South Carolina Property & Casualty Insurance License, Practice Exams

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.

Which statement about Part Two (Employers Liability) limits and Part One is correct?

1. Part One has no policy limit; Part Two has stated dollar limits ✓
2. Part Two has no policy limit; Part One has stated dollar limits
3. Neither Part has any limits
4. Both Part One and Part Two have stated dollar limits

Why: Part One has no policy limit (the statute controls benefits), while Part Two carries stated dollar limits for the three employers liability exposures.

Section 38-45-20 requires a resident applicant for an insurance broker's licence to file a bond with the department, in a form approved by the Attorney General and in favour of South Carolina. The amount of that bond is:

1. $5,000
2. $10,000 ✓
3. $20,000
4. $25,000

Why: S.C. Code § 38-45-20(4) sets ten thousand dollars, executed by a corporate surety licensed to transact surety insurance in this State and personally countersigned by a licensed resident agent of the surety. The bond is conditioned to pay a person insured or seeking insurance through the broker who sustains loss from the broker's violation of an insurance law or regulation, his failure to transmit properly a payment received for an insurer or an insured, or an act of fraud in connection with an insurance transaction. Certificates of deposit of the same amount in federally insured banks or savings and loan associations located within the State may be filed instead.

An action involving a covered claim is pending in a South Carolina court against a party the insolvent insurer was obliged to defend. Under section 38-31-160 the proceedings must be stayed:

1. Sixty days from the date the association receives notice of the claim
2. Until the receiver or liquidator is appointed
3. Until the association elects whether to assume the defence
4. Ninety days from the date insolvency is determined ✓

Why: S.C. Code § 38-31-160 makes the stay automatic and dates it from the DETERMINATION OF INSOLVENCY rather than from anything the association does, and the court may extend it where more time is needed to permit a proper defence. The section then reaches backwards: where a judgment, decision, order, verdict or finding rests on the insurer's default or failure to defend, the association may apply to the same court or administrator to have it set aside, and must be permitted to defend the claim on its merits.

Under section 38-77-125, every automobile insurance policy must state on the face of the policy the complete name of the issuing company, its address and:

1. Its NAIC company code
2. The name of the producing agent
3. Its telephone number ✓
4. Its South Carolina licence number

Why: S.C. Code § 38-77-125 requires three things on the FACE of the policy - the complete company name, the address and the telephone number - and its point is practical rather than regulatory: an insured who has an accident needs to reach the insurer from the roadside without having to work out which of several affiliated companies actually issued the cover. It reaches any policy containing automobile insurance coverage, not only a stand-alone auto policy.

The provision describing the geographic area where coverage applies is the:

1. Policy period
2. Coinsurance clause
3. Insuring agreement
4. Policy territory ✓

Why: The policy territory defines the geographic boundaries within which covered losses or occurrences must take place.

Which valuation method pays the cost to repair or replace property with new property of like kind and quality, without deduction for depreciation?

1. Agreed value
2. Functional replacement cost
3. Actual cash value
4. Replacement cost ✓

Why: Replacement cost pays to repair or replace with new property of like kind and quality with no deduction for depreciation.

The right of an insurer, after paying a claim, to recover from the party who caused the loss is:

1. Abandonment
2. Subrogation ✓
3. Salvage
4. Liberalization

Why: Subrogation transfers the insured's right of recovery against a responsible third party to the insurer after it pays the claim.

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

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

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

Liability imposed on a party regardless of fault or intent, often involving inherently dangerous activities, is known as:

1. Comparative liability
2. Absolute (strict) liability ✓
3. Contributory liability
4. Vicarious liability

Why: Absolute/strict liability applies regardless of fault, commonly to abnormally dangerous activities such as blasting or keeping wild animals.

An 'insured contract' in the CGL includes:

1. Any written or oral agreement the insured enters into, so long as the other party demands indemnification as a condition of the deal
2. Only purchase orders issued to suppliers for materials delivered to the job site
3. Only employment contracts between the insured and its workers, including union collective bargaining agreements
4. A contract in which the insured assumes the tort liability of another, such as a lease or sidetrack agreement ✓

Why: Insured contracts are specified agreements (leases, easements, sidetrack agreements, etc.) in which the insured assumes another party's tort liability.

