2024 CPCU 530 Practice Exam New Latest Version Best Studying Material with All Questions , Exams of Insurance law

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Which one of the following statements correctly describes how courts treat insurance policy provisions that require all waivers to be in writing? --------- Correct Answer --------- They generally do not enforce them. Kenta has a liability insurance policy that has multiple types of provisions. Which one of the following statements best illustrates a policy condition in Kenta's policy? --------- Correct Answer --------- You must notify the insurer promptly if a claim has been made against you. Which one of the following alternative dispute resolution procedures is one most likely to encounter in the context of an insurance dispute, pursuant to an insurance policy provision? ---------- Correct Answer ---------- Arbitration As applied to administrative agencies, appropriate notice under the Due Process Clause of the U.S. Constitution requires which one of the following? ---------- Correct Answer ---- ------ A statement of the hearing time, place, and nature, the legal authority and jurisdiction, reference to the statute or rule involved and a short, clear statement of the matters at issue Which one of the following statements correctly describes the effect of an agent's oral promise—made before or during the finalizing of a policy—to waive an insured's future breach of any policy condition? --------- Correct Answer --------- It is ineffective due to the parol evidence rule Furkan, who was insured with Argot Insurance Company, ran a stop sign and hit Katie, injuring her severely. Katie sued Furkan and Argot Insurance Company jointly. This action is known as --------- Correct Answer --------- Direct action, pursuant to statute. Under Ella's will, Fatima received a life estate in a house located at 1 Salem Street and Harry received a remainder interest in the property. Fatima lived in the house but did not obtain property insurance. The house was destroyed in a windstorm. Harry sued Fatima for failing to have obtained adequate insurance on the property. The court will decide this lawsuit in favor of --------- Correct Answer --------- Fatima, because she was not obligated to obtain insurance. Mehmet met with insurance agent Leila to obtain homeowners insurance. Leila had binding authority through Cintriel Insurance and she issued a written binder to Mehmet, submitting a signed homeowners insurance application to Cintriel at the same time. The binder stated that it provided homeowners coverage for 30 days, pending issuance of the policy. Five days later, before Cintriel acted on Mehmet's application, Mehmet's

house was damaged by fire. Which one of the following statements about Mehmet's insurance is true? --------- Correct Answer --------- Mehmet has homeowners insurance, as provided by the binder. Which one of the following statements correctly expresses a distinction between waiver and estoppel? --------- Correct Answer --------- Estoppel requires resulting injury or detriment by the party asserting it. Shota submitted an auto insurance application to Cromley Insurance. The application asked if anyone lived with Shota and Shota answered "no." In fact, two other people lived with Shota, each with poor driving records. Cromley issued a policy to Shota, which it would not have done had it known about the other residents. Which one of the following statements about Shota's application for auto insurance is true? --------- Correct Answer --------- Shota made a material misrepresentation, which would allow Cromley to avoid his policy. Insurance agent Benjamin has previously placed business with Etchley Insurance Company for Magnus. Benjamin has also issued oral agreements for coverage for Etchley's Insurance Company on auto policies for Magnus. Benjamin has recently issued an oral binder for Magnus and has made a note on his calendar to place business with Etchley Insurance Company for Magnus. If a loss occurred for Magnus before Benjamin contacted Etchley, what would be the outcome for Benjamin's coverage with Etchley? --------- Correct Answer --------- Etchley Insurance Company would provide coverage since Benjamin had placed previous business with Etchley for Magnus. Juanita paid in advance for her six-month automobile policy but sold her vehicle to Peter after three months. As a part of the sale agreement, Juanita gave Peter the remaining three months of the insurance policy on the vehicle. Which one of the following statements is true regarding the validity of the insurance policy transfer? --------- Correct Answer --------- It is invalid because insurance policies generally cannot be transferred. Which one of the following is an element that must be present for a reservation of rights notice to be effective? --------- Correct Answer --------- The notice must inform the insured fairly of the insurer's position. Sue has submitted a claim to her insurer for fire damage to a building insured under a property policy. Which one of the following questions must be answered in the affirmative to determine whether any coverage applies? --------- Correct Answer --------- Was the loss caused by a covered peril? Logan has a fully paid insurance policy that covers liability and physical damage for his vehicle. Logan lends this vehicle to a neighbor who has an accident and is found legally liable. There were injuries to the not-at-fault driver and damage to that vehicle as well. In this case, which one of the following is considered to be third-party to the automobile insurance policy? --------- Correct Answer --------- Only the accident victim

