Washington Property & Casualty Insurance License, Practice Exams

Under RCW 48.19.030, in making rates for all insurances, due consideration must be given to all of the following EXCEPT:

1. past and prospective loss experience within this state
2. the political affiliation of the insurer's policyholders ✓
3. a reasonable margin for underwriting profit and contingencies
4. conflagration and catastrophe hazards, where present

Why: RCW 48.19.030(3) lists factors including past and prospective loss experience, catastrophe hazards, a reasonable margin for profit and contingencies, dividends, operating expenses, and investment income. Policyholders' political affiliation is not a rate-making factor.

In a reinsurance arrangement, the company that transfers (gives up) part of its risk is called the:

1. Attorney-in-fact
2. Reinsurer
3. Ceding insurer ✓
4. Surplus lines broker

Why: The ceding insurer is the original insurer that cedes a portion of its risk to a reinsurer.

Under RCW 48.22.030, the UM/UIM coverage required to be offered is NOT applicable to:

1. a personal automobile policy insuring two vehicles owned by the same named insured
2. general liability policies commonly known as umbrella policies ✓
3. a policy covering a vehicle the insured leases for more than thirty days
4. a private passenger automobile policy

Why: RCW 48.22.030(2) provides that the required UM/UIM coverage is not applicable to general liability policies, commonly known as umbrella policies, or other policies that apply only as excess to the insurance directly applicable to the vehicle.

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.

The CAN-SPAM Act primarily regulates:

1. In-person sales presentations at a consumer's home or workplace, including the required cooling-off disclosure
2. The issuance and renewal of federal flood policies written by private carriers under the Write Your Own program
3. Commercial email messages, requiring honest headers, a valid opt-out, and a physical address ✓
4. Telephone solicitations, requiring callers to identify themselves and to check a national suppression list

Why: CAN-SPAM sets rules for commercial email, including truthful subject lines and sender information, a functioning opt-out, and inclusion of a valid postal address.

The MCS-90 endorsement is best described as a:

1. Physical damage coverage paying collision and comprehensive losses to trailers and semitrailers a carrier pulls under lease
2. State-filed certificate showing that no-fault benefits are in force
3. Motor truck cargo form paying for freight damaged in transit
4. Federally mandated public liability endorsement assuring payment for bodily injury and property damage to the public ✓

Why: The MCS-90 is a federally required endorsement guaranteeing the motor carrier will pay for public bodily injury and property damage, ensuring financial responsibility.

RCW 48.01.070 defines 'person' to include each of the following EXCEPT:

1. An interinsurance exchange organization
2. A partnership or a business trust
3. An association or a corporation
4. A municipal or county government body ✓

Why: RCW 48.01.070 lists individual, company, insurer, association, organization, reciprocal or interinsurance exchange, partnership, business trust, and corporation; a government body is not among them.

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.

Under RCW 46.30.030, an insurance identification card issued with a Washington motor vehicle liability policy:

1. Must be printed on tamper-resistant paper stock in a form prescribed by the insurance commissioner before delivery
2. Is mailed to the insured by the department of licensing after the insurer reports the policy
3. Must be issued only in electronic format for policies written on or after January 1, 2013
4. May be provided in either paper or electronic format, including an image displayed on a cellular phone ✓

Why: RCW 46.30.030(1) requires the insurer to provide an identification card as specified by the department of licensing, and states the card may be provided in either paper or electronic format, with acceptable electronic formats including electronic images displayed on a cellular phone or other portable electronic device.

A new NFIP flood policy generally does not take effect until how many days after the application and premium are submitted?

1. 10 days
2. 60 days
3. 30 days ✓
4. 15 days

Why: The NFIP imposes a standard 30-day waiting period before a new flood policy becomes effective, to discourage buying coverage only when a flood is imminent.

Under RCW 48.15.023, if the commissioner has cause to believe a person has transacted insurance for an unauthorized insurer in violation of RCW 48.15.020(1), the commissioner may assess a civil penalty of not more than:

1. $1,000 for each violation
2. $10,000 for each violation
3. $100,000 for each violation
4. $25,000 for each violation ✓

Why: RCW 48.15.023(5)(a)(ii) authorizes the commissioner, after notice and opportunity for a hearing, to assess a civil penalty of not more than $25,000 for each violation of RCW 48.15.020(1).

