Deck 51: Insurance Law

Question 1

The insured party transfers his or her risk of loss of property or life to the insurance company through the insurance agreement.

Answer 1

True

Question 2

Insurance policies can be cancelled according to state laws not federal laws.

Answer 2

True

Question 3

The beneficiary is another name for the insured in an insurance contract.

Answer 3

False

Question 4

When a person makes a payment to an insurance agency for insurance coverage, this payment is known as an annuity.

Question 5

If an insured person is caught up on payments, there is no defense to nonpayment of a claim by an insurance company.

Question 6

Insurance is defined as a contract in which the insured party makes payments to the insurer in exchange for the insurer's promise to make payment or transfer goods to another party in the event of injury or destruction to the insured party's property or life.

Question 7

The insured and insurer both have obligations under an insurance contract, if either fails to meet their obligation, the other can usually sue for breach of contract.

Question 8

A person who is unable to work due to disability is protected by life insurance.

Question 9

A commercial general liability policy provides protection against intentional wrongful acts committed by an insured.

Question 10

Which of the following was the result in Royal Capital Development LLC v. Maryland Casualty Company, the case in the text involving whether on a policy of insurance covering "direct physical loss of or damage to" a building that allows the insurer the option of paying either "the cost of repairing the building" or "the loss of value," the insurer must also compensate the insured for the diminution in value of the building if the insured elects to repair the building?

A) That the insurer could choose between repairing the building or paying for its loss of value and that once proper repairs were made, the insurer had no obligation to cover any diminution in value.
B) That unless the insured notified the insurer prior to the beginning of repairs that a claim for diminution in value would be made, the issue was waived because the insurer was entitled to take such a claim into consideration in making its decisions.
C) That a claim for diminution in value could be made only if the insurer delayed in making repairs such that the insured had an equitable claim for diminution in value.
D) That when a policy promised to pay the insured's loss, the insured has no claim for diminution in value if repairs are made.
E) That when a policy promised to pay the insured's loss, the insured had a claim for diminution in value even if repairs were made.

Question 11

If an insured makes a claim for property damage and the insurer offers a payout lower than what the insured believes the property was worth, the insured can demand an appraisal under the contract's antilapse clause.

Question 12

Arbitration clauses are illegal in policies of insurance, as a matter of federal law.

Question 13

If an insurance company wants to cancel a policy, it must provide the insured with a grace period, but it does not have to provide advanced notice.

Question 14

Car insurance may be canceled if the insured loses his or her license because of a driving violation.

Question 15

The government spends large amounts on social insurance.

Question 16

If a person has an insurable interest in property, which of the following is required for the person to collect the beneficiary payment when there is a loss?

A) The person must have had an interest in the property at the time of the loss.
B) The person must have had an interest in the property before the loss.
C) The person must have had an interest in the property at anytime during coverage.
D) The person must make a claim to the insurer within 14 days of the loss.
E) The person must make a claim to the insurer within 30 days of the loss.

Question 17

Premiums for whole-life insurance are generally smaller than those for term-life insurance.

Question 18

What does a co-payment or deductible incentivize an individual to do?

A) Pay for a higher coverage amount.
B) Pay a lower premium.
C) Refrain from making claims.
D) Decrease the number of insurance policies an insured has.
E) Shop around for the best coverage.

Question 19

An individual has an insurable interest in property whenever that person derives a(n) ________

A) above fair market value quote for the property.
B) ownership interest separate from a lending agency.
C) a clear title to the property.
D) fair market selling price.
E) financial benefit from its continued use.

Question 20

________ suggests people who are insulated from risk sometimes behave differently

A) Moral hazard
B) Negligence
C) Strict liability
D) Coverage insulation
E) Coverage protection

Question 21

________ is the transfer and distribution of risk.

A) Property management
B) Distributive lost
C) Insurance benefit
D) Risk management
E) Casualty management

Question 22

Which of the following is a state mandated clause that ensures that after an insurance policy has existed for a period of time, the company cannot contest any statements in the application?