A mortgagee's insurable interest in an insured building is generally limited to:

1. The unpaid balance of the mortgage loan ✓
2. The full replacement cost of the building
3. The market value of the land only
4. The borrower's down payment

Why: A mortgagee (lender) has an insurable interest equal to the outstanding balance of the loan it has secured by the property.

A South Carolina insurer has already taken one rate increase inside the flex band during the past twelve months and now files a second, also inside the band. Under section 38-73-260 that second filing:

1. May take effect without prior approval, like the first
2. Is subject to the prior approval of the director ✓
3. Is prohibited until the twelve-month period expires
4. May take effect only if the two increases together stay inside the band

Why: S.C. Code § 38-73-260(B) allows no more than two flex-band increases in a twelve-month period and makes the second one prior-approval even though it is inside the band. Subsection (C) sets the timing for a band filing - effective not less than thirty days after filing - and limits the director's power to unwind it: an order issued more than thirty days after he received the filing operates PROSPECTIVELY ONLY and does not affect a contract issued or made before its effective date.

In the Homeowners policy, the term 'insured location' generally includes all of the following EXCEPT:

1. Other premises acquired during the policy period for use as a residence
2. The residence premises
3. A commercial warehouse rented to a third party ✓
4. Vacant land owned by the insured

Why: Insured location includes the residence premises, newly acquired residences, vacant land, and certain other personal-use premises, but not a separately rented commercial property.

Under PAP Part A, which of the following is an "insured" while using a non-owned auto?

1. The named insured and family members for any auto, and others only for the covered auto ✓
2. Any person operating the named insured's vehicle for a fee, such as a valet or mechanic on duty
3. Only the registered owner of the non-owned auto, since that owner's policy is primary
4. Anyone in the world who drives any vehicle with the named insured's verbal or written permission

Why: For Part A, the named insured and family members are insureds for the ownership/use of any auto, while other persons are insureds only for use of the named insured's covered auto.

An automobile assigned-risk plan is a type of:

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

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

A South Carolina resident applies for an initial insurance producer licence. Under the fee table in section 38-43-80 the initial producer licence fee is:

1. $20
2. $25 ✓
3. $40
4. $100

Why: S.C. Code § 38-43-80(A)(1)(a) charges twenty-five dollars initially and the same twenty-five on biennial renewal. Everything else in the table is a different figure and belongs to a different thing: forty dollars for a local appointment and forty for an agency licence, one hundred for a special or a general appointment, and twenty - the lowest in the section - for a producer of a common carrier who sells only transportation ticket accident and health policies or baggage insurance on personal effects.

An insured who intentionally sets fire to insured property to collect on the policy demonstrates:

1. A moral hazard ✓
2. A physical hazard
3. A morale hazard
4. An aleatory hazard

Why: A moral hazard exists when a person's dishonesty or tendency to cause a loss, such as arson for profit, increases the chance of loss.

A boatowner wants liability protection for bodily injury to others caused by the vessel. This is provided under the yacht policy's:

1. Hull coverage
2. Medical payments to the owner only
3. Flood coverage
4. Protection and indemnity (P&I) coverage ✓

Why: Protection and indemnity coverage in a yacht policy provides liability protection for bodily injury and property damage to others arising from operation of the vessel.

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

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

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

Insurers require minimum 'underlying limits' for an umbrella because:

1. Umbrellas are written to pay first-dollar losses, so the underlying policies serve only to establish the premium basis for the account
2. Drop-down is prohibited by the insuring agreement, so the umbrella cannot respond until every underlying policy's limits renew
3. The insurer wants more premium from each underlying policy the insured is made to buy
4. The umbrella is meant to sit above primary coverage; the insured must maintain stated underlying limits or pay as though they were in force ✓

Why: Umbrellas require specified underlying limits; if the insured fails to maintain them, the umbrella pays only as if the required underlying limits existed.

An Extended Reporting Period (tail coverage) on a claims-made policy:

1. Removes the retroactive date from the policy so that injuries from any earlier year become covered claims
2. Extends the time within which claims may be reported for injuries that occurred during the policy period ✓
3. Increases the each-occurrence limit throughout the reporting window without any additional premium charge
4. Extends the period during which the injury itself must occur, adding a further year of covered exposure time

Why: A tail/ERP extends only the reporting window for claims arising from covered occurrences; it does not extend the period during which injury must take place.