Which of the following is typically a FIRST-PARTY coverage under a cyber policy?

1. Bodily injury liability arising from a hacked industrial control system
2. Advertising injury liability for content posted on the insured's website
3. Breach notification, credit monitoring, and data restoration costs for the insured ✓
4. Defense of a third-party suit alleging the insured leaked customer data

Why: First-party cyber coverages reimburse the insured's own costs, such as breach notification, forensics, and data restoration.

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

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

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

Under RCW 48.15.050, every insurance contract delivered as surplus line coverage must have stamped upon it:

1. the commissioner's seal of approval whenever the circumstances reasonably require it
2. a statement that the contract is registered and delivered as a surplus line coverage under Title 48 RCW ✓
3. the premium tax rate applied to the surplus line coverage delivered, to the extent permitted under the insurance code
4. the name of the guaranty association covering the risk unless the commissioner directs otherwise

Why: RCW 48.15.050 requires every surplus line contract to have stamped upon it, and be initialed by or bear the name of the surplus line broker, a statement that the contract is registered and delivered as a surplus line coverage under the insurance code of the state of Washington, Title 48 RCW.

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.

Under the NFIP, deductibles apply:

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

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

Which statement about no-fault auto insurance CONCEPTS is generally correct?

1. No-fault systems let injured parties recover certain economic losses from their own insurer regardless of fault ✓
2. No-fault means no one pays for accident losses until a court or arbitration panel first assigns fault to one of the drivers
3. No-fault eliminates the need for liability coverage entirely, so states adopting it repeal their financial responsibility laws
4. No-fault applies only to property damage claims, with every bodily injury claim still settled through the tort system

Why: Under no-fault concepts, an injured person's own insurer pays specified personal injury/economic losses regardless of who caused the accident, with limits on lawsuits.

The Valuable Papers and Records floater covers:

1. Cost to research, replace, or restore lost documents and records ✓
2. Money and securities kept in the insured's office safe
3. Computer hardware and the media stored in it
4. The insured's legal liability for losing a client's documents

Why: Valuable Papers and Records coverage pays the cost to research, reconstruct, or replace damaged or destroyed written, printed, or otherwise inscribed documents and records.

Several manufacturers in the same industry want to form an insurer they own to write their own liability coverage and operate across state lines. The most appropriate vehicle is a:

1. Beach plan
2. Risk purchasing group
3. Risk retention group ✓
4. FAIR Plan

Why: A risk retention group, owned by members in similar businesses, is designed to write its members' liability coverage and may operate across states once licensed in one.

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.

An insurer incorporated in the state where it is transacting business is classified as:

1. Alien
2. Domestic ✓
3. Foreign
4. Reciprocal

Why: A domestic insurer is one organized under the laws of the state in which it is doing business.

Under RCW 48.53.040, the notice of cancellation for an arson-fraud cancellation must be delivered or mailed to the insured by:

1. first-class mail only as a condition of doing business in this state
2. personal delivery only after notice and an opportunity for a hearing
3. certified mail, return receipt requested, and in addition by first-class mail ✓
4. electronic mail with read receipt once the applicable waiting period has elapsed

Why: RCW 48.53.040(2) requires that the notice be actually delivered or mailed to the insured by certified mail, return receipt requested, and in addition by first-class mail, with a copy mailed to the insurance commissioner.

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

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

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

A special duty imposed on the commissioner by RCW 48.02.160 is to:

1. collect the premium taxes owed by surplus line brokers in the manner prescribed by the commissioner
2. provide assistance to members of the public in resolving complaints involving insurers and other licensees ✓
3. personally approve every property and casualty rate filing subject to the terms stated in the contract
4. underwrite residual-market risks that private insurers decline in the ordinary course of business

Why: RCW 48.02.160 lists special duties of the commissioner, including disseminating information concerning the insurance laws and providing assistance to members of the public in obtaining information and resolving complaints involving insurers and other licensees.