A) Antilapse clause
B) Incontestability clause
C) Periodic clause
D) Exception clause
E) No contest clause

Question 23

What is the name of the payment, which is paid in exchange for a later payment in the event of damage or injury to property or person?

A) A rider
B) An addendum
C) A premium
D) A bill of lading
E) A payment plan

Question 24

Bemer returned from vacation only to realize his insurance payment was past due. Luckily, his insurance company had inserted a(n) ________ clause that provided a grace period to pay the premium.

A) antilapse
B) grace period
C) payment forgiveness
D) waiver of payment
E) compassion

Question 25

A policy which covers some type of business risk is known as commercial insurance, such as ________.

A) business loss insurance
B) profit and loss insurance
C) fidelity insurance
D) economic duress insurance
E) risk of harm insurance

Question 26

What is the name of the document that embodies the insured and insurers agreement?

A) Policy
B) Application
C) Draft
D) Check
E) Paperwork

Question 27

An insurer, sometimes called a(n) ________, receives payments from the insured party.

A) overseer
B) policy writer
C) policy provider
D) underwriter
E) guarantor

Question 28

Which of the following was the result on appeal in Equity Fire & Casualty Company v. Laurence Traver, the case in the text in which an insured on a policy of automobile insurance mailed a premium to the insurer, but it did not reach the insurer prior to the expiration date of the policy; and the insurer refused to provide coverage for a motor vehicle accident that occurred after the expiration date of the policy and before the premium was received?

A) The court ruled that coverage was required under the policy because of the mailbox rule.
B) The court ruled that coverage was not required under the policy because of the mailbox rule.
C) The court ruled that coverage was not required under the policy because the insured did not meet his obligation of seeing that the premium amount was received by the insurer in a timely manner.
D) The court ruled that coverage was required because the insured had a grace period of 7 days in order for the payment to arrive.
E) The court ruled that under the unique facts of the case, there was acceptance of the renewal offer preventing a lapse of the policy.

Question 29

What type of agreement is usually put in place as temporary insurance while the company determines whether to accept or reject an insurance application?

A) Temporary plan
B) Binder agreement
C) Preauthorization agreement
D) Prebinding agreement
E) Preemptive agreement

Question 30

Thellan purchased an insurance policy that covered his new boat and trailer. The coverage begins on June 1, 2018. This date is known as the ________.

A) insured date
B) effective date
C) application date
D) premium date
E) inception date

Question 31

The most important element of the insurance agreement is ________, the potential for loss.

A) risk
B) the parties
C) the premium
D) harm
E) consideration

Question 32

Which type of insurance protects a person or property from accidental injury?

A) casualty insurance
B) economic loss insurance
C) property insurance
D) negligence insurance
E) injury to self and property insurance

Question 33

Which of the following was the result of the "Case Opener", in which the Clarys contended that when the privilege to rebuild or repair property is reserved in a policy, and the insurer asserts that privilege and begins repair and restoration, the insurer cannot later abandon the restoration and change its election to paying for the loss?

A) The courts ruling supported the Clarys' argument that having elected to repair the property, Allstate breached the contract by abandoning the restoration.
B) The court asserted that the Clarys' were correct and Allstate was obligated to pay after its initial election.
C) The court denied the trial court's entry and summary judgement in favor of the Clarys'.
D) The court required a percentage split be determined by an arbitrator for the loss, to be divided between the Clarys and Allstate.
E) The court rejected the Clarys' argument that once Allstate elected to repair the property, the amount of loss was no longer at issue.

Question 34

Businesses generally carry ________, a policy that covers some of type of business risk.

A) loss prevention insurance
B) lost profit insurance
C) commercial insurance
D) economic harm insurance
E) risk aversion insurance

Question 35

Micha and Genenive just bought a new house after their recent wedding. What type of insurance will help protect their home from loss or damage?

A) Property insurance
B) Home insurance
C) Loss of property insurance
D) Marital insurance
E) Golden parachute insurance

Question 36

Who is the person that is named on an insurance policy that will receive the insurance proceeds in the event of an injury or damage?