Which is an example of a direct loss?

1. Fire damage to the structure of a building ✓
2. Loss of rental income after a fire
3. Extra expense to operate at a temporary location
4. Spoiled food after a power outage

Why: Direct loss is immediate physical damage to property; the fire damage to the structure is direct, while income/expense impacts are indirect.

Section 38-77-155 directs the director to distribute monies annually from the Uninsured Motorists Fund among the insurers writing motor vehicle bodily injury and property damage liability insurance on vehicles registered in this State. The distribution is made in proportion to:

1. Each insurer's share of the uninsured motorist claims paid in this State during the preceding year, as reported on its annual statement
2. Each insurer's share of the motor vehicles registered in this State
3. Each insurer's number of policies in force at the end of the preceding year
4. Each insurer's premium income for auto liability coverage against the total written in this State in the preceding year ✓

Why: S.C. Code § 38-77-155 defines the premium income it means - gross premiums less cancellation and return premiums, for coverage required by § 38-77-150 - and directs the director to take the figures from the annual statement each insurer files, so the distribution rests on a filing the department already holds. The fund itself is under the supervision and control of the Department of Insurance under § 38-77-154, and payments from it are made on warrants of the Comptroller General.

Section 38-77-10 declares the purposes of South Carolina's automobile insurance chapter. The first purpose it states is that every automobile insurance risk which is insurable on the basis of the criteria established in the chapter is:

1. Entitled to insurance through the residual market mechanism only
2. Entitled to automobile insurance ✓
3. Entitled to insurance at a rate approved by the director
4. Guaranteed a renewal for so long as the risk remains insurable

Why: S.C. Code § 38-77-10(1) states the entitlement flatly, and the rest of the section supplies the machinery for it. Item (2) provides a residual market mechanism, known as the Associated Auto Insurers Plan, for a person legally entitled to automobile insurance who has not been able to obtain a motor vehicle liability policy. Item (3) provides prohibitions and penalties against unfairly discriminatory or unfairly competitive practices having as their purpose or effect evasion of the chapter's coverages, and item (4) provides that medical, surgical, funeral and disability benefits without regard to fault be OFFERED under policies that provide bodily injury and property damage liability insurance.

In a monopolistic state fund jurisdiction, employers must generally obtain workers' compensation coverage from:

1. A federal program
2. Any private insurer licensed in the state
3. An out-of-state surplus lines insurer
4. The state-operated fund only ✓

Why: In monopolistic fund states, the state fund is the sole source of WC coverage and private insurers may not write it; employers must buy from the state fund.

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.

A producer entered a plea of nolo contendere to a qualifying offence. Under section 38-43-130 he:

1. Is treated as convicted ✓
2. Is not treated as convicted, no guilt being admitted
3. Is treated as convicted only if sentenced
4. Is treated as convicted only for a felony

Why: S.C. Code § 38-43-130(B) defines "convicted" to include both a guilty plea and a plea of nolo contendere, and makes the certified record of conviction CONCLUSIVE evidence of it. A producer cannot relitigate the underlying facts before the department.

A business decides not to manufacture a dangerous chemical at all to eliminate the chance of related liability claims. This is an example of risk:

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

Why: Risk avoidance eliminates the possibility of a particular loss by not engaging in the activity that creates the exposure.

A South Carolina automobile insurance policy is presented for issue with no uninsured motorist provision in it. Under section 38-77-150 such a policy:

1. May not be issued or delivered ✓
2. May be issued if the insured rejects the coverage in writing
3. May be issued if the insured carries liability limits above the statutory minimum
4. May be issued only through the Associated Auto Insurers Plan

Why: S.C. Code § 38-77-150(A) makes the uninsured motorist provision a condition of issue and delivery rather than something the insured may decline, which is what separates it from the ADDITIONAL uninsured and the underinsured coverages that § 38-77-160 requires a carrier only to offer. The provision must undertake to pay the insured all sums he is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle, within limits no less than the requirements of § 38-77-140. The director or his designee may prescribe the form, and once a form is prescribed and promulgated no other may be used.