A worker loses the use of both hands and is permanently unable to engage in any gainful employment. This is classified as:

1. Permanent partial disability
2. Permanent total disability ✓
3. Temporary partial disability
4. Temporary total disability

Why: Permanent total disability (PTD) applies when the worker is permanently and completely unable to return to any gainful employment.

A resident individual applying for an insurance producer license generally must, under RCW 48.17.110:

1. pass a written examination covering the lines of authority applied for and the insurance laws of this state ✓
2. complete a two-year apprenticeship with an appointed agent subject to the terms stated in the contract
3. obtain the sponsorship of at least three authorized insurers unless the commissioner directs otherwise
4. post a fidelity bond of at least $100,000 before licensure regardless of where the risk is located

Why: RCW 48.17.110(1) requires a resident individual applying for a producer license, unless exempt, to pass a written examination testing knowledge of the lines of authority applied for, the duties of a producer, and the insurance laws and rules of this state.

The Personal and Advertising Injury Limit in the CGL is:

1. Identical to the Medical Expense Limit and shared with it for each person injured
2. A per-person-and-per-offense limit that is also subject to the General Aggregate ✓
3. Unlimited for offenses such as libel, slander, and wrongful eviction once defense costs begin
4. One aggregate covering Coverages A, B, and C combined for the term

Why: The Personal and Advertising Injury Limit caps damages per person/organization for one offense and is subject to the General Aggregate.

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 RCW 48.18.300, how may an insured cancel a policy that by its terms is cancellable at the insured's option?

1. Only by returning the original policy in person to the insurer's home office before the effective cancellation date shown on it
2. By oral notice to the producer who placed the coverage
3. Only by giving the insurer thirty days' advance written notice
4. By written notice to the insurer or surrender of the policy or binder on or before the effective date of cancellation ✓

Why: RCW 48.18.300(1) allows cancellation by the insured through written notice to the insurer or surrender of the policy or binder prior to or on the effective date of cancellation.

Which of the following is an additional coverage commonly found in Homeowners forms?

1. War, insurrection, and related military action, up to the Coverage A limit
2. Earthquake, landslide, and other earth movement, subject to a 10% deductible
3. Flood, surface water, and tidal overflow
4. Credit cards, fund transfer cards, forgery, and counterfeit money ✓

Why: Coverage for credit card, electronic fund transfer card, forgery, and counterfeit money loss (commonly up to $500) is a standard additional coverage in Homeowners forms.

Under RCW 48.32.080, if a member insurer fails to pay an assessment when due, the commissioner may, as an alternative to suspension or revocation, levy a fine that shall not exceed:

1. ten percent of the unpaid assessment per month
2. one percent of the unpaid assessment per month
3. five percent of the unpaid assessment per month, but not less than $100 per month ✓
4. a flat $1,000 regardless of the amount unpaid for each policy period the coverage remains in force

Why: RCW 48.32.080(2)(b) authorizes the commissioner, as an alternative to license action, to levy a fine on a member insurer that fails to pay an assessment when due, not exceeding five percent of the unpaid assessment per month, but no less than $100 per month.

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.

Under RCW 48.05.030, the certificate of authority issued to an insurer must specify:

1. the maximum premium volume the insurer may write in a year subject to the terms stated in the contract
2. the insurer's name, the location of its principal office, and the kinds of insurance it may transact ✓
3. the names of every producer appointed to represent the insurer
4. the commissioner's projected loss ratio for the insurer's book of business

Why: RCW 48.05.030(2) provides that every certificate of authority must specify the name of the insurer, the location of its principal office, the attorney-in-fact if a reciprocal insurer, and the kind or kinds of insurance it is authorized to transact.

A peril is best defined as:

1. The financial consequence of a loss
2. The cause of a loss ✓
3. A condition that increases the chance of loss
4. An item of exposed property

Why: A peril is the actual cause of loss (such as fire, wind, or theft); a hazard merely increases the chance of loss.

Under RCW 48.32.040, membership in the Washington Insurance Guaranty Association is:

1. limited to insurers domiciled in Washington according to the schedule adopted by rule
2. voluntary for insurers that write only commercial lines
3. required only after an insurer becomes insolvent
4. a condition of a member insurer's authority to transact insurance in this state ✓

Why: RCW 48.32.040 provides that all insurers defined as member insurers shall be and remain members of the association as a condition of their authority to transact insurance in this state.