A) Payee
B) Receiver
C) Insured
D) Beneficiary
E) Payor

Question 37

Bowman's Hunting Store has 34 employees and pays for each employee's workers' compensation insurance as a benefit. This type of insurance is known as:

A) casualty insurance
B) loss of work insurance
C) economic loss insurance
D) business risk insurance
E) injured worker's insurance

Question 38

What type of insurance policy covers an individual's life or health insurance?

A) Personal
B) Proprietary
C) Individual
D) Private
E) Particular

Question 39

A person must be subject to economic loss if there is damage or harm to the person or property in order to have a[n] ________ in property or life.

A) Acknowledged loss
B) Protected loss
C) True injury
D) Insurable interest
E) Understandable failure

Question 40

A policy of title insurance is an example of which of the following types of insurance?

A) Business loss
B) Profit loss
C) Commercial
D) Economy
E) Economic

Question 41

[Information Issues] Nari bought a sporty, yellow convertible. She had a teenage son at home, Joon, but she did not plan to let him drive the new car because he had driven her last car into the lake. Embarrassed, Nari decided to change insurers. She went to Big Insurance Company to apply. She got an application from Mark, an agent. Nari was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Nari decided to answer "no" on both counts because she had no plans to let Joon drive. Nari got full coverage on the car, and the policy was issued shortly after she completed the application. One year later, she renewed the policy without revising any of the information she provided. One month after she renewed the policy, Nari really needed some gas in the car for the next day, but she was unable to go to the gas station. Under the belief that he had sufficiently matured, Nari sent Joon to get gas. Unfortunately, a driver who had no insurance hit the car and totaled it. (Luckily, Joon was okay.) Nari immediately called her agent, Mark. When Mark reviewed the police report, however, he told Nari that there would be no coverage on the car because Joon was driving. Nari said that was completely unfair and that she would take her case to court to be decided by a jury. Nari told Mark that Big Insurance Co. issued the policy and that she was relying on the incontestability clause. Mark told Nari that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury.
Regarding Mark's statement that Nari would never see a jury, which of the following is true?

A) Mark is correct based on provisions in most policies denying the insured the right to contest policy provisions.
B) Mark is incorrect, and insurers may not require as a condition of a policy that an insured give up the right to a trial by jury.
C) Mark is correct based on provisions in most policies providing that the insurance company has the final word regarding coverage.
D) Mark is likely referencing a provision requiring arbitration contained in some policies.
E) Mark is likely referencing a provision requiring that any dispute be settled by the Insurance Adjustors of America contained in some policies.

Question 42

A(an) ________ clause can help swiftly settle disputes between the parties.

A) Arbitration clause
B) Antilapse clause
C) Incontestability clause
D) Appraisal clause
E) Court-ruling clause

Question 43

The ________ type of life insurance provides protection for the entire life of the insured and has a cash-surrender value.

A) Whole-life
B) Term-life
C) Surrender-life
D) Useful-life
E) Entire-life

Question 44

Regarding the reduction of the impact of moral hazard by insurers, which of the following is true?

A) It is not possible for insurers to reduce the risk of moral hazard, and this is seen as a risk of doing business.
B) Insurers refuse to pay claims believed to result from the effects of moral hazard.
C) The only avenue for insurers seeking to reduce moral hazard is through the use of deductibles.
D) The only avenue for insurers seeking to reduce moral hazard is through refusing to insure those who have previously made multiple insurance claims.
E) Insurance companies lessen the impact of moral hazard by requiring that individuals with insurance make co-payments or pay a deductible.

Question 45

Which type of insurance is the most important type of insurance as a business person that protects you from tort liability to third parties?

A) Negligence insurance
B) Class action insurance
C) Tortious insurance
D) Third-party liability insurance
E) Liability insurance

Question 46

Daria's property is damaged in a fire. She claims the property damage amounted to $10,000, and the insurer claims it only amounted to $5,000. Which of the following is true in this situation?

A) Daria should demand an appraisal under her policy's appraisal clause.
B) Daria has no alternative because she must accept the insurer's valuation.
C) The insurer is required to accept Daria's valuation unless the insurer can establish that the insured failed to act in good faith.
D) Daria should call the state inspector who investigates and makes rulings in such cases.
E) Daria should file for a field evaluation.

