND OF THE STATE WILL NOT PAY LOSSES UNDER THE SURPLUS LINES COVERAGE. (3): A SUBMISSION FORM FILED UNDER THIS SECTION IS SUBJECT TO PUBLIC INSPECTION. (4): the commissioner MAY establish by rule AN ENDORSEMENT to the same effect, which THE PRODUCER SHALL PROPERLY FILL IN AND SIGN.

When does a Montana midterm cancellation take effect, and what about a policy written last month?

1. Cancellation takes effect on the date stated in the notice, which may be the date of mailing; and a policy in effect less than 60 days may be cancelled without notice at all, the insurer being entitled to a period of grace in which to look at the risk it has taken on.
2. Cancellation is not effective until 45 days after the notice in every case, including nonpayment of premium; a policy in effect less than 60 days is subject to the same period, the section drawing no distinction between a new policy and one which has been renewed.
3. Cancellation is not effective until 20 days after notice, and a newly issued policy in effect less than 90 days may be cancelled on any ground the insurer chooses without any notice period at all, since the insured has not yet relied on the cover for any substantial time.
4. Except as provided in 33-23-401, cancellation is not effective until 10 days after the notice is delivered or mailed. The grounds and that period do not apply to a new policy in effect less than 60 days - but such a cancellation is still not effective for ten days. ✓

Why: MCA 33-15-1103(2): EXCEPT AS PROVIDED IN 33-23-401, CANCELLATION UNDER SUBSECTION (1) IS NOT EFFECTIVE UNTIL 10 DAYS AFTER A NOTICE OF CANCELLATION IS EITHER DELIVERED OR MAILED TO THE INSURED. (3): SUBSECTIONS (1) AND (2) DO NOT APPLY TO A NEWLY ISSUED INSURANCE POLICY IF THE POLICY HAS BEEN IN EFFECT LESS THAN 60 DAYS AT THE TIME THE NOTICE OF CANCELLATION IS MAILED OR DELIVERED. A CANCELLATION UNDER THIS SUBSECTION IS NOT EFFECTIVE UNTIL 10 DAYS AFTER THE NOTICE IS DELIVERED OR MAILED TO THE INSURED. So the grounds fall away for a new policy; the ten days do not.

A building worth $800,000 has 80% coinsurance. The insured carries $700,000. A $100,000 loss occurs. After applying coinsurance, how much is paid (before deductible)?

1. $70,000
2. $80,000
3. $87,500
4. $100,000 ✓

Why: Required = 80% x $800,000 = $640,000. The insured carries $700,000, which exceeds the requirement, so no penalty applies and the full $100,000 is paid.

What is the purpose of MCA 33-15 part 11, and to what does it apply?

1. To protect the public in cancellation, renewal, nonrenewal and premium increases on property and casualty contracts, chiefly by regulating midterm cancellation and barring midterm increases; it covers 33-1-206 and 33-1-210 lines except where they conflict with chapter 23. ✓
2. To codify the whole law of cancellation for every class of insurance written in this State, including life and disability, so that one set of periods and grounds governs the termination of any Montana policy whatever the risk it covers and whoever the insurer may be.
3. To give the commissioner power to approve or disapprove each cancellation before it takes effect, and to require an insurer proposing to cancel or decline to renew to satisfy the commissioner that the ground relied upon is a proper one in the circumstances of the case.
4. To protect the public in cancellation and nonrenewal transactions on property and casualty contracts, the part applying to every such contract without exception and overriding the motor vehicle provisions of chapter 23 wherever the two are inconsistent with one another.