A South Carolina insurer wishes to change its homeowner's rates without prior approval, on a file and use basis. Under section 38-73-260 the overall average rate-level change for all coverages combined may not exceed, above or below the rates then in effect:

1. 5 percent
2. 7 percent ✓
3. 10 percent
4. 15 percent

Why: S.C. Code § 38-73-260(A) is South Carolina's flex band, and it applies to fire, allied lines and homeowner's policies. Two qualifications do most of the work: the seven percent is an OVERALL AVERAGE for all coverages combined and the section says expressly that it does NOT apply on an individual insured basis, so a single policyholder's renewal may move by more. Anything outside the band is subject to prior approval under §§ 38-73-960 and 38-73-990.

A salaried full-time employee counsels his own employer about the employer's insurance interests. Section 38-43-20 exempts him from licensing only if he neither sells, solicits nor negotiates insurance, and in addition:

1. Receives no commission ✓
2. Holds no other employment in the insurance industry
3. Advises on no more than one line of insurance
4. Reports the arrangement to the director annually

Why: S.C. Code § 38-43-20(D)(7) covers the in-house insurance manager, and reaches advice about the employer's subsidiaries and business affiliates as well as the employer itself. Two conditions must BOTH hold - no selling, soliciting or negotiating, and no commission - so an employee who takes even a share of commission on the employer's own cover falls outside the exemption however administrative the rest of his work.

An insured makes no request for a particular glass shop. Under section 38-57-75 the insurer or third party administrator:

1. Must offer the insured a choice of three providers
2. May refer the repair to a member of its preferred network ✓
3. Must refer the repair to the nearest available provider
4. Must obtain the insured's written waiver before referring

Why: S.C. Code § 38-57-75(F) permits the network referral only where the insured has NOT requested a specific provider of choice, which is why subsection (C) requires the insurer to ask first. The permission is a 'may', so nothing compels a network referral either. Read the section as a sequence rather than a list: verify and evaluate, ask about a provider of choice, then either assign to that provider under (D) or (E), or - only if there is none - refer under (F).

A spectator hit by a foul ball at a baseball game may be barred from recovery under which defense?

1. Subrogation
2. Assumption of risk ✓
3. Contribution
4. Vicarious liability

Why: Assumption of risk applies when a person knowingly and voluntarily exposes themselves to a known danger, such as inherent risks at a sporting event.

Earthquake coverage on a Homeowners policy is:

1. Automatically included in the HO-3 dwelling coverage once the home is insured to full replacement cost
2. Added by endorsement for an additional premium ✓
3. Available only under an HO-4 renters form
4. Provided within the Coverage E liability limit

Why: Earthquake is excluded under the base form but can be added by endorsement, often with a percentage deductible based on Coverage A.

The intentional withholding of a known material fact that the applicant has a duty to disclose is called:

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

Why: Concealment is the failure to disclose a known material fact; if intentional, it can void the contract.

A limit expressed as 'per occurrence' refers to:

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

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

An insurer wishes to print a symbol derived from the Seal of South Carolina on its brochures. Under section 38-57-45 it may do so only with the approval of:

1. The Director of Insurance
2. The Secretary of State
3. The State Budget and Control Board ✓
4. The Attorney General

Why: S.C. Code § 38-57-45(A) reaches insurance agencies, insurers AND health maintenance organizations, and covers the Seal itself or any symbol containing, including or derived from it, in a newspaper, magazine or other solicitation material. Approval rests with the State Budget and Control Board, not the department - a Code Commissioner's note preserves that reference despite the 2014 Restructuring Act until the General Assembly acts.

Which of the following is paid IN ADDITION to the policy limits under the CGL Supplementary Payments provision?

1. Damage to the insured's own product, which is drawn from the products-completed operations aggregate limit
2. Punitive damages assessed against the insured, paid on top of the each-occurrence limit of insurance
3. Lost wages of an injured employee for the entire time missed from work, over and above the general aggregate
4. The cost of bonds to release attachments and reasonable expenses incurred at the insurer's request ✓

Why: Supplementary Payments — including defense costs, bond premiums, and expenses at the insurer's request — are paid in addition to the limits of insurance.

