4. Saint Somewhere Hospital has a directors and officers (D&O) liability policy from Colossal Casualty. The hospital's other policies were issued by other insurers. Saint Somewhere's D&O policy is a(n) a. coverage part. b. package policy. c. stand-alone policy. d. standard policy. 5. One of the exclusions in the property section of Myron's homeowners policy precludes coverage for "any act the 'insured' commits or conspires to commit with the intent to cause a loss." What is the primary purpose of this exclusion? a. Assist in managing moral and morale hazards b. Eliminate a coverage a typical policyholder does not need or want to pay for c. Eliminate a coverage that requires special treatment d. Eliminate or reduce the likelihood of duplicate coverage 6. Aaron is explaining the liability coverage to one of his customers. Aaron tells the customer that the policy contains certain exclusions but that some of the exclusions contain an exception, meaning that a. the exclusion would apply regardless of what the insured was doing at the time of loss. b. the exclusion only applies to certain types of insureds. c. the exclusion does not apply during certain times of the year. d. there could be coverage in limited situations. 7. While reading his personal auto policy, Sandy notices that the word "trailer" always appears in quotation marks. Trailer is a common word that everybody understands. So why, he asks, is it in quotation marks? a. Because movie previews are also referred to as trailers b. Because the word trailer has a special meaning as defined in the policy's definitions c. It's just a style thing adopted by the person who designed this policy. d. To highlight the distinction between trailers and the autos that tow them 8. An insurance policy includes this provision: "No 'suit' may be brought against 'us' unless all 'terms' of this coverage have been complied with." This provision functions as a(n) a. condition. b. declaration. c. exclusion. d. definition. 9. In response to a call from one of the agency's customers who wants to add theft coverage to its existing contractors equipment floater, Cindy will probably tell the customer a. coverage cannot be changed during the policy term. b. the policy can be endorsed now to add that coverage. c. the policy can only be endorsed mid term if the insurer wants to limit coverage. d. there is no such coverage. 10. Which one of the following organizations does not create standard insurance policies for use by all insurers? a. AAIS b. GEICO c. ISO d. NCCI 11. An equipment breakdown coverage form includes this insuring agreement: "We will pay for direct damage to 'Covered Property' located at the premises described in the declarations." To understand what this policy covers, it is necessary to a. determine what qualifies as "Covered Property." b. distinguish between liability and other damage. c. know how the premium for this coverage was determined. d. see what conditions apply. 12. Jessica is training a new employee at the agency about insurance. Jessica explains that each policy contains a definitions section. The new employee asks Jessica why we have a definitions section in a policy since we can use a dictionary. Jessica tells her trainee that a. it's much easier to look in the policy than to pull out a dictionary. b. this is the way it's always been done. c. certain words have a very specific meaning as they relate to the coverage in the policy; therefore, we must define them accordingly. d. regulators require that policies be a certain number of pages and having some defined terms in the policy helps to meet that requirement. 13. The insuring agreement in an employment-related practices liability coverage form begins as follows: "We will pay those sums the insured becomes legally obligated to pay as damages resulting from a 'wrongful act' to which this insurance applies." Unless otherwise limited or excluded, it appears that this policy will cover losses resulting from the named insured's a. employment-related property damage to employees. b. liability as an employer under workers compensation law. c. liability for bodily injury to employees. d. wrongful acts, as defined in the definitions. 14. Wise Manufacturing, LLC, is trying to find some general information regarding its policy, such as policy dates, coverage limits, and premiums. They call their agent, who immediately directs them to the policy's a. conditions section. b. declarations page. c. general information section. d. policy cover sheet. 15. Which of the following best describes an insurance policy endorsement? a. A document that modifies the policy b. A notice to the policyholder c. A statement of the insurer's privacy policy d. Approval by a famous celebrity 16. Trimble Insurance is meeting with a customer to discuss coverage options. The producer, Greg, is to explain what is covered in the "open perils" form. How should he describe the coverage? a. Any peril that is not specifically excluded is covered. b. Coverage is open to interpretation. c. If the peril is not named, it's not covered. d. Only flood, earthquake, and volcano damage are excluded. 