Under RCW 48.19.050, if authorized by an insurer, the commissioner must accept, in lieu of filings by the insurer, filings made on its behalf by:

1. a rating organization then licensed under the chapter ✓
2. the property and casualty guaranty association
3. an independent public adjuster
4. the National Association of Insurance Commissioners

Why: RCW 48.19.050(1) provides that if so authorized by an insurer, the commissioner shall accept, in lieu of filings by the insurer, filings made on its behalf by a rating organization then licensed under the chapter.

'Perils of the sea' in ocean marine refers to:

1. Negligence by the master or crew in navigating the vessel, standing alone
2. Fortuitous accidents or casualties of the sea, such as heavy weather, sinking, and stranding ✓
3. Every cause of loss arising on a voyage, including inherent vice of the cargo and delay in delivery
4. Ordinary wear and tear on hull and rigging from the normal action of wind and waves

Why: Perils of the sea are extraordinary, fortuitous events peculiar to the sea, like storms, stranding, collision, and sinking—not the ordinary action of wind and waves.

A resident business entity applying for an insurance producer license must, under RCW 48.17.090, designate:

1. an independent adjuster to review all claims the entity handles once the applicable waiting period has elapsed
2. a nonresident officer to serve as the entity's tax agent unless the commissioner directs otherwise
3. a surety company to guarantee the entity's premium accounts whenever the circumstances reasonably require it
4. a licensed insurance producer responsible for the entity's compliance with the insurance laws and rules of this state ✓

Why: RCW 48.17.090(3)(b) requires that a resident business entity applying for a producer license designate a licensed insurance producer responsible for the business entity's compliance with the insurance laws and rules of this state (the DRLP).

A technology consultant gives faulty advice causing a client a large financial loss (no bodily injury or property damage). The proper coverage is:

1. A liquor liability endorsement
2. Technology/Professional E&O ✓
3. CGL Coverage A for property damage
4. A $10,000 bid bond

Why: Pure financial loss from negligent professional advice is covered by professional E&O, not the CGL which requires BI/PD (or a covered offense).

An insurer decides not to renew a commercial general liability policy. All of the following are required by RCW 48.18.2901 or 48.18.289 EXCEPT:

1. written notice of nonrenewal to the named insured at least 60 days before expiration
2. the commissioner's prior written approval of the nonrenewal decision ✓
3. a copy of the nonrenewal notice to the producer on the account within five working days
4. inclusion of the insurer's actual reason for refusing to renew

Why: RCW 48.18.2901 requires 60 days' notice with the actual reason, and RCW 48.18.289 requires a copy to the producer within five working days. Neither statute requires the commissioner's prior approval of an individual nonrenewal decision.

A key feature of Coverage C — Medical Payments under the CGL is that it pays:

1. Regardless of the insured's legal liability, up to the medical expense limit ✓
2. Only after a court has found the insured legally liable for the injury
3. Only for the insured's own employees hurt on the job
4. Punitive damages awarded against the insured in addition to the medical bills incurred

Why: Medical Payments coverage is a goodwill, no-fault coverage paying medical expenses regardless of the insured's legal liability, within the medical expense limit.

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.

Violations of 18 U.S.C. § 1033 can result in:

1. A written warning letter from the state insurance department and nothing further
2. Loss of eligibility to write NFIP flood policies, with no other consequence
3. A surcharge added to the producer's errors and omissions premium at renewal
4. Federal criminal penalties including fines and imprisonment ✓

Why: Section 1033 carries federal criminal penalties, including fines and imprisonment, depending on the offense and resulting harm.

Under RCW 48.15.040, surplus line coverage may be procured from an unauthorized insurer only if the insurance is not procurable, after diligent effort, from among:

1. a majority of the insurers authorized to transact that kind of insurance in this state ✓
2. the residual market or assigned risk plan unless the commissioner directs otherwise
3. any single authorized insurer in the state as part of the applicable filing then in effect
4. at least three surplus line brokers as a condition of doing business in this state

Why: RCW 48.15.040(2) requires that the insurance not be procurable, after diligent effort, from among a majority of the insurers authorized to transact that kind of insurance in this state.