An insurer's agent offers a prospective buyer shares in the agency company, promising returns and profits, as an inducement to take out a policy. Under section 38-55-40 the Director, on being satisfied of the violation:

1. Shall refer the matter to the Securities Commissioner
2. Shall impose the penalties provided in section 38-2-10 ✓
3. May order restitution of the premium to the buyer
4. May suspend the agent but may not fine the insurer

Why: S.C. Code § 38-55-40 is mandatory once the Director is satisfied - he SHALL impose the § 38-2-10 penalties, which for a licensed insurer reach fifteen thousand dollars, or thirty thousand for a wilful violation, or suspension or revocation, or both. The section reaches conduct in ANY state or territory, so an insurer doing this elsewhere may not be authorised here. It carries one exception, and it is narrow: it does not apply to marine insurers or their agents where the agents write only marine insurance.

Title 38 of the South Carolina Code may be cited as:

1. The South Carolina Insurance Code
2. The Insurance Regulation Act
3. The Insurance Law ✓
4. The Insurance Practices Act

Why: S.C. Code § 38-1-10 is a single sentence giving the title its short name, "The Insurance Law". It is worth knowing because South Carolina material refers to the body of law both ways, and a candidate who expects "Insurance Code" will read past the correct citation.

Which of the following losses is covered under "Other Than Collision" (comprehensive) rather than Collision?

1. Rolling the vehicle over in a ditch
2. Striking a guardrail
3. Damage from hail, fire, theft, or hitting a deer ✓
4. Colliding with another vehicle at an intersection

Why: Other Than Collision (comprehensive) covers losses such as fire, theft, hail, vandalism, glass breakage, and contact with animals like a deer.

Section 38-5-90 sets the conditions for licensing a foreign or alien insurer. Three of its conditions have no counterpart in the domestic insurer list at section 38-5-80. They are that the insurer is safe and solvent, that its dealings are fair and equitable, and that it:

1. Maintains its original books and records within this State
2. Employs a manager who resides within the State of licensure
3. Has been licensed in its own state for at least one year
4. Does not conduct business contrary to the public interest ✓

Why: S.C. Code § 38-5-90(j), (k) and (l) add safety and solvency, fair and equitable dealing, and conduct not contrary to the public interest - broad standards the Director can apply to a company he cannot examine as closely as a domestic one. The comparison runs the other way too: § 38-5-90(e) requires competent, trustworthy directors of good reputation but drops the domestic requirement that none has been convicted of fraud or of violating an insurance statute, and § 38-5-90(f) drops the word RESIDING, so a foreign insurer's manager need not live here.

Compared with the standard CGL, professional liability and D&O policies most often pay defense costs:

1. Within the limit of insurance, eroding the available limit ✓
2. Only after the self-insured retention has been paid twice
3. In addition to the limit, as under the CGL
4. Never, leaving defense entirely to the insured

Why: Many specialty/management liability policies use defense-within-limits, so defense costs reduce the amount available for settlements.

Section 38-73-737 provides a driver's education course credit for a youthful operator. The section requires that credit to be afforded, from the date the approved course was completed:

1. For a minimum of thirty-six months
2. Until the operator reaches the age of twenty-five, whether or not he remains insured with the same insurer
3. For the remainder of the policy period in which it was completed
4. For as long as the premium rates continue to be determined by a youthful driver classification ✓

Why: S.C. Code § 38-73-737(B) ties the credit's life to the classification rather than to a fixed term or to a birthday, and that is the difference from § 38-73-736's minimum of thirty-six months for a driver who is not a youthful operator. The insurer may condition the credit on the applicant not being at fault in an accident and not being convicted of, pleading guilty to, or pleading nolo contendere to any moving violation, and the credit must be afforded in a nondiscriminatory manner to all applicants.

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

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

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

A person contemptuously violates a cease and desist order issued by the Director, and the violation is not wilful. Under section 38-57-230 the fine the Director may set may not exceed:

1. $50 for each day of violation ✓
2. $100 for each day of violation
3. $500 for each day of violation
4. $1,000 for each day of violation

Why: S.C. Code § 38-57-230 runs at fifty dollars a day, rising to one hundred a day where the violation is wilful, and it is a DAILY fine - the exposure is a function of how long the contempt lasts rather than of the underlying practice. It is also procedurally distinct: the person is entitled to a hearing on due notice before the Director determines that a contemptuous violation has been committed and issues his order of contempt.