Question 47

Which of the following types of insurance protects members of specific professions from liability associated with their professional acts?

A) Business liability
B) Licensed
C) Trained liability
D) Professional liability
E) Consumer

Question 48

Which of the following types of insurance should a business manager purchase to obtain protection against a broad range of risks?

A) A commercial general liability policy
B) A business tort policy
C) A litigation commercial policy
D) An economic protection policy
E) A business approved policy

Question 49

Conan, a bit of a hypochondriac, decides that he should have MRIs covering his whole body and insists that his doctor order them. Conan tells his doctor that he is not concerned about cost because he has great insurance. Which of the following is the appropriate and recognized term for the problem associated with Conan's behavior as far as an insurer is concerned?

A) Hypochondria neurosis
B) Hypochondria psychosis
C) Moral hazard
D) Medical excessiveness
E) Unfair persuasiveness

Question 50

Prophet's parents bought insurance that provides a specific sum of money upon their deaths to Prophet. Prophet is considered a(n) ________

A) payee
B) consumer
C) profit sharer
D) designated beneficiary
E) annuity payee

Question 51

Excluding injuries to employees, ________ protects contractors against liability for injuries while completing a job.

A) professional liability insurance
B) third-party protection insurance
C) contractors' liability insurance
D) owner-operator liability insurance
E) third-party harm liability insurance

Question 52

The ________ type of life insurance provides coverage for a specified term.

A) Whole-life
B) Term-life
C) Surrender-life
D) Useful-life
E) Entire-life

Question 53

[Information Issues] Nari bought a sporty, yellow convertible. She had a teenage son at home, Joon, but she did not plan to let him drive the new car because he had driven her last car into the lake. Embarrassed, Nari decided to change insurers. She went to Big Insurance Company to apply. She got an application from Mark, an agent. Nari was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Nari decided to answer "no" on both counts because she had no plans to let Joon drive. Nari got full coverage on the car, and the policy was issued shortly after she completed the application. One year later, she renewed the policy without revising any of the information she provided. One month after she renewed the policy, Nari really needed some gas in the car for the next day, but she was unable to go to the gas station. Under the belief that he had sufficiently matured, Nari sent Joon to get gas. Unfortunately, a driver who had no insurance hit the car and totaled it. (Luckily, Joon was okay.) Nari immediately called her agent, Mark. When Mark reviewed the police report, however, he told Nari that there would be no coverage on the car because Joon was driving. Nari said that was completely unfair and that she would take her case to court to be decided by a jury. Nari told Mark that Big Insurance Co. issued the policy and that she was relying on the incontestability clause. Mark told Nari that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury.
Regarding Nari's reliance on an incontestability clause if typical state laws are in effect, which of the following is most likely true?

A) Nari is correct, and the insurance has been in effect over one year, a sufficient length of time for the incontestability clause to bar any defense by the insurer based on her failure to mention Joon on the application.
B) Nari is incorrect because the incontestability clause does not generally apply until coverage has been in effect for at least two years.
C) Nari is incorrect because the incontestability clause operates to deny her the right to dispute inaccuracies on the application, not as a bar against the insurer.
D) Nari is correct because the incontestability clause acts to bar an insurer from denying coverage in cases in which any driver with permission is driving an insured's vehicle.
E) Nari is incorrect because incontestability clauses were barred by federal law a number of years ago.

Question 54

________ is a term referencing the concept that a sufficient interest must exist on the part of an insured in order to take out a policy of insurance.

A) Insurable interest
B) Pecuniary interest
C) Financial concern
D) Financial effect
E) Profit impact

Question 55

Which of the following types of liability insurance protects a garage owner from liability to persons injured by the operation of the garage?

A) Contractors' Liability Insurance
B) Product Liability Insurance
C) Garage Liability Insurance
D) Professional Liability Insurance
E) Fire Insurance

Question 56

If an insurance policy is cancelled, what might the insured be entitled to?