Why: MCA 33-15-1101(1): the purpose is TO PROTECT THE PUBLIC WITH REGARD TO INSURANCE TRANSACTIONS THAT INVOLVE CANCELLATION, RENEWAL, NONRENEWAL, OR PREMIUM INCREASES ON CONTRACTS OF PROPERTY OR CASUALTY INSURANCE BY (a) REGULATING THE GROUNDS FOR MIDTERM CANCELLATION; (b) EXCEPT AS PROVIDED IN 33-15-1108, PROHIBITING MIDTERM INCREASES IN PREMIUMS; (c) INCREASING THE OPPORTUNITY FOR INSUREDS TO SHOP FOR REPLACEMENT OR SUBSTITUTE INSURANCE; (d) REDUCING THE OPPORTUNITY FOR BREACH OF CONTRACT, MISREPRESENTATION BY OMISSION OR UNTIMELY DISCLOSURE, AND UNFAIR DISCRIMINATION AMONG INSUREDS; and (e) INCREASING THE OPPORTUNITY FOR INSURANCE PRODUCERS TO COMPETE FREELY. (2): THIS PART APPLIES TO THOSE FORMS OF INSURANCE DEFINED IN 33-1-206 AND 33-1-210, EXCEPT TO THE EXTENT THEY CONFLICT WITH CHAPTER 23 OF THIS TITLE. (3): it DOES NOT LIMIT undefined unfair trade practices under 33-18-1003; POLICIES MAY PROVIDE TERMS MORE FAVORABLE TO INSUREDS; and the rights given ARE IN ADDITION TO other rights.

On what grounds may a Montana insurer cancel a policy before the end of its term under MCA 33-15-1103(1)?

1. On any ground stated in the policy, the section requiring only that the ground be written into the contract and that the insured be given notice, so that an insured knows from the policy itself the circumstances in which the insurer may bring the cover to an end before term.
2. On the ground of nonpayment of premium alone. Montana does not permit midterm cancellation for any other reason; an insurer which wishes to be rid of a risk for any other cause must wait for the expiration date and then decline to renew on 45 days' written notice.
3. Only for reasons specifically allowed by statute; for failure to pay a premium when due; or on grounds stated in the policy pertaining to material misrepresentation, substantial change in risk, substantial breach of duty, financial impairment, or any other approved reason. ✓
4. For nonpayment of premium, material misrepresentation, or a substantial increase in the hazard, whether or not those grounds are stated in the policy, the statute supplying the grounds directly and the policy wording being immaterial to the insurer's right to cancel.

Why: MCA 33-15-1103(1): an insurer MAY NOT CANCEL AN INSURANCE POLICY BEFORE EITHER THE EXPIRATION OF THE AGREED TERM OR 1 YEAR FROM THE EFFECTIVE DATE OF THE POLICY OR RENEWAL DATE, WHICHEVER IS LESS, EXCEPT (a) FOR REASONS SPECIFICALLY ALLOWED BY STATUTE; (b) FOR FAILURE TO PAY A PREMIUM WHEN DUE; or (c) ON GROUNDS STATED IN THE POLICY WHICH PERTAIN TO (i) MATERIAL MISREPRESENTATION; (ii) SUBSTANTIAL CHANGE IN THE RISK ASSUMED, EXCEPT TO THE EXTENT THAT THE INSURER SHOULD REASONABLY HAVE FORESEEN THE CHANGE OR CONTEMPLATED THE RISK WHEN THE CONTRACT WAS WRITTEN; (iii) SUBSTANTIAL BREACHES OF CONTRACTUAL DUTIES, CONDITIONS, OR WARRANTIES; (iv) DETERMINATION BY THE COMMISSIONER THAT CONTINUATION OF THE POLICY WOULD PLACE THE INSURER IN VIOLATION OF THIS CODE; (v) FINANCIAL IMPAIRMENT OF THE INSURER; or (vi) ANY OTHER REASON APPROVED BY THE COMMISSIONER. The grounds in (c) must be STATED IN THE POLICY.

What is the stated purpose of the Montana Insurance Guaranty Association Act?

1. To provide a way of paying covered claims that avoids excessive delay and loss to claimants or policyholders when an insurer becomes insolvent, to help detect and prevent insolvencies, and to assess the cost among insurers. ✓
2. To guarantee the solvency of every insurer authorized in this State by requiring each of them to contribute to a standing fund maintained by the commissioner, out of which the claims of any insurer which fails are paid in full without regard to any statutory limit.
3. To provide a mechanism for the rehabilitation of an insurer in financial difficulty, so that its policyholders are not put to the trouble of finding replacement cover, and to spread the cost of that rehabilitation among the other insurers writing the same lines in this State.
4. To indemnify policyholders of insolvent insurers for the premiums they have paid, the association being a scheme of premium protection rather than of claims payment, and to put the claims of such policyholders ahead of those of other creditors in the liquidation.