Section 38-77-210 addresses property damage for which a policyholder has already been compensated. It provides that the uninsured motorist provision:

1. Need not insure any liability for property damages for which the policyholder has been compensated by insurance or otherwise ✓
2. Must insure that property damage even where the policyholder has been compensated, leaving the insurer to recover whatever it pays from the other source by way of subrogation
3. Must insure that damage where the other compensation did not come from an automobile policy
4. Must insure that damage up to the twenty-five thousand dollar minimum

Why: S.C. Code § 38-77-210 is a single sentence preventing a double recovery on the property side, and the words 'or otherwise' reach compensation from any source rather than only from another policy. It works alongside § 38-77-150(A)'s permitted two hundred dollar exclusion: between them, the property half of the uninsured motorist provision is the narrowest part of the coverage.

A personal umbrella policy typically requires the insured to maintain minimum underlying limits on:

1. Life insurance with a $100,000 face amount
2. Individual disability income benefits
3. Group health insurance from the employer
4. Personal auto and homeowners liability ✓

Why: Personal umbrellas sit above personal auto and homeowners liability and require stated minimum underlying limits on those policies.

PAP Part A excludes liability coverage when the insured is:

1. Carrying family members as passengers on a trip across state lines
2. Driving to work during rush hour
3. Using a vehicle as a public or livery conveyance (e.g., taxi) ✓
4. Driving in another state or Canadian province

Why: Liability is excluded for any insured using a vehicle as a public or livery conveyance, though share-the-expense carpools are not excluded.

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.

In commercial auto, mobile equipment (e.g., a bulldozer) is generally:

1. Covered under garagekeepers, since the dozer sits in the insured's care and custody
2. Treated as a covered auto under the BACF whenever it is self-propelled
3. Not a covered auto under the BACF and typically insured under general liability ✓
4. Covered under Symbol 1 alone, never any other symbol

Why: Self-propelled mobile equipment is excluded from the auto definition and is normally addressed under a commercial general liability policy.

A risk retention group (RRG) is:

1. A reinsurance company that assumes liability risk ceded by primary insurers under a treaty
2. A consumer-reporting agency that assembles loss-history reports for underwriters
3. A liability insurer owned by its members who are engaged in similar businesses ✓
4. A federal pool that writes flood coverage for commercial property in flood zones

Why: Authorized under the federal Liability Risk Retention Act, an RRG is a member-owned insurer that writes liability coverage for its members engaged in similar or related businesses.

A homeowner is sued because a visitor slipped on an icy walkway and was injured. The cost of the insurer defending this suit is:

1. Provided in addition to the Coverage E limit as a supplementary/defense cost ✓
2. Charged against the Coverage E limit, reducing what remains for damages
3. Excluded once the insured retains private counsel
4. Paid under Coverage D as an additional living expense

Why: Defense costs under Section II are generally provided in addition to the Coverage E limit of liability and continue until the limit is exhausted by settlement or judgment.

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

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

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

An insured sues the owner of an uninsured vehicle and serves copies of the pleadings on the insurer writing his uninsured motorist provision. Under section 38-77-150 the period the insurer has in which to appear, running from service of process on it, is:

1. 30 days ✓
2. 45 days
3. 60 days
4. 120 days

Why: S.C. Code § 38-77-150(B) gives the insurer thirty days and gives it the right to appear and DEFEND IN THE NAME OF THE UNINSURED MOTORIST in any action which may affect its liability. Two conditions travel with it: no action may be brought under the provision at all unless copies of the pleadings establishing liability are served on the insurer in the manner provided by law, and the evidence of that service may not be made a part of the record. Section 38-77-160 gives the underinsured motorist insurer the identical thirty days in an underinsured motorist action.

Smoke damage under a Homeowners policy is typically:

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

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

A 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.