Which one of the following special characteristics of insurance contracts may result in a court interpreting ambiguous insurance contract provisions in favor of the insured? ------- -- Correct Answer --------- Contract of adhesion Certain elements must be present for a reservation of rights notice or nonwaiver agreement to be effective. Which one of the following is one of these elements? --------- Correct Answer --------- Must communicate the notice by letter to the insured in a timely manner Sho submitted a business insurance application to Blithe Insurance. Sho answered all application questions correctly. Blithe issued the policy. After Sho sustained a covered loss, Blithe realized that there were a number of things about Sho's business that would have caused it not to issue the policy. Based on this, Blithe --------- Correct Answer ------ ---. Cannot deny coverage because Sho's answers were correct and he made no misrepresentation. Oliver contacted his insurance agent Maria about homeowners insurance. Oliver said: "I want homeowners insurance." Maria responded: "You got it." Which one of the following is the best statement of why no agreement to provide insurance was likely reached by the parties? --------- Correct Answer --------- The agreement was not sufficiently specific on key terms. Mitsuki applied for property insurance with Cintriell Insurance. Cintriell's application asked about the type of roof on Mitsuki's building. Mitsuki answered that her building had a tile roof. In fact, the building had a wood shingle roof. Cintriell issued the policy. Two months later, Mitsuki's building was destroyed by fire. Cintriell can deny coverage if Mitsuki's statement about the roof --------- Correct Answer --------- Involved a material fact. Rin applied for auto insurance with Jancy Insurance. Jancy's application asked about any youthful drivers in Rin's household. Rin said there was one youthful driver living with her but in fact there were two, each with excellent driving records. Jancy issued the insurance policy and it would also have issued the policy had it known about both youthful drivers. If Jancy ultimately learns about Rin's incorrect application statement, it should --------- Correct Answer --------- Do nothing because Rin's misrepresentation was not material. Mustafa met with his insurance agent Lucy to obtain a businessowners policy. Lucy helped Mustafa complete an application and sent the signed application along with Mustafa's premium check to Delmond Insurance Co. Delmond never responded to Mustafa. Ninety days later, Mustafa had a loss to his business that would have been covered by the Delmond policy. If Mustafa files suit against Delmond to receive compensation for his loss, --------- Correct Answer --------- Mustafa will win, if Delmond's s delay on his application was unreasonable.

Larissa has a property policy covering her auto repair shop. The shop is totally destroyed by a fire. The process of determining whether and to what extent this specific loss is covered under Larissa's property policy is known as --------- Correct Answer - ------ -- Policy analysis. Which one of the following statements distinguishes estoppel from waiver? --------- Correct Answer --------- Waiver is contractual in nature and rests upon agreement between parties. With a contract of indemnity, the insurer agrees, in the event of a covered loss, to pay -- ------- Correct Answer --------- An amount directly related to the amount of loss. Which one of the following statements is true regarding warranties? --------- Correct Answer --------- Warranties may be either material or immaterial and are part of the final contract. If an insurance producer tells an insured that the insured's policy covers something that it does not, the producer might be liable --------- Correct Answer --------- For misrepresentation. Cintriell Insurance issued a commercial property insurance policy to Oscar. Cintriell's insurance application asked applicants to rate the condition of their buildings and Oscar stated that his building was in "good" condition. The Cintriell application did not explicitly label the insured's building rating as a warranty and the application did not state that it is considered part of the insurance policy. If a dispute arose, a court would most likely view Oscar's statement about the condition of his building as a --------- Correct Answer -- ------- Representation, because it is not clear that the parties intended it to be a warranty and the statement was not incorporated into the policy. Magnus, an agent for Insurance Company, received a call from Carla about orally binding coverage on her home at closing which was today. To be effective an agreement to insure must have, whether oral or written, which one of the following components? --------- Correct Answer --------- The object or premises if any to be insured Which one of the following reinforces the principle of indemnity? --------- Correct Answer --------- Subrogation Cian purchased a house with money loaned to him by Keithly Mortgage Co. (KMC). Cian obtained a homeowner policy from Melfor Insurance—containing a standard mortgage clause—which covered the house for damage due to windstorm. A windstorm destroyed Cian's house three years later. Which one of the following correctly states who is entitled to the proceeds payable under Cian's homeowner policy? --------- Correct Answer --------- KMC, as its interests appear. Aaron had recently purchased a home. He called an insurance agent to secure a policy. Aaron told the agent that he needed immediate homeowners coverage for $345,000.