A) A refund of premium payments.
B) A grace period to obtain a different insurance company.
C) The opportunity to dispute the cancellation.
D) An injunction against the insurance company.
E) An opportunity to appeal to an insurance board.

Question 57

Which of the following types of insurance protects the producer or manufacturer of a good from loss incurred by people who are injured using the good?

A) Contractors' liability
B) Strict liability
C) Product liability
D) Business operations
E) Consumer protection

Question 58

________ insurance protects a garage owner from liability to persons who are injured by the operation of the garage.

A) Transportation liability
B) Employee liability
C) Garage liability
D) Vehicle liability
E) Peril

Question 59

[Insurance Incident] Ace Photo, a company specializing in wild animal photography, took out a life insurance policy through ABC Insurance on its president, Ringo, and an insurance policy on the company-owned jeep that he drove. Some time later, Ringo got a better offer from Flash Company, another company specializing in the photography of wild animals, and went to work for them. He parted on good terms with Ace Photo, and took the jeep under the mistaken idea that it was part of his severance benefits. Neither of the insurance policies was cancelled by Ace Photo. Unfortunately, while photographing a lion for Flash Company, Ringo was attacked and eaten. His jeep was then stolen by a bystander. Ace Photo had been in the process of contacting Ringo in an attempt to obtain possession of the jeep but had not reacquired it at the time of his death. Ace Photo had renewed the policy on the jeep, reaffirming to the insurer that its purpose was for use by Ace Photo employees because Ace Photo planned to have possession of the vehicle shortly. Ace Photo filed a claim to collect on the life insurance policy and also on the vehicle policy. ABC Insurance denied both claims.
Which statement is true regarding the contention of ABC Insurance that it is not required to pay to Ace Photo the amount for which Ringo's life was insured?

A) ABC Insurance Company is incorrect because Ace Photo held an economic interest in Ringo's life at the time the insurance was purchased.
B) ABC Insurance Company is correct because Ace Photo no longer had an economic interest in Ringo's life.
C) ABC Insurance Company is correct only if Ringo's new employer had purchased life insurance on his life.
D) ABC Insurance Company is incorrect because Ace Photo had an economic interest in Ringo based on his possession of the jeep that Ace Photo still owned.
E) ABC Insurance Company is incorrect only if Ace Photo owed Ringo retirement or some other sort of benefit.

Question 60

[Insurance Incident] Ace Photo, a company specializing in wild animal photography, took out a life insurance policy through ABC Insurance on its president, Ringo, and an insurance policy on the company-owned jeep that he drove. Some time later, Ringo got a better offer from Flash Company, another company specializing in the photography of wild animals, and went to work for them. He parted on good terms with Ace Photo, and took the jeep under the mistaken idea that it was part of his severance benefits. Neither of the insurance policies was cancelled by Ace Photo. Unfortunately, while photographing a lion for Flash Company, Ringo was attacked and eaten. His jeep was then stolen by a bystander. Ace Photo had been in the process of contacting Ringo in an attempt to obtain possession of the jeep but had not reacquired it at the time of his death. Ace Photo had renewed the policy on the jeep, reaffirming to the insurer that its purpose was for use by Ace Photo employees because Ace Photo planned to have possession of the vehicle shortly. Ace Photo filed a claim to collect on the life insurance policy and also on the vehicle policy. ABC Insurance denied both claims.
Regarding whether ABC Insurance will be required to provide coverage on the jeep, which of the following is true?

A) ABC will likely not be required to provide coverage on the jeep because Ace Photo made material misrepresentations in the renewal of the policy that would have prevented its renewal.
B) ABC will likely be required to provide coverage on the jeep because any misrepresentations made were innocently made in the belief that the jeep would be returned soon.
C) ABC will not have to provide coverage because Ace Photo did not have an insurable interest in the jeep.
D) ABC will have to provide coverage unless Ringo had already obtained his own insurance on the vehicle because one vehicle may only be insured under one policy.
E) ABC will not likely be required to provide coverage because Ringo's new employer was liable under workers' compensation.