An umbrella liability policy:

1. Covers only physical damage to the insured's own dwelling and detached structures, written on a replacement cost basis
2. Is another name for a difference in conditions policy, filling property gaps such as flood rather than adding liability limits
3. Replaces all underlying liability coverage, so the insured may drop the primary auto and homeowners liability once the umbrella and its retention are in place
4. Provides excess limits over underlying policies and may cover some claims the underlying policies do not (subject to a self-insured retention) ✓

Why: An umbrella sits above primary liability policies, providing excess limits and broader coverage, with the insured paying a self-insured retention for claims not covered underneath.

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

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

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

Section 38-73-1210(A)(1) deals with an insurer's obligation to make required rate filings for property and casualty insurance other than workers' compensation. Under that item, becoming a member of or a subscriber to a licensed rating organisation which makes filings:

1. Is required of every insurer for each line of insurance it writes
2. Relieves the insurer of any obligation to adhere to the organisation's filings
3. Lets a new member adopt the organisation's higher approved rate at once
4. Is one way the insurer may satisfy its obligation to make required filings ✓

Why: S.C. Code § 38-73-1210(A)(1) says an insurer may satisfy its obligation to make required filings by becoming a member of, or a subscriber to, a licensed rating organisation which makes filings and authorising the director to accept the filings on its behalf: a permitted route, not a requirement. Within twelve months after joining, a member or subscriber may not file to adopt the organisation's approved rate if it is more than the rate it used before, and may not be granted an upward deviation from its rate in use, although if the organisation is granted a rate increase in that period the member may increase its rates by the same percentage. Under § 38-73-1290 members and subscribers must adhere to the filings made on their behalf, except as §§ 38-73-1300 and 38-73-1310 provide. For workers' compensation, item (A)(2) bars a rating organisation from satisfying the insurer's filing obligation under § 38-73-525.

In ocean marine insurance, Hull coverage insures:

1. Lost freight charges
2. The vessel itself and its machinery ✓
3. Liability to third parties
4. The cargo being carried

Why: Hull insurance covers physical damage to the vessel, including its structure, machinery, and equipment.

Section 38-77-170 requires an affidavit where recovery against an unknown motorist rests on an independent witness. A statement must be prominently displayed on the face of that affidavit warning that a false statement about the facts it contains may subject the person making it to:

1. Criminal penalties as provided by law ✓
2. A civil penalty payable to the Department of Insurance
3. Loss of the insured's right to recover under the policy
4. Contempt of the court in which the action is brought

Why: S.C. Code § 38-77-170(B) sets the warning out in capitals and requires it on the FACE of the affidavit, which is a formality worth remembering because an affidavit without it is not the document the section describes. The affidavit belongs to the witness route in item (2)(b) alone; neither the physical-contact route nor the recording route calls for one.

A home has a replacement cost of $300,000 but a market value of $230,000. For insurance-to-value purposes, the amount of insurance should be based on:

1. The original purchase price
2. The land value
3. Replacement cost of $300,000 ✓
4. Market value of $230,000

Why: Insurance to value is based on the cost to rebuild (replacement cost), not market value, which includes land and location factors.

Section 38-55-550 allows the director of the Insurance Fraud Division and a person alleged to have violated the fraud article to enter a written agreement under which the person neither admits nor denies the charges but consents to pay the civil penalty. Under that section such a consent agreement:

1. Is admissible in any later proceeding as evidence of the violation
2. Requires the approval of the court before it can take effect
3. May not be used in a subsequent proceeding under the article ✓
4. Bars any criminal prosecution arising from the same facts

Why: S.C. Code § 38-55-550(C) protects the consent agreement from being turned into an admission later, which is what makes settling one possible at all. Notice what it does NOT do: it does not bar a criminal prosecution. Subsection (A) is explicit that the civil penalty is in addition to any criminal liability, so consenting to the civil penalty settles the civil exposure and nothing else.

The amount added to the pure premium to cover operating expenses, commissions, and profit is called the:

1. Deductible
2. Loading ✓
3. Salvage
4. Coinsurance

Why: Loading is added to the pure premium to account for the insurer's expenses, contingencies, and profit margin.

The Spoilage endorsement primarily covers:

1. Theft of packaged inventory from a walk-in cooler
2. Damage to the building's refrigeration room structure
3. Spoilage of perishable stock due to power outages or equipment breakdown ✓
4. Liability for customer illness caused by contaminated food sold

Why: The Spoilage endorsement covers loss to perishable stock from breakdown of refrigeration equipment or off-premises power interruption, depending on options selected.

