Tennessee Property & Casualty Insurance License, Practice Exams

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 implied warranty of seaworthiness in ocean marine requires that:

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

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

Under T.C.A. § 56-12-107, except for workers' compensation, the association's total obligation for any single insured and its affiliates ceases once it has paid, in the aggregate:

1. Ten million dollars ($10,000,000) on the covered claims ✓
2. One million dollars ($1,000,000) on the covered claims
3. Five million dollars ($5,000,000) on the covered claims
4. Fifty million dollars ($50,000,000) on the covered claims

Why: T.C.A. § 56-12-107(a)(1)(C)(ii) ends the obligation when $10,000,000 has been paid in the aggregate for a single insured and its affiliates — therefore $10 million is correct.

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.

Under T.C.A. § 50-6-102, the term 'employee' expressly includes?

1. Only workers who are full-time and salaried
2. Independent contractors in every situation
3. Only workers holding a written contract
4. A minor and a corporate executive officer ✓

Why: T.C.A. § 50-6-102(10)(A) defines 'employee' to include minors and corporate officers (president, VP, secretary, treasurer) — therefore a minor and a corporate executive officer.

Under PAP Part E, after a theft of the covered auto, the insured must additionally:

1. Promptly notify the police ✓
2. Wait 30 days before any action
3. Pay the deductible to the police
4. Repair the vehicle first

Why: For a theft loss, the insured has a specific duty to promptly notify the police in addition to notifying the insurer.

A homeowner stores a guest's furniture temporarily. Property of others while on the residence premises is:

1. Covered only under Section ii liability, since the guest is not an insured
2. Subject to the $200 special limit for money
3. Never covered while owned by a non-insured
4. Coverable at the insured's option under Coverage C ✓

Why: Coverage C may, at the insured's option, apply to property of others while on the part of the residence premises occupied by an insured.

The General Aggregate Limit in the standard CGL applies to all of the following EXCEPT:

1. Coverage A losses other than products-completed operations
2. Coverage B personal and advertising injury
3. Coverage C medical payments
4. Products-completed operations claims ✓

Why: Products-completed operations losses are subject to their own separate Products-Completed Operations Aggregate, not the General Aggregate.

Under the PAP, an insured loaning their covered auto to a friend who then causes an accident results in:

1. Liability coverage applying, since a permissive user of the covered auto is an insured ✓
2. Coverage only if the friend is a family member or a resident of the named insured's household at the time of the accident
3. No coverage because the named insured was not driving, leaving the friend's own policy as the only source of recovery
4. Coverage only under Part C, treating the friend as an uninsured motorist

Why: A person using the named insured's covered auto with permission is an insured under Part A, so the policy responds to that permissive user's liability.

Bodily injury caused by a defect in a product after it has left the insured's possession is subject to which aggregate limit?

1. General Aggregate Limit
2. Products-Completed Operations Aggregate Limit ✓
3. Damage to Premises Rented Limit
4. Personal and Advertising Injury Limit

Why: Products and completed operations losses are capped by the separate Products-Completed Operations Aggregate.

Underinsured motorists (UIM) coverage applies when:

1. The insured wants collision limits raised above the actual cash value of the covered auto without paying more premium
2. The at-fault driver's liability limits are insufficient to fully cover the insured's damages ✓
3. The at-fault driver has no liability insurance whatsoever
4. The insured driver is the one at fault and wants their own injuries paid from their liability limits

Why: UIM applies when the at-fault driver has insurance, but with limits lower than the damages, allowing the insured to recover the difference up to the UIM limit.

Under the PAP, sound-reproducing equipment that IS permanently installed by the manufacturer is:

1. Covered under Part D physical damage as part of the auto ✓
2. Covered only under Part B if damaged in an accident causing injury
3. Never covered, as electronics are excluded
4. Excluded under Part D as added equipment

Why: Factory or permanently installed original equipment is part of the covered auto under Part D; the limitation targets certain aftermarket/added electronic equipment.

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.

Which of the following is NOT one of the four elements required to prove a negligent act?

1. Intent to cause harm ✓
2. A breach of that duty
3. Proximate cause
4. A legal duty owed

Why: Negligence requires duty, breach, proximate cause, and damages. Intent is not required—an intentional act is a different category (an intentional tort).