The agent told Aaron that his home was covered. Under these circumstances, is Aaron covered? --------- Correct Answer --------- Yes, there is coverage because the agent's oral agreement is binding. Anna had an auto insurance policy written by Hallbinger Insurance Co. Anna had an accident with Beatrice. Beatrice sued Anna and was awarded $100,000 by a jury and the verdict was entered as a judgment against Anna. Beatrice demanded that Hallbinger pay this judgment. Hallbinger refused and Beatrice sued Hallbinger. Hallbinger moved to dismiss the lawsuit, claiming that Beatrice had no right to sue Hallbinger. Which one of the following correctly states how the court will rule on Hallbinger's motion? --------- Correct Answer --------- The motion will be denied and the suit against Hallbinger will continue if the state allows garnishment actions. Which one of the following special characteristics of insurance contracts reflects the idea that insurance companies should be able to select persons who will be insured by them? --------- Correct Answer --------- Nontransferable contract Linnea has a liability policy covering her auto repair shop. Someone slips and falls on the premises. One policy analysis question to ask to make a determination of whether the slip and fall claim is covered under Linnea's liability insurance policy is --------- Correct Answer --------- Does an exclusion apply? Tobias applied for business insurance with Gulford Insurance. Gulford's application asked if Tobias had been refused insurance previously and he replied he had not. In fact, he was refused by Argot Insurance five years ago due to poor credit history. Gulford issued the policy to Tobias. Tobias lived in a state with a contribute-to-loss statute. If Gulford ultimately discovers Tobias' incorrect statement about prior refusal of insurance, it should --------- Correct Answer --------- Do nothing—Tobias' misrepresentation could not contribute to destruction of the property. Which one of the following is the result of an insurer's waiver, estoppel, or election? ----- ---- Correct Answer --------- The insurer is prevented from reviving a defense it forfeited earlier. Which one of the following would most likely be recognized by a court as something that an insurer could properly waive? --------- Correct Answer --------- Policy notice of loss requirements Samuel applied for auto insurance with Barnley Insurance. The application asked Samuel to estimate his annual mileage. He drove 10,000 miles last year, and believing that he would do the same next year he placed this mileage on the application. Barnley issued an auto policy, but Samuel ended up driving 15,000 miles. Samuel's mileage estimate will result in Barnley --------- Correct Answer --------- Taking no action because Samuel gave an opinion and had no fraudulent intent.

Martin visited his insurance agent Laura to discuss his insurance needs. Laura recommended that Martin purchase a businessowners policy and Martin agreed with Laura's recommendation. Laura helped Martin complete an insurance application and she sent the completed and signed application to Blythe Insurance Co., along with Martin's premium payment check. Blithe cashed Martin's check, issued the policy, and mailed the policy to Martin. Blythe's actions were --------- Correct Answer --------- An acceptance. Hanna is insured under a life insurance policy written by Cromley Insurance, with a two- year contestable period. Hanna made a material misrepresentation about her health in her insurance application. Hanna died five years after Cromley issued the policy to her. Which one of the following statements correctly describes how Cromley should handle a claim under Hanna's life insurance policy submitted by Hanna's survivors? --------- Correct Answer --------- Pay the claim because more than two years have passed without contest An insurance contract is often said to be a contract of adhesion. Which one of the following is the basis of this characteristic of insurance contracts? --------- Correct Answer --------- The insurer writes the insurance policy so the insured must "take or leave" the policy. Katie met with her insurance agent Luke to discuss Katie's insurance needs. Luke recommended that Katie purchase a renter's policy and Katie agreed with Luke's recommendation. Luke helped Katie complete a renter's insurance application, Katie signed the application, and Luke sent the application to the Argot Insurance Company. The submission of the application to Argot was --------- Correct Answer --------- An offer. Noncompliance with a warranty concerning one type of covered property will not defeat coverage for another type of property to which the warranty does not relate, because courts generally interpret insurance policies as --------- Correct Answer --------- Severable. Delmond Insurance is a large life insurance company. It is required by state law to include an incontestable clause in all life insurance policies. Delmond publicly advocated changing state law so that it can remove this clause from its policies. Which one of the following is Delmond's best argument for repealing the state law requiring inclusion of the incontestable clause in all life insurance policies? --------- Correct Answer --------- The clause is inconsistent with the maxim that fraud vitiates consent. Sebastian applied for homeowner insurance with Blithe Insurance. Blithe's application asked if Sebastian had any damage to his house within the last three years. Sebastian had two losses four years ago but none in the last three years so Sebastian answered "no" to this question. Blithe issued the homeowner policy. Which one of the following statements about Sebastian's response to the application question is true? --------- Correct Answer --------- It was neither a warranty nor a misrepresentation.

