QUESTION 1

The application of the rule of strict liability or absolute liability is best shown by

		the employer's liability under workers compensation laws.
		prima facie evidence of negligence.
		res ipsa loquitur.
		respondeat superior.
		the doctrine of last clear chance.

1 points

QUESTION 2

Damages assessed against the negligent party in a tort action sometimes include amounts that are designed to punish that party. Such damages are called

		exemplary damages.
		punitive damages.
		special damages.
		general damages.
		explicit damages.

1 points

QUESTION 3

Liability insurance is concerned primarily with the financial consequences of

		crimes.
		intentional torts.
		unintentional torts.
		unintentional torts which are also crimes.
		contractual torts.
		all of the above.

1 points

QUESTION 4

The doctrine of contributory negligence

		has been replaced in many jurisdictions by the doctrine of comparative negligence.
		is a defense that benefits the injured party.
		is currently applied only in the field of employers liability.
		applies only in the case of automobile accidents.
		actually contributed to the increase in liability damages.
		none of the above.

1 points

QUESTION 5

In most jurisdictions, a property owner owes the highest degree of care to

		a trespasser.
		a social guest.
		a licensee.
		an invitee.
		the degree of care owed is the same to all.

1 points

QUESTION 6

A drunken driver killed a young boy and injured his father in an automobile accident. The court awarded $10 million in damages to the father. A substantial part of the damages were undoubtedly

		loss of consortium damages.
		special damages.
		general damages.
		punitive damages.
		intangible damages.

1 points

QUESTION 7

Which of the following is least likely to be held legally liable?

		infants.
		minors.
		insurance companies.
		charitable institutions.
		municipalities.
		corporations.

1 points

QUESTION 8

During the decade of the 1990s, virtually every state in the U.S. enacted some type of tort reform. These statutes

		usually involved limits on joint and several liability and pain and suffering.
		failed to address the issue of punitive damages.
		have withheld virtually all of the challenges to their constitutionality.
		have virtually eliminated pressure at the federal level for tort reform.
		all of the above.

1 points

QUESTION 9

When an insurer denies liability because it does not believe the insured is liable,

		the effect is the same as a denial because of a policy exclusion.
		the insured must retain his or her own counsel to defend the suit.
		the policy provides for arbitration of the dispute.
		the insurer will defend the suit and pay up to the policy limit if the insured is liable.
		none of the above.

1 points

QUESTION 10

All but which of the following might be interposed as a defense by a negligent party in a tort action?

		assumption of risk.
		contributory negligence.
		comparative negligence.
		res ipsa loquitur.
		last clear chance.

1 points

QUESTION 11

Vicarious liability involves a situation where one person becomes legally liable because of the negligence of another. One of the doctrines upon which vicarious liability may be based is

		negligence per se.
		employee activities.
		sovereign immunity.
		the fellow servant doctrine.
		none of the above.

1 points

QUESTION 12

The traditional disadvantages of the mutual insurance structure that have become more apparent in recent years include the fact that

		mutual insurers have limited mechanisms for accessing capital.
		the structure of mutual insurers is not particularly flexible.
		mutuals cannot use stock to acquire other companies.
		federal legislation to allow banks and insurers to affiliate requires that there be a holding company structure.
		all of the above.

1 points

QUESTION 13

The type of insurance company in which insureds are also insurers, and in which the members of the group assume liability for losses individually rather than collectively is

		a reciprocal.
		a pure assessment mutual.
		any mutual insurer.
		Lloyd's of London.
		none of the above.

1 points

QUESTION 14

The distribution system which places great emphasis on the "ownership of renewals" is referred to as

		the brokerage system.
		the direct writing system.
		the captive agent system.
		the independent agency system.
		none of the above.

1 points

QUESTION 15

Insurance companies

		are members of the NAIC.
		must belong to an underwriting association.
		cannot make risky investments with their premium revenue.
		must use actuarial data.
		prefer to use agents.

1 points

QUESTION 16

Multiple line operation

		has been the dominant form of operation in the American insurance industry since about the time of the civil war.
		involves the combination of property insurance, liability insurance, life insurance, and health insurance by a single insurance company.
		was retarded primarily by the reluctance of insurance companies to engage in such operations.
		extends the concept of diversification to the insurance field, permitting the combination of property and liability insurance by a single company.
		none of the above.

1 points

QUESTION 17

Price competition in the insurance industry

		occurs primarily at the insurer level where prices are set.
		occurs at the agency level through the selection of insurers.
		occurs despite the regulated pricing structure.
		is sometimes based on the selectivity an insurer exercises.
		All of the above.

1 points

QUESTION 18

Lloyd's of London

		is licensed in about half of the states.
		is the parent company of the so-called American Lloyds.
		is a mutual insurance company.
		is a capital stock insurance company.
		is similar in its operation to the New York Stock Exchange.

1 points

QUESTION 19

Underwriting syndicates are formed by insurance companies

		to deal with large concentrations of value.
		to eliminate competition for better classes of business.
		to operate as cartels, dividing the market according to a plan.
		to provide subsidized insurance to groups of applicants who cannot afford the aggregate losses of the group.
		none of the above.

1 points

QUESTION 20

Which of the following is true of brokers and agents?

		brokers are compensated by their clients on a fee basis, while agents receive a commission from the company.
		brokers do not work for the insurer, and therefore cannot bind the company.
		brokers operate primarily in the life insurance field, while agents operate in both the life insurance field and the property and liability field.
		agents may bind a company orally, while brokers have the authority to bind only in writing.
		none of the above.

1 points

QUESTION 21

The cyclical nature of the U.S. property and liability insurance industry, in which insurance prices and the availability of insurance fluctuate over time

		is evidence of a conspiracy on the part of insurers.
		reflects mismanagement on the part of insurance company executives.
		is gradually changing to a more stable market.
		is evidence that the industry is highly competitive.
		none of the above.

1 points

QUESTION 22

Which of the following is not true with respect to the property and liability insurance industry?

		there are few barriers to entry by new competitors.
		competition has produced changes in market share of competitors over time.
		the field is highly decentralized, with no firm controlling as much as 10% of the market.
		the business is highly cyclical.
		profits have consistently been above those in other industries.