An admitted (authorized) insurer is one that:

1. Is incorporated outside the United States and operates here through a branch office
2. Sells only surplus lines coverage, placed through licensed surplus lines brokers
3. Is owned by its policyholders rather than by stockholders
4. Has received a certificate of authority to do business in the state ✓

Why: An admitted or authorized insurer has been granted a certificate of authority by the state insurance department to transact business there.

The Homeowners additional coverage for trees, shrubs, and plants typically limits aggregate coverage to what percentage of Coverage A?

1. 20%
2. Unlimited
3. 50%
4. 5% ✓

Why: Trees, shrubs, plants, and lawns are covered up to 5% of Coverage A for named perils (not wind), with a per-item dollar cap.

Provisions that remove or restrict coverage for certain perils, property, or losses are found in the:

1. Insuring agreement
2. Declarations
3. Exclusions ✓
4. Supplementary payments

Why: Exclusions identify perils, property, hazards, or losses that the policy does not cover.

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.

The right of subrogation is intended to:

1. Waive the insured's deductible whenever some other party is legally at fault for the loss
2. Prevent the insured from collecting twice and hold the responsible party accountable ✓
3. Increase the limit by the amount recovered
4. Allow the insured to keep both the insurer's payment and any recovery from the wrongdoer

Why: Subrogation supports the principle of indemnity by preventing double recovery and shifting cost to the at-fault party.

A claimant recovers on a covered claim from the association after the insurer's insolvency. Under T.C.A. § 56-12-110, that claimant is deemed to have:

1. Waived any right to cooperate with the association's handling
2. Retained full rights to sue the association for a larger sum
3. Released the insolvent insurer's estate from all other claims
4. Assigned rights under the policy to the association up to recovery ✓

Why: T.C.A. § 56-12-110(a) deems the recovering person to have assigned policy rights to the association to the extent of the recovery — therefore assignment is correct.

An insurer wants to nonrenew a homeowners policy based only on the insured's credit information. Under T.C.A. § 56-5-202, is this permitted?

1. Yes, credit information alone is a sufficient basis
2. Yes, but only if the score is under a set threshold
3. No; it may not act solely on credit without another factor ✓
4. No, unless the insured has no other coverage available

Why: T.C.A. § 56-5-202(4) bars denying, canceling, or nonrenewing a personal insurance policy solely on credit information without another applicable underwriting factor.

Under T.C.A. § 56-7-1206, the uninsured motorist provision may NOT do which of the following?

1. Require arbitration of any claim arising under it ✓
2. Allow the insurer to file pleadings and take other action in its own name
3. Permit the insured to retain his own counsel
4. Let the insured sue the insurer directly

Why: T.C.A. § 56-7-1206(c) provides the UM provision shall not require arbitration of any claim — therefore it may not require arbitration.

The principle of indemnity states that an insured should:

1. Profit from a covered loss, since the premium was paid for that possibility
2. Receive replacement cost on every policy, whatever valuation basis it names
3. Be restored to approximately the same financial condition that existed before the loss ✓
4. Always receive the full face amount of the policy regardless of the size of the loss

Why: Indemnity restores the insured to the financial position held before the loss, without allowing profit from the loss.

Which Homeowners form provides the narrowest, modified settlement and is limited in covered perils for the dwelling?

1. HO-2
2. HO-3
3. HO-8 ✓
4. HO-6

Why: HO-8 is the Modified Coverage Form with restricted perils and functional/repair-cost settlement, designed for older homes; it is narrower than HO-2 or HO-3.

Pure risk differs from speculative risk in that pure risk involves:

1. Only the chance of loss or no loss ✓
2. Voluntary participation for reward
3. Guaranteed profit
4. Both loss and gain possibilities

Why: Pure risk presents only the possibility of loss or no loss, with no opportunity for gain, making it the only insurable type of risk.

Under the PAP, an insured loses control on ice and slides into a tree. This loss is covered under:

1. Liability
2. Other Than Collision
3. Medical Payments
4. Collision ✓

Why: Striking a tree as the result of losing control is a collision loss, since collision includes upset or impact with an object.