Kenta is insured under a property insurance policy. He sustained a loss covered by the policy, but did not notify his insurance company until over a year later. The insurance company denied coverage because of Kenta's failure to promptly report the loss. Which one of the following special characteristics of insurance contracts is the basis of the insurance company's denial? --------- Correct Answer --------- Conditional contract The premium for any particular insurance policy should reflect --------- Correct Answer -- ------- The insured's share of estimated losses that the insurer must pay. Mikael, a new insurance agent, sent a letter to all residents of his apartment complex that set out the basic terms of a renter's policy and stated: "I will issue this policy to you and expect your $300 annual premium if I don't hear from you to the contrary within 30 days." Linnea, a neighbor, received this letter but did not respond. Which one of the following statements about Linnea's legal obligation under contract law is true? --------- Correct Answer --------- Linnea has no legal obligation to pay Mikael $300 because no prior course of dealing supports this. Elin purchased insurance coverage for her florist business. She received her mulit-page policy from the carrier and calls her agent Olivia to find where the amounts of insurance and the premium is found in the policy. Olivia should tell Elin to look in which section of the policy? --------- Correct Answer --------- Declarations. For an insurer to waive the insured's breach of condition under the insurer's policy, the insurer --------- Correct Answer --------- Must know of the breach of the condition. Leah called her insurance agent Matthias right after Leah purchased her first car. Leah said: "I need coverage on my car (which she described in detail)—$100,000 liability and $250 deductible collision and comprehensive." Mathias responded: "Great—you have this insurance effective immediately." Which one of the following statements about this conversation is true? --------- Correct Answer --------- It resulted in a binding oral insurance contract. Oscar purchased a term life insurance policy from TLife, Inc. The policy included a renewal option. If Oscar chose to renew, TLife had the right to require a detailed medical examination. At the end of the term, Oscar decided to renew the policy, and TLife accepted his renewal without demanding a medical exam. One week into the renewal term, Oscar became seriously ill. TLife began an investigation and asked Oscar to sign a nonwaiver agreement. When he complied, TLife insisted that Oscar participate in the medical exam that was TLife's right under the renewal option. Which one of the following answers best explains whether TLife has the right to demand a medical exam? --------- Correct Answer --------- TLife waived its right to demand a medical exam when it accepted the renewed policy. Luis leases a house from Daniel, the lessor. Luis, the lessee, is concerned about what would happen if he negligently burned down the premises. Which one of the following describes protection that may be available for Luis? --------- Correct Answer --------- A

provision is included in the lease that makes the lessor financially responsible to pay for damage to the property. Matt was an insurance applicant. Matt included untrue information on his application for insurance and the insurer agreed to insure Matt based on this false information. Which one of the following special characteristics of insurance contracts will provide Matt's insurer a basis to deny coverage under Matt's policy? --------- Correct Answer --------- Contract of utmost good faith Frederik has an insurance policy with a provision stating, "We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy." Which one of the following parts of Frederik's policy does this represent? --------- Correct Answer --------- Insuring agreement Maja is purchasing a home and has plans to finance it with Gulford Mortgage Company. At closing Maja and Gulford Mortgage Company have not agreed on who will obtain insurance on the property. If such a provision has not been included on the mortgage which one of the following situations could occur? --------- Correct Answer --------- Gulford Mortgage Company can obtain separate insurance on Maja's property, solely for the mortgagee's benefit. An insurance company determines that inaccurate information has been provided by an insurance applicant. Which one of the following statements is true concerning whether the contract is voidable? --------- Correct Answer --------- If the information was false and related to a material fact and relied upon by the insurer, the contract is voidable. If the information was false or misleading and material, the contract is voidable. --------- Correct Answer --------- Argot cannot deny coverage because Mia made no misrepresentation on her application. Estoppel arises in insurance law from the following sequence of events: false representation of a material fact, reasonable reliance on that representation, and the ---- ----- Correct Answer --------- Resulting injury or detriment to the insured. After a windstorm which opened a hole in the roof, an insured was required to place a tarp over the hole. This requirement is an example of an insurance policy being a --------

• Correct Answer --------- Conditional contract. Vincente applied for business insurance with Hallbinger Insurance. Hallbinger's application asked if Vincente had any prior "serious accidents or losses." Vincente had a small water loss five years ago, but believing it wasn't serious, he answered "no." Hallbinger issued the policy. If Hallbinger subsequently discovers Vincente's prior water loss, Hallbinger should --------- Correct Answer --------- Do nothing because Vincente's statement was not a material misrepresentation.

