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

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 3

An individual who had a chance and failed to avoid an accident would likely be liable under the doctrine of

		respondeat superior.
		res ipsa loquitur.
		negligence per se.
		last clear chance.
		contributory negligence.

1 points

QUESTION 4

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.
		respondeat superior.
		sovereign immunity.
		the fellow servant doctrine.
		strict liability.
		none of the above.

1 points

QUESTION 5

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 6

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

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

1 points

QUESTION 7

Legal liability is imposed by the courts when it has been established that

		there was actual damage or loss.
		there was negligence.
		the negligence was the proximate cause of the damage or loss.
		there are no defenses that relieve the negligent party.
		all of the above.

1 points

QUESTION 8

Failure to do what an ordinary and reasonably prudent person would do under the same or similar circumstances defines:

		proximate cause.
		intervening cause.
		assumption of risk.
		breach of duty.
		concurrent causation.

1 points

QUESTION 9

All of the following statements are true with respect to liability insurance except

		it is commonly referred to as third party coverage.
		the insurer is obligated to pay damages only when the insured is legally liable.
		the injured party has a direct claim against the insurance company.
		the insurer promises to defend any suits involving the type of liability insured.
		none of the above.

1 points

QUESTION 10

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 11

Damages assessed against the negligent party in a tort action sometimes include amounts that are designed to compensate for intangible losses such as pain and suffering. Such damages are called

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

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

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 14

A fraternal insurer is

		a type of capital stock company.
		a type of reciprocal exchange.
		a type of mutual insurer.
		a type of the Lloyds insurer.
		it may be any of the above.

1 points

QUESTION 15

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 16

Reinsurance

		is required by regulators for insurers.
		is insurance for insurance companies.
		is purchased through Lloyds exchanges.
		is usually not available.
		can reduce the total costs of catastrophes.

1 points

QUESTION 17

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 18

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 19

The combined ratio

		predicts future revenue of in insurance company.
		increases when dividends and profitability increase.
		is used because of the accounting principle of matching cannot be used with premium earned and claims paid.
		is affected by investment income.
		of over 100 is desirable.
		increases as premium increases.

1 points

QUESTION 20

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 21

Insurance actuarial services are primarily responsible for

		customer selection.
		claims costs.
		regulatory profitability.
		predicting impact of risk and uncertainty.
		all of the above.

1 points

QUESTION 22

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.