Question 61

[Imari's Imprudence] Imari was texting while driving and slammed into the back of Cody's car. Shortly thereafter she received notice of a lawsuit setting forth Cody's claims for personal injury and property damage. Imari was very busy studying for college and did not feel like dealing with a pesky lawsuit. Several months later, Beatriz, a new agent with the insurer, called Imari and told Imari that she had just heard something about a lawsuit from the Cody's lawyer. Beatriz told Imari that although investigation would be difficult after so many months, she would like to talk with Imari because the trial was scheduled for next week. Imari told Beatriz that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Beatriz told Imari that the insurance company was going to deny coverage. Beatriz also told Imari that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Beatriz told Imari that Imari's insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Imari anyway, and that the insurer wanted nothing more to do with her.
The insurer would likely attempt to deny coverage based on which of the following legal theories?

A) Negligence
B) Recklessness
C) Breach of contract
D) Misrepresentation
E) Illegality

Question 62

In the case text, Mellin v. Northern Security Insurance Company, the Mellins filed a claim under their homeowner's insurance policy because the odor of cat urine emanated from a downstairs neighbor's condominium to an open plumbing chase servicing their kitchen. The Mellins sold their unit for a price less than that of a comparable condominium in the area, which was unaffected by the odor. The Mellins sued their insurance company because it denied the claim, stating it was not a "physical loss" and therefore, the claim was not covered under their policy. Which of the following was the result on this issue?

A) The Mellins' claim was dismissed because an odor was not considered to be a "physical loss" as defined under the insurance policy.
B) The Mellins' claim was dismissed because the suit should have been brought against the downstairs neighbor, not against their insurance company.
C) The Mellins were allowed to proceed with their claim because the court held physical loss can include changes perceived by the sense of smell, even in the absence of physical damage.
D) The Mellins' claim was dismissed because they sold the property and did not receive a proper appraisal demonstrating their damages prior to bringing the lawsuit.
E) The Mellins' were allowed to proceed with their claim because the insurance company failed to exclude odors in its policy.

Question 63

Homeowner's insurance is an example of which of the following types of insurance?

A) Casualty
B) Property
C) Personal
D) Individual
E) Commercial

Question 64

In which of the following circumstances can an insurer void an insurance contract?

A) The insured made material misrepresentations in the insurance application and if the insurer would have known of these material representations, it would have rejected the application.
B) The insured made material misrepresentations in the insurance application, regardless if the misrepresentation would have altered the insurer's decision to issue the policy.
C) The insured failed to disclose any fact; material or nonmaterial, on the insurance application and the insurer relied on the information contained in the application when it issued the policy.
D) The insured made material misrepresentations in the insurance application, but the insurer knew these representations were likely false when it issued the policy.
E) The insured made material misrepresentations in the insurance application, but the insurer did not rely on these representations when it issued the policy.

Question 65

[Imari's Imprudence] Imari was texting while driving and slammed into the back of Cody's car. Shortly thereafter she received notice of a lawsuit setting forth Cody's claims for personal injury and property damage. Imari was very busy studying for college and did not feel like dealing with a pesky lawsuit. Several months later, Beatriz, a new agent with the insurer, called Imari and told Imari that she had just heard something about a lawsuit from the Cody's lawyer. Beatriz told Imari that although investigation would be difficult after so many months, she would like to talk with Imari because the trial was scheduled for next week. Imari told Beatriz that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Beatriz told Imari that the insurance company was going to deny coverage. Beatriz also told Imari that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Beatriz told Imari that Imari's insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Imari anyway, and that the insurer wanted nothing more to do with her.
Regarding Beatriz's assertion that the insurer was not liable for accidents that were the fault of the insured, which of the following is true?

A) Beatriz is correct because insurance on vehicles is meant to assist drivers who are involved in accidents through no fault of their own.
B) Beatriz is correct only if Imari has had at least two previous accidents.
C) Beatriz is only correct if Imari is still carried on a parent's insurance policy.
D) Beatriz is likely correct only because Imari is a student with a student policy.
E) Beatriz is incorrect

Question 66

Which of the following is not a type of property insurance?