Why: MCA 33-10-101(2): THE PURPOSE OF THIS PART IS TO PROVIDE A MECHANISM FOR THE PAYMENT OF COVERED CLAIMS UNDER CERTAIN INSURANCE POLICIES TO AVOID EXCESSIVE DELAY IN PAYMENT AND TO AVOID FINANCIAL LOSS TO CLAIMANTS OR POLICYHOLDERS BECAUSE OF THE INSOLVENCY OF AN INSURER, TO ASSIST IN THE DETECTION AND PREVENTION OF INSURER INSOLVENCIES, AND TO PROVIDE AN ASSOCIATION TO ASSESS THE COST OF SUCH PROTECTION AMONG INSURERS. (1): the part is the MONTANA INSURANCE GUARANTY ASSOCIATION ACT. (4): it SHALL BE LIBERALLY CONSTRUED to effect that purpose, WHICH SHALL CONSTITUTE AN AID AND GUIDE TO INTERPRETATION.

In a competitive state fund jurisdiction, the state fund:

1. Writes only Employers Liability, leaving benefits to carriers
2. Is the only lawful source of workers compensation coverage
3. Competes with private insurers as one option among many ✓
4. Is reserved for federal employees covered by the FECA program

Why: A competitive state fund operates alongside private insurers; employers may buy WC from the state fund or from private carriers.

What power of exemption does MCA 33-1-501(7) give the Montana commissioner?

1. To exempt a particular insurer from the filing requirement for a period not exceeding one year on a showing that the insurer's volume of business in this State does not justify the expense of the filing, the exemption being renewable on a fresh showing each year.
2. To exempt a class of forms by rule adopted under the Montana Administrative Procedure Act, the commissioner having no power to exempt a document or form individually and every exemption therefore being published and open to comment before it takes effect.
3. To exempt surety bonds and forms of unique character, which are the documents the section cannot practicably reach, the exemption power being the mechanism by which those two classes are taken out of the filing requirement in the first place under this section.
4. To exempt, for as long as the commissioner considers proper, any document, form or type of form to which the section cannot practicably be applied, or whose filing and approval are not desirable or necessary to protect the public. ✓

Why: MCA 33-1-501(7): THE COMMISSIONER MAY EXEMPT FROM THE REQUIREMENTS OF THIS SECTION, FOR SO LONG AS THE COMMISSIONER CONSIDERS PROPER, AN INSURANCE DOCUMENT, FORM, OR TYPE OF DOCUMENT OR FORM TO WHICH, IN THE COMMISSIONER'S OPINION, THIS SECTION MAY NOT PRACTICABLY BE APPLIED OR THE FILING AND APPROVAL OF WHICH ARE NOT DESIRABLE OR NECESSARY FOR THE PROTECTION OF THE PUBLIC. Surety bonds and unique-character forms are excluded by subsection (1)(a) itself, not by this power.

What does MCA 27-1-701 make a person responsible for?

1. For the results of the person's willful acts and also for injury to another caused by the person's want of ordinary care or skill in managing the person's property or person, except so far as the injured person willfully or by want of ordinary care brought the injury on himself or herself. ✓
2. For the results of the person's willful acts only. An injury occasioned to another by a want of ordinary care or skill in the management of one's own property or person is not actionable in this state except where a statute expressly creates a duty of care owed to the person who has been injured by the want of that care or skill.
3. For the results of the person's willful acts and for any injury occasioned to another by the person's want of ordinary care or skill, without exception, so that a person who has by that person's own want of ordinary care brought an injury upon himself or herself may nevertheless recover the whole of the damages from the other party.
4. For any injury occasioned to another by a want of ordinary care or skill in the management of the person's property or person, and for the results of willful acts only where the act was directed at the person injured with the actual intention of causing that person the injury which the act in fact brought about.