Under Homeowners Coverage C special limits, money, bank notes, and coins are typically limited to about:

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

Why: Money, bank notes, gold, and coins carry a low special limit (commonly $200) under Coverage C.

Under T.C.A. § 56-6-117, an insurer that terminates a producer for cause must notify the commissioner within what time after the effective date?

1. Within fifteen (15) days
2. Within sixty (60) days
3. Within thirty (30) days ✓
4. Within ninety (90) days

Why: T.C.A. § 56-6-117(a) requires an insurer terminating a producer for a reason set forth in § 56-6-112 to notify the commissioner within thirty (30) days of the effective date.

A driver with no insurance negligently causes a crash injuring another person. Under T.C.A. § 55-12-139, the failure-to-provide offense is elevated to?

1. A Class C misdemeanor
2. A Class A misdemeanor ✓
3. A Class E felony
4. A non-criminal penalty

Why: T.C.A. § 55-12-139(c)(3) elevates the violation to a Class A misdemeanor when the at-fault driver injures someone while uninsured — therefore Class A misdemeanor.

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

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

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

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

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

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

The authority that is not written but is reasonably necessary to carry out a producer's express authority is called:

1. Implied authority ✓
2. Apparent authority
3. Express authority
4. Statutory authority

Why: Implied authority is not written but is assumed to be granted because it is necessary to transact the business of the agency.

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

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

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

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.

A pet dog owned by the insured causes damage. Animals are addressed in a Homeowners policy how?

1. Animals are excluded as covered property but liability for injury they cause may fall under Coverage E ✓
2. Animals are scheduled under Coverage D, and the policy pays their appraised value when a covered peril strikes the home
3. Animals are covered under Coverage A whenever they are kept inside the dwelling structure at the time of the loss
4. Animals are covered as personal property under Coverage C, up to a $500 special limit

Why: Animals, birds, and fish are excluded as Coverage C property, but bodily injury or property damage caused by a pet may be covered under Section II liability.

Personal Injury Protection (PIP), where applicable, typically covers:

1. Comprehensive damage to the insured's own vehicle from theft, fire, hail, or falling objects
2. Liability to third parties for bodily injury and property damage the insured causes
3. Property damage to another person's vehicle or fence caused by the insured
4. The insured's medical expenses, lost wages, and certain other economic losses regardless of fault ✓

Why: PIP, common in no-fault states, pays the insured's own medical, wage loss, and related economic benefits without regard to fault.

Under T.C.A. § 50-6-207, temporary total disability is paid at what percentage of the average weekly wages?

1. 50%
2. 75%
3. 80%
4. 66 2/3% ✓

Why: T.C.A. § 50-6-207(1) sets temporary total disability at sixty-six and two-thirds percent (66 2/3%) of average weekly wages — therefore 66 2/3%.

Employee Benefits Liability (EBL) coverage protects an employer against:

1. Errors or omissions in the administration of the company's employee benefit programs ✓
2. Discrimination and harassment claims brought by job applicants and current employees alike
3. Bodily injury to an employee occurring in the course of employment
4. Liability for injuries caused by products the employer made and sold

Why: EBL covers negligent acts, errors, or omissions in administering employee benefit plans (e.g., failing to enroll an employee).

Flood damage to a home is covered under a standard Homeowners policy:

1. Only under the HO-8 modified form, which reaches flood because losses there settle at functional repair cost
2. Always, since water damage of any origin falls within the open-peril wording of the dwelling coverage
3. Only under Coverage F, which responds to flood damage once a federal disaster is declared for the county
4. Never; flood is excluded and covered through the NFIP or a separate flood policy ✓

Why: Flood is a standard exclusion in Homeowners policies; it must be insured separately, typically through the National Flood Insurance Program.

A reporting form in commercial property is used when:

1. Values fluctuate and the insured periodically reports current values ✓
2. Only liability coverage is needed for the operation
3. The risk is a single building of fixed value that the insured owns outright and rarely changes
4. Coverage is written monoline for the insured's auto fleet

Why: Reporting forms suit fluctuating inventory values; the insured periodically reports values and premium adjusts, helping match coverage to actual exposure.