Under RCW 48.19.070, certain special filings, such as specific rates on individually rated inland marine risks, become effective:

1. only with the commissioner's prior written approval whenever the circumstances reasonably require it
2. only after a thirty-day waiting period once the applicable waiting period has elapsed
3. when filed, and are deemed to meet the requirements until the commissioner reviews them ✓
4. after publication in the Washington Administrative Code

Why: RCW 48.19.070 provides that specified special filings become effective when filed and are deemed to meet the requirements of the chapter until the commissioner reviews the filing and for so long thereafter as it remains in effect.

Under the PAP, the duty to allow the insurer to inspect and appraise the damaged vehicle before its repair or disposal falls under:

1. Part E — Duties After an Accident or Loss ✓
2. Part C, which governs uninsured motorists claims handling
3. Part A general conditions applying to liability claims
4. Part B medical payments

Why: Part E requires the insured to permit the insurer to inspect and appraise the damaged property before repairs or disposal, as part of the post-loss duties.

A farmowners-ranchowners policy is best described as a package that combines:

1. Multiple peril crop insurance on the farmer's planted acreage, bought separately from any dwelling coverage
2. Property and liability coverage for the farm dwelling, farm structures, and farming operations ✓
3. Automobile coverage on farm trucks and tractors only
4. Farm liability alone, leaving the dwelling and outbuildings to be insured under a separate property form

Why: The farmowners-ranchowners policy is a package combining homeowners-type property and liability coverage with coverage for farm structures, equipment, and operations.

Under RCW 48.15.040, surplus lines placement of property and casualty insurance must be conducted under the laws and rules of:

1. the state where the surplus line broker is licensed
2. whichever state imposes the lowest premium tax
3. the state where the unauthorized insurer is domiciled
4. the insured's home state ✓

Why: RCW 48.15.040(1) provides that if the insurance is property and casualty insurance (except industrial insurance under Title 51 RCW), it must be procured under the laws and rules of the insured's home state.

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.

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.

An Installation floater covers:

1. Dishonest acts committed by the contractor's own employees, including theft of materials from the job site
2. Property/materials being installed by a contractor until installation is complete and accepted ✓
3. The contractor's office building and the permanent fixtures inside it
4. Equipment after it has been sold and delivered to the public, while it sits in the buyer's possession

Why: An Installation floater covers materials and equipment during transit, storage, and installation until the work is accepted, common for HVAC or fixture installers.

A medical professional wants protection against patient claims of negligent treatment. The correct policy is:

1. Medical Professional Liability (malpractice) / E&O ✓
2. Employee Benefits Liability, which covers errors in administering benefit plans
3. Commercial General Liability, since the patient suffered bodily injury
4. A performance bond for medical work

Why: Patient injury from professional treatment is excluded by the CGL and covered by medical professional liability (malpractice) insurance.

Under RCW 48.32.080, the commissioner must notify the association of the existence of an insolvent insurer not later than:

1. three days after receiving notice of the determination of insolvency ✓
2. sixty days after receiving notice of the determination of insolvency
3. ten days after receiving notice of the determination of insolvency
4. thirty days after receiving notice of the determination of insolvency

Why: RCW 48.32.080(1)(c) requires the commissioner to notify the association of the existence of an insolvent insurer not later than three days after receiving notice of the determination of insolvency.

The Business Pursuits endorsement on a Homeowners policy is used to:

1. Extend liability for certain business activities of an insured (e.g., a teacher or clerk) ✓
2. Cover an insured's full-scale business operation, replacing the need for a commercial general liability policy
3. Add scheduled coverage for jewelry, silverware and other valuables kept at the insured's place of work
4. Provide flood coverage for a home office

Why: The business pursuits endorsement extends Section II liability to certain employee business activities that would otherwise be excluded; it does not cover an owned business.

A producer (agent) represents the interests of the insurer, while a broker generally represents the interests of the:

1. Underwriting department
2. State insurance department
3. Insured (applicant) ✓
4. Reinsurer

Why: A broker typically represents the insured or applicant in seeking coverage, whereas an agent represents the insurer.