Why: MCA 27-1-701: EXCEPT AS OTHERWISE PROVIDED BY LAW, EACH PERSON IS RESPONSIBLE NOT ONLY FOR THE RESULTS OF THE PERSON'S WILLFUL ACTS BUT ALSO FOR AN INJURY OCCASIONED TO ANOTHER BY THE PERSON'S WANT OF ORDINARY CARE OR SKILL IN THE MANAGEMENT OF THE PERSON'S PROPERTY OR PERSON EXCEPT SO FAR AS THE PERSON HAS WILLFULLY OR BY WANT OF ORDINARY CARE BROUGHT THE INJURY UPON THE PERSON.

Defining key terms (often in quotation marks or bold) so they have a consistent meaning throughout the contract is the purpose of the:

1. Definitions section ✓
2. Endorsements
3. Exclusions section
4. Declarations

Why: The definitions section clarifies the precise meaning of specific terms used throughout the policy.

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

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

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

A Montana applicant has no credit history at all and no insurance score can be calculated. What may the insurer do under MCA 33-18-605(1)(e)?

1. It must treat the consumer as if the consumer had neutral credit information, that being the single course the subsection allows, the definition of neutral credit information being prescribed by the commissioner by rule rather than left to the insurer to settle.
2. Only if it does one of three things: treat the consumer as otherwise approved by the commissioner, on information that the absence relates to the risk; treat the consumer as having neutral credit information; or exclude credit information and use other rules. ✓
3. It may decline the risk, an absence of credit information being treated by the part as equivalent to adverse credit information, provided the insurer also considers another applicable underwriting factor which is independent of any credit information at all.
4. It must obtain a consumer report from a second consumer reporting agency before making any decision, and if no score can be calculated from that report either, it must write the risk at its most favourably priced tier within its group of affiliated insurers.

Why: MCA 33-18-605(1)(e): an insurer may not CONSIDER AN ABSENCE OF CREDIT INFORMATION OR AN INABILITY TO CALCULATE AN INSURANCE SCORE in underwriting or rating personal insurance UNLESS THE INSURER DOES ONE OF THE FOLLOWING - (i) TREATS THE CONSUMER AS OTHERWISE APPROVED BY THE COMMISSIONER IF THE INSURER PRESENTS INFORMATION THAT THE ABSENCE OR INABILITY RELATES TO THE RISK FOR THE INSURER; (ii) TREATS THE CONSUMER AS IF THE CONSUMER HAD NEUTRAL CREDIT INFORMATION, AS DEFINED BY THE INSURER; or (iii) EXCLUDES THE USE OF CREDIT INFORMATION AS A FACTOR AND USES ONLY OTHER UNDERWRITING CRITERIA. The insurer chooses, and it is the INSURER that defines neutral credit information.

What are the insurer's four time limits in MCA 39-71-606, and what is the effect of missing one?

1. Accept or deny the claim within 30 days of receipt, notify the claimant of potential benefits, notify the employer of a reopening within 14 days and provide loss information within 10 days of a request. An insurer which fails to accept or deny within the 30 days is deemed to have accepted the claim as a matter of law and may not afterwards dispute liability for it.
2. Accept or deny the claim within 14 days of receipt, notify the claimant of potential benefits within 30 days, notify the employer of a reopening within 10 days and provide loss information within 60 days of a request. A failure to comply is a violation of the unfair claim settlement practices provisions of Title 33, chapter 18, of the insurance code.
3. Accept or deny the claim within 30 days of receipt of a signed claim and, if denied, inform the claimant and the department in writing; promptly notify the claimant of potential benefits; under plan no. 2 or no. 3, notify the employer of a reopening within 14 days; and provide loss information in 10 days. Failure to comply is not acceptance as a matter of law. ✓
4. Accept or deny the claim within 30 days of receipt and inform the claimant of a denial, notify the claimant of potential benefits, notify the employer of a reopening within 14 days and provide loss information within 10 days. A failure to comply does not constitute acceptance, and the loss information provided to the employer is public information once released.