A neighbor is injured by the insured's dog and incurs medical bills. Even though no lawsuit is filed and fault is unclear, payment may be available under:

1. Coverage E — Personal Liability
2. Coverage F — Medical Payments to Others ✓
3. Coverage C — Personal Property
4. Coverage D — Loss of Use

Why: Coverage F pays reasonable medical expenses for injured third parties on a no-fault, goodwill basis without requiring a finding of legal liability.

An insurer requires its insured to use a specific body shop that the insurer designates. Under T.C.A. § 56-8-105, the insurer must adopt standards ensuring the repairs are:

1. Completed at the lowest cost available in that local market
2. Performed in a workmanlike manner under reasonable standards ✓
3. Warranted by the insurer for the entire life of the vehicle
4. Inspected by the commissioner before the claim is paid out

Why: T.C.A. § 56-8-105(14) requires standards assuring repairs are performed in a workmanlike manner when the insurer requires a repairer — therefore that is the standard.

The CGL Medical Expense (Coverage C) limit typically applies:

1. Only to the named insured and resident family
2. Per occurrence to everyone hurt, not per person
3. Per person and is subject to the each occurrence limit ✓
4. As a separate aggregate outside Coverage A

Why: The Medical Expense Limit applies per person and the total is subject to the Each Occurrence Limit.

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

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

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

Why does Part One (Workers Compensation) of the standard policy contain no dollar limit of liability?

1. Because benefits are capped by the policy's aggregate limit
2. Because the benefit amounts are set by the state's WC statute ✓
3. Because the insurer can choose how much to pay
4. Because Part One only covers medical bills

Why: Part One has no policy limit because the insurer agrees to pay whatever benefits the state statute requires; the statute, not the policy, controls the amount.

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

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

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

A non-admitted (unauthorized) insurer is one that:

1. Has no certificate of authority in the state where the risk is located ✓
2. Can never legally write any business in the state, even through a licensed surplus lines broker
3. Is owned by the state government and writes only the residual market business assigned to it
4. Is by definition financially unsound, which is why it was refused a certificate of authority

Why: A non-admitted insurer lacks a certificate of authority in that state, though it may write surplus lines business through licensed surplus lines brokers.

Under T.C.A. § 56-6-125, a producer who charges a fee under a qualifying written agreement must retain a copy of that agreement for at least:

1. One (1) year after the services under it are completed
2. Three (3) years after the services under it are completed ✓
3. Five (5) years after the services under it are completed
4. Two (2) years after the services under it are completed

Why: T.C.A. § 56-6-125(a)(3)(C) requires the producer to retain the agreement for not less than three years after services are completed — therefore three years is correct.

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.

Which of the following is typically EXCLUDED under an NFIP flood policy?

1. The furnace and central air conditioner serving the dwelling, which NFIP building coverage insures even when they sit in a basement
2. Damage to finished basement improvements and personal property in a basement (with limited exceptions) ✓
3. The building's foundation walls, anchorage system, and staircases
4. A detached garage located on the same premises, which may draw up to ten percent of the building coverage limit

Why: The NFIP severely limits coverage in basements, generally excluding finished walls, floors, and most personal property below the lowest elevated floor.

Inland marine transportation coverage frequently insures property:

1. That is permanently attached to the insured's building foundation
2. Only while it is aboard an ocean vessel
3. Only while it sits inside the insured's own warehouse
4. While being shipped by truck, rail, or other land conveyance ✓

Why: Inland marine transportation coverage protects goods in transit over land (and inland waterways), reflecting marine insurance's roots in covering moving property.

PAP Part A supplementary payments include all of the following EXCEPT:

1. Interest that accrues on a judgment after it is entered, until the insurer pays its limit
2. Bail bonds up to $250 after an accident
3. The full bodily injury damages owed to the claimant ✓
4. Attorney fees and the cost of defending a suit

Why: Supplementary payments include defense, bail bonds, post-judgment interest, and certain expenses, but NOT the damages themselves, which are paid within the liability limit.

An employer is also the manufacturer of the product that injured its own employee, and the employee sues the employer in its role as product maker rather than as employer. What doctrine does this illustrate, potentially triggering Part Two?