In the Dwelling Policy, which coverage applies to a detached garage or storage shed?

1. Coverage B — Other Structures ✓
2. Coverage C — Personal Property
3. Coverage A — Dwelling
4. Coverage D — Fair Rental Value

Why: Coverage B — Other Structures covers structures separated from the dwelling, such as detached garages, sheds, and fences.

A mutual insurer is owned by its:

1. Policyholders ✓
2. Reinsurers
3. Producers
4. Stockholders

Why: A mutual insurer is owned by its policyholders, who may receive policy dividends from divisible surplus.

Under the PAP, a "temporary substitute auto" used while the covered auto is being repaired is treated as:

1. A non-owned auto, which the pap leaves entirely uninsured
2. Excluded outright once the covered auto goes into the shop
3. A covered auto, picking up the coverages that applied to the disabled vehicle ✓
4. Covered for Part A liability only, never for damage to the substitute itself

Why: A temporary substitute for a covered auto out of service (for repair, breakdown, etc.) is covered with the same coverages as the vehicle it replaces.

Symbol 1 in the Business Auto Coverage Form means:

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

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

Which best describes "hired autos" in commercial auto?

1. Autos the named insured leases, hires, rents, or borrows for business use ✓
2. Employees' own personal autos driven on company errands and reimbursed by the mile
3. Autos the named insured holds title to and garages at its premises
4. Customer vehicles left at a repair shop, which the shop hires out while they wait

Why: Hired autos are vehicles the insured leases, hires, rents, or borrows, addressed by Symbol 8 for liability.

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.

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).

Under RCW 48.19.040, where a filing is required, no insurer may make or issue a policy except:

1. in accordance with its filing then in effect, except as provided by RCW 48.19.090 ✓
2. at a rate lower than the filed rate to remain competitive
3. after obtaining the insured's written waiver of the filed rate
4. if a rating organization has approved a deviation unless the commissioner directs otherwise

Why: RCW 48.19.040(6) provides that where a filing is required, no insurer shall make or issue an insurance contract or policy except in accordance with its filing then in effect, except as provided by RCW 48.19.090.

Under RCW 48.22.030, a "phantom vehicle" claim (no physical contact) requires, among other conditions, that the accident be reported to the appropriate law enforcement agency within:

1. 24 hours of the accident
2. 72 hours of the accident ✓
3. five days of the accident
4. 48 hours of the accident

Why: RCW 48.22.030(8)(b) requires, for a phantom vehicle claim, that the accident be reported to the appropriate law enforcement agency within seventy-two hours of the accident, and that the facts be corroborated by competent evidence other than the claimant's testimony.

A Value Reporting form differs from a standard policy in that:

1. Premium is based on values the insured reports rather than a fixed limit ✓
2. Coinsurance is never required because reported values are audited each month
3. It covers only the insured's liability exposures, not property
4. It excludes loss caused by fire

Why: Value Reporting forms adjust premium based on reported values; failure to report accurately can trigger a penalty (full reporting clause).

Injuries to civilian federal government employees (such as a postal or federal agency worker) are covered under:

1. FELA, since the employer is federal
2. The Defense Base Act, for postal routes
3. The Federal Employees' Compensation Act (FECA) ✓
4. The LHWCA, for federal facilities

Why: FECA provides workers' compensation benefits to civilian employees of the federal government for job-related injuries and illnesses.

Under the unendorsed PAP, towing and labor (Part D) coverage is:

1. An optional coverage that must be added, with a stated per-disablement limit ✓
2. Built into Part A liability, so any tow after an accident is paid within the liability limit
3. Included automatically at full cost whenever the policy carries collision, with no separate premium
4. Available only for rental cars the insured hires while the covered auto is being repaired

Why: Towing and labor costs coverage is an optional add-on with a small per-disablement limit (e.g., $25–$75), not automatically included.