A) Fire
B) Casualty
C) Livestock
D) Water
E) Natural forces

Question 67

If the insured or insurer fails to meet an obligation under the insurance contract, what cause of action might the other party have?

A) Breach of duty
B) Breach of implied warranty
C) Breach of good faith and fair dealing
D) Breach of contract
E) Breach of warranty

Question 68

[Information Issues] Nari bought a sporty, yellow convertible. She had a teenage son at home, Joon, but she did not plan to let him drive the new car because he had driven her last car into the lake. Embarrassed, Nari decided to change insurers. She went to Big Insurance Company to apply. She got an application from Mark, an agent. Nari was a little nervous because the application asked about other drivers in the home. It also asked if there were any teenagers in the home. Nari decided to answer "no" on both counts because she had no plans to let Joon drive. Nari got full coverage on the car, and the policy was issued shortly after she completed the application. One year later, she renewed the policy without revising any of the information she provided. One month after she renewed the policy, Nari really needed some gas in the car for the next day, but she was unable to go to the gas station. Under the belief that he had sufficiently matured, Nari sent Joon to get gas. Unfortunately, a driver who had no insurance hit the car and totaled it. (Luckily, Joon was okay.) Nari immediately called her agent, Mark. When Mark reviewed the police report, however, he told Nari that there would be no coverage on the car because Joon was driving. Nari said that was completely unfair and that she would take her case to court to be decided by a jury. Nari told Mark that Big Insurance Co. issued the policy and that she was relying on the incontestability clause. Mark told Nari that she was wrong and that based on how disputes were handled under the policy, she would not even see a jury.
Which of the following, if any, will Big Insurance Co. most likely be required to prove in order to deny coverage based on the discrepancy between the application and Joon's driving?

A) Only that Nari's misrepresentation was material.
B) Only that the company's knowledge of the misrepresentation would have resulted in rejection of Nari's application.
C) Both that Nari's misrepresentation was material and that knowledge of the misrepresentation would have resulted in the refusal to provide insurance.
D) That Nari's misrepresentation was material; that knowledge of the misrepresentation would have resulted in rejection of her application; and that the insurer's loss would be in an amount over $10,000.
E) There is no proof that Big Insurance Co. can provide to avoid coverage because, as a matter of law, it is clear that coverage must be provided based on Joon's permissive use of the vehicle.

Question 69

A[n] ________ clause is part of an insurance contract that calls for a dispute to be settled by a neutral third party.

A) Mediation
B) Litigation
C) Dispute
D) Settlement
E) Arbitration

Question 70

Under which of the following circumstances would an insurer pay the beneficiary in the event of the insured's death?

A) War
B) Execution
C) Suicide
D) Accidental
E) Life insurance policies cover all causes of death.

Question 71

Which of the following prevents an insurer from denying payment because it decides to investigate the application for fraud?

A) Arbitration clause
B) Investigation clause
C) Antilapse clause
D) Incontestability clause
E) Appraisal clause

Question 72

Which of the following best describes the insured's duty to disclose information to the insurer?

A) The insured must disclose all material information on the application.
B) The insured must disclose all material information on the application and fully and truthfully answer any questions.
C) The insured must fully and truthfully answer any questions.
D) The insured must disclose all information on the application and fully and truthfully answer any questions.
E) The insured must disclose all information on the application and answer only relevant questions to the best of his or her ability.

Question 73

What type of insurance is purchased by neither the insured party nor the insurer?

A) Individual
B) Commercial
C) Group
D) Personal
E) Casualty

Question 74

Which of the following acts would not be covered under a commercial general liability policy?

A) A customer's personal injury claim
B) An employee's intentional tortious act
C) A competitor's patent claim
D) A competitor's copyright claim
E) A competitor's trademark claim

Question 75

Which of the following best describes the insured's duty to cooperate with the insurer?