1. Dual-capacity doctrine ✓
2. Exclusive remedy doctrine
3. Fellow-servant doctrine
4. Going-and-coming doctrine

Why: The dual-capacity doctrine allows an employee to sue the employer in a second, distinct capacity (e.g., as product manufacturer); such suits can fall under Part Two Employers Liability.

Under T.C.A. § 56-7-1101, when the owner's only coverage is a garage policy, which coverage is primary for a permittee?

1. The owner's garage policy on the vehicle
2. Whichever policy carries the lower limits
3. The coverage available to the permittee ✓
4. Neither, since the two policies share equally

Why: T.C.A. § 56-7-1101(b) makes the permittee's coverage primary where the owner's only coverage is a garage policy — therefore the permittee's coverage.

PAP Part B — Medical Payments covers:

1. Lost wages and the cost of household services the named insured cannot perform while recovering from the accident
2. Medical expenses of the other driver only, and only after that driver's own liability insurer has denied the claim
3. Repair costs for damage to the covered auto, plus any medical bills the insured cannot recover from the at-fault driver
4. Reasonable medical and funeral expenses for the insured and occupants of the covered auto, regardless of fault ✓

Why: Medical Payments covers reasonable and necessary medical and funeral expenses for an insured injured in an auto accident, paid without regard to fault.

When an applicant submits a completed application with the initial premium, the applicant is generally making the:

1. Consideration only
2. Counteroffer by the insurer
3. Offer ✓
4. Acceptance

Why: In insurance, the applicant typically makes the offer by submitting the application and premium; the insurer accepts by issuing the policy.

Proof of automobile insurance coverage is most commonly evidenced by:

1. A bill of sale showing the dealer collected the first premium
2. An insurance ID card listing the policy number, insurer, and effective dates ✓
3. The registration card alone, since the state checks coverage at renewal
4. A driver's license endorsed by the examining officer

Why: An insurance identification card showing the insurer, policy number, vehicle, and policy period is the standard proof of coverage carried by drivers.

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.

A building valued at $500,000 carries an 80% coinsurance clause and $300,000 of insurance. A $50,000 loss occurs with a $1,000 deductible. The insurer pays:

1. $30,000
2. $50,000
3. $36,500 ✓
4. $37,500

Why: Required = 80% × $500,000 = $400,000. ($300,000 ÷ $400,000) × $50,000 = $37,500, minus $1,000 deductible = $36,500.

Under T.C.A. § 56-6-120, the commissioner's investigatory power includes what authority?

1. Issuing arrest warrants for suspected violators
2. Subpoenaing witnesses and examining them under oath ✓
3. Seizing an agency's premises without prior notice
4. Imposing criminal fines without a hearing

Why: T.C.A. § 56-6-120(a) grants the commissioner inquisitorial powers, including the power to subpoena witnesses and examine them under oath.

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

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

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

Under T.C.A. § 56-6-120, after issuing an inquisitorial order or receiving a complaint, the department must provide the person a copy within what time?

1. Within sixty (60) days of the order or complaint
2. Within ten (10) days of the order or complaint
3. Within thirty (30) days of the order or complaint ✓
4. Within ninety (90) days of the order or complaint

Why: T.C.A. § 56-6-120(b)(1) requires the department to provide a copy of the inquisitorial order or complaint within thirty (30) days of its issuance or receipt.

The element of negligence requiring an unbroken chain of events linking the act to the injury is called:

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

Why: Proximate cause is the direct, uninterrupted causal connection between the negligent act and the resulting injury.

An applicant is charged a higher auto premium because of information in a consumer report. The producer fails to send any adverse action notice. This most likely violates:

1. The NFIP waiting-period rule
2. The crop insurance rules
3. The Terrorism Risk Insurance Act
4. The Fair Credit Reporting Act ✓

Why: Failing to provide the required adverse action notice after taking action based on a consumer report violates the FCRA.

How does the ISO Business Income form generally handle ordinary payroll?