An insured with 50/100/25 split limits injures one person for $80,000. How much does the policy pay for that injured person?

1. $25,000
2. $80,000
3. $100,000
4. $50,000 ✓

Why: The per-person bodily injury limit is $50,000, so the most payable for one injured person is $50,000 regardless of the per-accident limit.

Section 38-5-80 lists what the Director must be satisfied of before granting a domestic insurer its original certificate of authority. Which of the following is NOT among them?

1. That the insurer has made adequate reinsurance arrangements if required
2. That the insurer's reserves are adequate to protect policyholders
3. That the insurer employs one or more persons residing in this State
4. That the insurer has posted a surety bond with the department ✓

Why: S.C. Code § 38-5-80 runs from (a) to (k) with no catch-all, so the list is closed and a bond is simply not on it. What is on it is mostly about people and prudence rather than money: competent and trustworthy directors and officers with no conviction for fraud, dishonesty or like moral turpitude and none for violating an insurance statute anywhere; at least one person RESIDING in this State with adequate experience to manage the business; no management or agency agreement that would render the insurer's proceedings hazardous; adequate reserves, reserve basis and reinsurance.

A stock insurer is owned by its:

1. Stockholders ✓
2. State insurance department
3. Policyholders
4. Board of agents

Why: A stock insurer is owned by stockholders, who supply capital and receive dividends; policyholders are not owners.

A new applicant is sent the approved form offering optional automobile coverages and does not return it. Under section 38-77-350, if the executed form is not returned within thirty days the insurer shall:

1. Issue the policy with only the statutory minimum coverages required by section 38-77-140
2. Decline to issue the policy until the form is returned
3. Add uninsured and underinsured motorist coverage at the insured's liability limits ✓
4. Treat the optional coverages as rejected

Why: S.C. Code § 38-77-350(E) makes silence produce MORE cover rather than less, and at the insured's own liability limits rather than at the statutory minimum - so an applicant who ignores the paperwork ends up better protected and paying more. It is the mirror image of § 38-77-141, which warns an insured that limits will rise automatically unless he acts within twenty days. Subsection (C) limits the whole exercise to new business: no new offer is required on a policy that renews, extends, changes, supersedes or replaces an existing one.

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

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

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

Most Professional Liability/E&O and D&O policies are written on what kind of trigger?

1. Claims-made ✓
2. Named perils
3. Open peril
4. Occurrence

Why: Professional and management liability lines are typically claims-made, with a retroactive date and ERP options.

The Information Page of the Workers Compensation policy is most analogous to which component of other commercial policies?

1. The endorsement schedule
2. The declarations page ✓
3. The exclusions section
4. The conditions section

Why: The Information Page functions like a declarations page, showing the insured, policy period, listed states, classifications, premium basis, and limits for Part Two.

A workers' compensation claim may be recoverable from the guaranty associations of more than one state. Under section 38-31-100 the claimant must first exhaust all coverage and limits in recovery from the association of:

1. The residence of the insured employer
2. The state in which the injury occurred
3. The residence of the claimant ✓
4. The state in which the insolvent insurer was domiciled

Why: S.C. Code § 38-31-100(2) gives three different first-resort rules for three kinds of claim, and the workers' compensation rule is the one that follows the CLAIMANT rather than the policy: a general claim goes first to the association of the insured's place of residence, a first-party claim for damage to property with a permanent location goes to the association where the property is, and a workers' compensation claim goes to the association where the claimant lives. Whatever is recovered elsewhere reduces the covered claim here, and this association takes full credit for it.

The Governor declares a state of emergency and the Director issues an emergency regulation under section 38-3-410. Unless terminated sooner, it continues for:

1. Ninety days, unless extended by the General Assembly
2. Until the state of emergency is lifted
3. Thirty days, renewable once
4. One hundred twenty days ✓

Why: S.C. Code § 38-3-410 gives one hundred twenty days, extendable by the Director for further periods of the same length for as long as the conditions persist, whether or not the General Assembly is in session. Two checks sit on it: each extension must be published in the State Register, and the General Assembly may terminate the regulation by concurrent resolution.

Section I of a Businessowners Policy provides:

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

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