17. A monoline insurance policy a. has only one line of text that basically says, "you're covered." b. is a standard policy promulgated by an advisory organization. c. is an insurance contract that covers only one line of insurance. d. is one component of a package policy. 18. Generally speaking, a property insurance policy that provides broad-form coverage provides a. coverage against a relatively short list of perils. b. more coverage than a basic-form policy but less coverage than a special-form policy. c. more coverage than a single-peril coverage but less coverage than a basic-form policy. d. less coverage than a basic-form policy and more coverage than a special-form policy. 19. Aaron has agreed to allow Greg to provide risk management services for his business. Greg gives Aaron a document outlining the services to be provided. Aaron likes what Greg has proposed and agrees to the terms. In contract law, this is known as a. a nonbinding contract. b. a common agreement. c. a legal purpose. d. an offer and an acceptance. 20. Stephanie recently completed an application for auto insurance on her car with a $250 collision deductible. A few days later, her insurance agent called to say the insurer would require a $1,000 collision deductible. Stephanie's father, who answered the telephone, told the agent to go ahead and issue the policy with a $1,000 deductible. Based solely on this information, will the resulting policy be an enforceable contract? a. No. Stephanie did not personally accept the insurer's counteroffer. b. No. The insurer did not accept the exact terms of Stephanie's offer. c. Yes. Although Stephanie's original offer was rejected, the insurer made a counteroffer that was accepted. d. Yes. The insurer from which Stephanie offered to buy insurance accepted her offer subject to a higher deductible. 21. Lois, an insurance agent, sent a letter to select personal lines clients recommending that they purchase personal umbrella insurance. What element of an enforceable contract does this letter represent? a. Acceptance b. Competent parties c. Legal form d. Offer 22. Due to Claudette's driving record, Sawyer Insurance Company was not willing to issue a personal auto policy with a $500,000 liability limit she requested. However, Sawyer's underwriter states that the company would be willing to issue a policy with the minimum financial responsibility limit required by her state. In legal terms, the underwriter's statement is considered a(n) a. acceptance. b. counteroffer. c. negotiation. d. rejection. 23. Peggy recently purchased a motorhome with that was financed by River Bank. In Peggy's personal auto policy or motor vehicle policy, River Bank should be named as a(n) a. co-owner. b. loss payee. c. mortgagee. d. named insured. 24. After Aaron reviews the proposal describing services that Greg offered to provide, he makes some modifications to the proposal, returns it to Greg, and creates a(n) a. counteroffer. b. insurable interest. c. nonbinding agreement. d. personal contract. 25. Kermit purchased his current home with the help of a mortgage from Porcine Bank. To ensure that Porcine's interests are properly protected, Kermit's homeowners policy should name Porcine Bank as a(n) a. additional insured. b. loss payee. c. mortgagee. d. named insured. 26. When Chuck and Dot Baker sold their house to the Berkshire family on April 1, the Bakers did not bother to cancel their homeowners policy that would expire anyway on April 30. April 15, when the house burned to the ground, the Berkshires, who paid cash for the house and did not have a mortgage, had no insurance of their own. Should the Bakers' insurer pay for this loss? a. No; the Bakers had no insurable interest in the house at the time of the loss. b. Yes; the omnibus clause in a homeowners policy extends coverage to any party with an insurable interest in the property described in the declarations. c. Yes; the Bakers had an insurable interest in the house when they bought the insurance, and the policy is still in force. d. Yes; the Bakers paid a premium for coverage until April 30. 27. The premium that is paid to purchase an insurance policy is legally regarded as a. an offer. b. consideration. c. extortion. d. vigorish. 28. According to the terms of a typical property insurance policy, an insured event involves all the following elements EXCEPT a. a covered time period. b. alleged responsibility to pay covered damages. c. covered property. d. loss by a covered cause. 29. When Tonia failed to pay the premium by the due date, her insurer sent a notice by first-class mail, as required by the policy, notifying her that the insurer was terminating coverage under the policy. A month later, Tonia submits a claim that she expects the policy to cover. The insurer denies coverage on the basis that the policy was a. canceled. b. enforceable. c. void. d. voidable. 30. Shane would suffer a financial loss if a liability claim is made against the small business owned by him and his business partner Morris. Therefore, Shane has a(n) _____________ interest in the business. a. conciliatory b. enforceable c. insurable d. proprietary