Why: MCA 39-71-606(1): EACH INSURER SHALL, WITHIN 30 DAYS OF RECEIPT OF A CLAIM FOR COMPENSATION SIGNED BY THE CLAIMANT OR THE CLAIMANT'S REPRESENTATIVE, EITHER ACCEPT OR DENY THE CLAIM AND, IF DENIED, SHALL INFORM THE CLAIMANT AND THE DEPARTMENT IN WRITING OF THE DENIAL. (2)(a): ON RECEIPT OF A CLAIM, EACH INSURER SHALL PROMPTLY NOTIFY THE CLAIMANT IN WRITING OF POTENTIAL BENEFITS AND ENTITLEMENTS AVAILABLE BY PROVIDING THE CLAIMANT A COPY OF THE DOCUMENT PREPARED BY THE DEPARTMENT. (3): EACH INSURER UNDER PLAN NO. 2 OR NO. 3 SHALL NOTIFY THE EMPLOYER OF THE REOPENING OF THE CLAIM WITHIN 14 DAYS AFTER THE REOPENING. (4)(a): AN INSURER SHALL PROVIDE THE LOSS INFORMATION WITHIN 10 DAYS OF THE REQUEST. (4)(c): THE INFORMATION IS CONFIDENTIAL INSURANCE INFORMATION. (5): FAILURE OF AN INSURER TO COMPLY WITH THE TIME LIMITATIONS REQUIRED IN SUBSECTIONS (1) AND (3) DOES NOT CONSTITUTE AN ACCEPTANCE OF A CLAIM AS A MATTER OF LAW.

Theft of property is covered automatically under which Causes of Loss form?

1. None of the forms
2. Broad only
3. Special form ✓
4. Basic only

Why: Theft is not a named peril under Basic or Broad, but the open-perils Special form covers theft (subject to special limits) since it is not excluded.

Insurable interest in property insurance requires that the insured:

1. Hold a state insurance license before the property can be covered at all
2. Own the property outright, free of any mortgage, lien or other encumbrance
3. Be related by blood or marriage to the previous owner of the property
4. Will suffer a financial loss if the property is damaged or destroyed ✓

Why: Insurable interest exists when a person would suffer a genuine financial loss from damage to or destruction of the property.

In a surety bond, the party who is required to provide the bond and perform the obligation is the:

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

Why: The principal is the party who must perform the obligation and is required to furnish the bond.

Who is a PUBLIC ADJUSTER under MCA 33-17-102(21), and who is not?

1. Any adjuster who holds himself out to the public as available to adjust losses, whether retained by an insurer or by an insured, the distinction in the chapter being between those who advertise their services publicly and those who work under an exclusive contract with a single insurance company.
2. An adjuster retained by and representing the interests of the insured - not including a person who provides an estimate of work to an insurer on the insured's behalf, so long as the insured is notified of all communications between that person and the insurer about the estimates. ✓
3. An adjuster retained by an insured, including a contractor who prepares an estimate of repair work and submits it to the insurer, the definition reaching every person who deals with an insurer on an insured's behalf however limited that person's involvement in the claim may be.
4. An adjuster employed by the commissioner to review a disputed claim on a policyholder's complaint, the term describing a public officer rather than a private person retained by an insured, and the licensing provisions of the chapter having no application to such an officer of the department.

Why: MCA 33-17-102(21): (a) PUBLIC ADJUSTER MEANS AN ADJUSTER RETAINED BY AND REPRESENTING THE INTERESTS OF THE INSURED. (b) THE TERM DOES NOT INCLUDE A PERSON WHO PROVIDES AN ESTIMATE OF WORK TO AN INSURER ON BEHALF OF AN INSURED AS LONG AS THE INSURED IS NOTIFIED OF ALL COMMUNICATIONS BETWEEN THE PERSON AND THE INSURER RELATED TO THE ESTIMATES. The notification condition is what keeps a contractor out of the definition.

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

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

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

Self-insurance is best defined as:

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

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