Loss of use (Coverage D) additional living expense is best triggered when:

1. The mortgage is refinanced and the lender requires the insured to relocate during the closing
2. A covered loss makes the residence uninhabitable, forcing the insured to live elsewhere ✓
3. A guest is injured on the premises and needs lodging nearby
4. The insured chooses to remodel voluntarily and moves to a rental for the duration of the work

Why: Additional living expense under Coverage D applies when a covered peril renders the home uninhabitable and the insured incurs increased costs to maintain their normal standard of living elsewhere.

Under RCW 48.185.005, before a party consents to electronic delivery the insurer must give a clear and conspicuous statement of all of the following EXCEPT:

1. the right to withdraw consent and any consequences
2. the exact types of notices and documents the consent covers
3. the right to receive a notice or document in paper form
4. a guarantee that email delivery is more secure than mail ✓

Why: RCW 48.185.005 requires disclosure of the right to withdraw consent, the covered document types, the right to paper, and the procedures to withdraw and update the address; no security guarantee is required.

Under RCW 48.18.090, an oral or written misrepresentation made in the negotiation of a property or casualty insurance contract will not defeat or avoid the contract unless it:

1. is discovered after a loss has occurred
2. is made with the intent to deceive ✓
3. concerns a fact the producer already knew
4. relates to the amount of the premium charged

Why: RCW 48.18.090(1) provides that no misrepresentation or warranty made in the negotiation of an insurance contract by or on behalf of the insured shall be deemed material or avoid the contract unless it is made with the intent to deceive.

A heating contractor ships and installs a new furnace; the equipment is stolen from the job site before acceptance. Best coverage:

1. Installation floater ✓
2. Accounts receivable
3. Ocean marine cargo
4. Jewelers block

Why: An Installation floater covers materials and equipment during transit, storage, and installation until the work is accepted by the owner.

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.

Every advertisement of or on behalf of an insurer must, under RCW 48.30.050, set forth:

1. the premium rates approved by the commissioner unless the commissioner directs otherwise
2. the names of all producers appointed by the insurer
3. the insurer's current financial rating from a national service
4. the name in full of the insurer and the location of its home or principal office ✓

Why: RCW 48.30.050 requires every advertisement of, by, or on behalf of an insurer to set forth the name in full of the insurer and the location of its home office or principal office in the United States (if an alien insurer).

The CGL pollution exclusion generally bars coverage for:

1. Bodily injury and property damage arising from the discharge, dispersal, or release of pollutants ✓
2. Slander and libel spoken in the insured's advertising, which only a separate media liability policy will answer
3. Theft of an automobile from the insured's parking lot, an exposure that belongs on a commercial crime form
4. Every fire loss at the insured's own premises, no matter whether the fire was hostile or friendly in origin

Why: The pollution exclusion removes coverage for injury/damage from the release of pollutants, subject to limited exceptions.

A driver with multiple at-fault accidents and DUIs is repeatedly declined by standard auto insurers. The mechanism most likely to provide required liability coverage is:

1. An automobile assigned-risk plan ✓
2. A FAIR Plan
3. A beach and windstorm plan
4. A risk retention group

Why: Drivers unable to obtain coverage voluntarily are placed through the automobile assigned-risk plan, the residual market for auto insurance.

Under RCW 48.32.020, the guaranty association chapter applies to all kinds of direct insurance EXCEPT:

1. commercial general liability and commercial property before the transaction may lawfully proceed
2. life, title, surety, disability, credit, mortgage guaranty, workers' compensation, and ocean marine ✓
3. automobile liability and homeowners insurance for each policy period the coverage remains in force
4. personal and commercial automobile physical damage after notice and an opportunity for a hearing

Why: RCW 48.32.020 provides that the chapter applies to all kinds of direct insurance except life, title, surety, disability, credit, mortgage guaranty, workers' compensation, and ocean marine.

Under RCW 48.18.070, an application for insurance in writing may be altered:

1. by the insurer at any time to correct the applicant's errors
2. only after the policy has been issued and delivered
3. solely by the applicant or by the applicant's written consent ✓
4. by the producer without notice to the applicant

Why: RCW 48.18.070(1) provides that any written application for insurance shall be altered solely by the applicant or by the applicant's written consent; certain administrative insertions by the insurer are allowed if clearly marked as not ascribed to the applicant.