A) The insured must provide information regarding the incident that led to the claim.
B) The insured must provide information regarding the incident that led to the claim and provide a deposition within 30 days of the claim.
C) The insured must provide information regarding the incident but does not have to provide self-incriminating information.
D) The insured must provide information regarding the incident unless he or she is being sued as a result of the incident.
E) The insured must provide information he or she finds relevant to the incident that led to the claim.

Question 76

What type of insurance policies cover attacks by hackers, software coding, and human errors?

A) Cyber and data privacy policies
B) Cyber and security policies
C) Security and data privacy policies
D) Data privacy and hack prevention policies
E) Hack prevention and cyber policies

Question 77

Which of the following best describes the insurer's duty to defend the insured?

A) The insurer has a duty to defend the insured for all claims.
B) The insurer has a duty to defend the insured for only claims for which the insured is not liable.
C) The insurer does not have a duty to defend the insured.
D) The insurer has a duty to defend the insured only if the incident was not the insured's fault.
E) The insurer has a duty to defend the insured from all claims for which the insured is liable.

Question 78

When can an insured party cancel an insurance policy?

A) At any time
B) Once he or she is released from the insured
C) When he or she has paid the required amount of premiums under the policy
D) When he or she notifies the insurer and provides a 30-day notice of his or her intent to cancel the policy.
E) When he or she notifies the insurer and provides a 45-day notice of his or her intent to cancel the policy.

Question 79

[Imari's Imprudence] Imari was texting while driving and slammed into the back of Cody's car. Shortly thereafter she received notice of a lawsuit setting forth Cody's claims for personal injury and property damage. Imari was very busy studying for college and did not feel like dealing with a pesky lawsuit. Several months later, Beatriz, a new agent with the insurer, called Imari and told Imari that she had just heard something about a lawsuit from the Cody's lawyer. Beatriz told Imari that although investigation would be difficult after so many months, she would like to talk with Imari because the trial was scheduled for next week. Imari told Beatriz that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Beatriz told Imari that the insurance company was going to deny coverage. Beatriz also told Imari that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Beatriz told Imari that Imari's insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Imari anyway, and that the insurer wanted nothing more to do with her.
Regarding Beatriz's assertion that vehicle insurance policies do not generally provide coverage for legal representation, which of the following is true?

A) Beatriz is incorrect.
B) Beatriz is correct only in situations in which a student with a student policy is involved in an accident.
C) Beatriz is correct only in situations in which an insured has had at least two previous accidents.
D) Beatriz is correct only in situations in which a student is carried on a parent's insurance policy.
E) Beatriz is correct because insureds are expected to shoulder some of the burden of accidents.

Question 80

[Imari's Imprudence] Imari was texting while driving and slammed into the back of Cody's car. Shortly thereafter she received notice of a lawsuit setting forth Cody's claims for personal injury and property damage. Imari was very busy studying for college and did not feel like dealing with a pesky lawsuit. Several months later, Beatriz, a new agent with the insurer, called Imari and told Imari that she had just heard something about a lawsuit from the Cody's lawyer. Beatriz told Imari that although investigation would be difficult after so many months, she would like to talk with Imari because the trial was scheduled for next week. Imari told Beatriz that she had no time to meet at the moment and that just before court, she would meet with the lawyer the company appointed to represent her. Beatriz told Imari that the insurance company was going to deny coverage. Beatriz also told Imari that vehicle insurance did not typically provide for legal representation and that, in any event, no lawyer would be provided. Finally, Beatriz told Imari that Imari's insurance was cancelled immediately because she was a real jerk and failed to help, that insurance would not pay for accidents that were the fault of Imari anyway, and that the insurer wanted nothing more to do with her.
Regarding Beatriz's complaint that Imari failed to help, which of the following is true?

A) Imari had a duty to cooperate with the insurer.
B) Imari's only duty was to show up for court; otherwise she had no duty to assist the insurer.
C) Imari's only duty was to show up for a court and for any depositions for which she received a subpoena; otherwise, she had no duty to cooperate with the insurer.
D) Imari had a duty to assist the insurer and to provide a share of funds to help the insurer in defending her claim.
E) Imari had a duty to cooperate with the insurer only because it appears that the accident was her fault.