1. It is always excluded from business income unless the insured buys a separate payroll form
2. It is covered only for executives, managers, and other salaried key employees
3. It is never treated as a continuing expense
4. It is included unless specifically limited or excluded by endorsement ✓

Why: Ordinary payroll is included as a continuing expense by default, but the insured may limit it (e.g., 90 days) or exclude it to reduce premium.

Under T.C.A. § 56-7-804, when a fire insurance policy on real property is made payable to a mortgagee as its interest may appear, the mortgagee's interest generally is NOT invalidated by which of the following?

1. The mortgagee's own failure to pay a demanded premium
2. The mortgagee's refusal to pay for increased hazard on demand
3. The mortgagee's failure to notify the insurer of a known increase of hazard
4. An act or neglect of the mortgagor owner of the property ✓

Why: T.C.A. § 56-7-804 provides that the insurance as to the mortgagee's interest shall not be invalidated by an act or neglect of the mortgagor owner, nor by foreclosure, change in title, or more hazardous occupation — therefore an act or neglect of the mortgagor owner is correct.

Under T.C.A. § 56-8-105, within how many days of a request must an insurer furnish the forms necessary to present a claim?

1. Within thirty (30) calendar days of receiving the request
2. Within fifteen (15) calendar days of receiving the request ✓
3. Within ten (10) business days of receiving the request
4. Within twenty (20) calendar days of receiving the request

Why: T.C.A. § 56-8-105(13) requires claim forms to be provided within fifteen calendar days of the request — therefore fifteen days is correct.

Under T.C.A. § 56-7-1806, at least 60 days' notice is required when an insurer intends to increase a commercial risk policy's premium by more than:

1. Twenty-five percent (25%) on equivalent-exposure policies ✓
2. Ten percent (10%) on equivalent-exposure policies
3. Fifty percent (50%) on equivalent-exposure policies
4. Fifteen percent (15%) on equivalent-exposure policies

Why: T.C.A. § 56-7-1806(a) requires 60 days' notice for an increase of more than twenty-five percent on equivalent exposures — therefore 25 percent is correct.

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

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

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

An employer claims an injury resulted from the worker's willful failure to use a safety device. Under T.C.A. § 50-6-110, the burden of proof is on?

1. The employee to affirmatively disprove it
2. The treating physician to make the finding
3. The employer to establish the defense ✓
4. The bureau administrator acting alone

Why: T.C.A. § 50-6-110(b) places the burden of proof on the employer to establish a subsection (a) defense — therefore on the employer.

Under T.C.A. § 56-12-107, a member insurer must be notified of an assessment no later than how long before it is due?

1. Ten (10) days before the assessment becomes due
2. Sixty (60) days before the assessment becomes due
3. Thirty (30) days before the assessment becomes due ✓
4. Ninety (90) days before the assessment becomes due

Why: T.C.A. § 56-12-107(a)(3) requires notice of an assessment no later than thirty days before it is due — therefore thirty days is correct.

A producer writes coverage on a family's personal-use pickup truck that is not operated for hire. Under T.C.A. § 56-5-102, this is classified as:

1. Personal risk insurance on a private passenger vehicle ✓
2. Commercial risk insurance because a truck is involved
3. Inland marine coverage exempt from the rate filing rules
4. A residual market risk assigned through a sharing plan

Why: T.C.A. § 56-5-102(7)(D) treats a personal-use pickup not used for hire as personal risk insurance — therefore personal risk is correct.

Under the Special Causes of Loss form, who bears the burden of proving a loss is or is not covered?

1. Neither party has any burden
2. The insured must prove the cause is a named peril
3. The insurer must prove an exclusion applies ✓
4. The state insurance department decides

Why: Because the Special form is open-perils, coverage is presumed and the insurer carries the burden of proving an exclusion applies.

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.

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

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

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

Under a Homeowners HO-4 (renters) policy, the Coverage A (Dwelling) limit is typically:

1. Always set at 80% of the Coverage C limit to satisfy the coinsurance requirement
2. Equal to the building's replacement cost, with the landlord's policy applying excess of it
3. Not applicable / minimal, since the tenant does not own the building ✓
4. The largest of the Section I limits

Why: Because tenants do not own the structure, HO-4 has no meaningful Coverage A; the emphasis is on Coverage C personal property and Section II liability.

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.