Which one of the following statements describes a waiver? --------- Correct Answer ------ --- The intentional relinquishment of a known right Joe bought insurance on his vehicle with a new insurance carrier. When the insurer inquired about the physical condition of the vehicle, Joe replied that the vehicle had no physical damage. Subsequently, the insurer issued a policy that included physical damage coverage. A month later Joe made a claim for hail damage. During the loss investigation, it was determined that hail had not fallen on the date Joe claimed. An inspection of the vehicle conclusively proved that the damage occurred well before the policy was issued. What will be the likely outcome of the claim? --------- Correct Answer --------- Because there was misrepresentation of a material fact, the insurer may avoid the policy. Which one of the following statements correctly states the effect of consideration on whether waivers are binding under insurance law? --------- Correct Answer --------- Some waivers are binding without consideration Ida desperately needed to purchase homeowners insurance on her newly purchased dwelling. When she talked with Grace, an agent with Jancy's Insurance Company, Ida lied on the application when she denied having previous total fire losses. She also told Grace she had not had any previous total fire losses. Ida had recently been declined by three other companies for having previous total fire losses that were caused by physical hazards under Ida's control. The type of behavior that Ida has exhibited is called - -------- Correct Answer --------- Concealment. Julio had a commercial insurance policy with Barnley Insurance. In Julio's application for this policy, Julio said that his building had a sprinkler system. Julio's insurance policy had a provision stating that the application is part of the insurance policy. Which one of the following factors would most likely result in a court finding that Julio's statement about the sprinkler system constituted a warranty? --------- Correct Answer --------- The statement was clearly and unmistakably intended by the parties to be a warranty A claim representative is working with Karl to settle a water damage claim. The loss was extensive and Karl fears retaining the wet property for inspection as required by his policy will cause a mold problem. The claim representative informs Karl that he does not need to retain the wet property. Is the action of the claim representative appropriate? --- ------ Correct Answer --------- Yes, because the claim representative may grant the insured a waiver of rights from the contract. Unless state law provides otherwise, which one of the following determines whether a policy statement is a warranty or a representation? --------- Correct Answer --------- The parties' intention Sandy is insured under an insurance policy. She has paid premiums for ten years and has never made a claim. Sandy says that her purchase of insurance has been an unfair trade and that the insurance company has taken advantage of her by collecting

premiums but not paying any claims. Which one of the following is the best explanation of why Sandy's insurance transactions have been a fair trade? --------- Correct Answer -- ------- The insurer could have paid claims for much higher amounts than Sandy's premiums. The insured must fulfill certain duties before a claim is paid under an insurance policy because --------- Correct Answer --------- Insurance policies are conditional contracts. Alva had an auto insurance policy written by Guilford Insurance Co. Alva had an auto accident with Furkan. Furkan was injured in the accident and he filed suit against Guilford for his damages. Guilford filed a motion to dismiss the lawsuit, claiming that Furkan had no right to sue Guilford. Which one of the following correctly states how the court will rule on Guilford's motion? --------- Correct Answer --------- The motion will be denied, if a direct-action statute has been enacted. Which one of the following legal doctrines would most effectively provide a defense against a party who asserts a legal remedy when that party had previously chosen another, inconsistent, legal remedy? --------- Correct Answer --------- Election Miu applied for auto insurance with Etchley Insurance. Etchley's application asked if Miu had any accidents in the prior three years and she said she had not. In fact she had two at-fault accidents, one of which involved alcohol. Etchley's underwriting guidelines state that it will not write insurance for applicants with more than one accident in the last three years. Etchley issued the policy. If Miu has an accident and Etchley learns about the prior accidents at that time, Etchley should --------- Correct Answer --------- Deny Miu's claim due to her material misrepresentation on which Etchley justly relied. Which one of the following is a legal principle that prohibits a party from asserting a claim or right that is inconsistent with that party's past statement or conduct on which another party has detrimentally relied? --------- Correct Answer --------- Estoppel When the insurance policy wording is ambiguous, a court generally applies the interpretation that favors the insured. This is because the insurance policy is a --------- Correct Answer --------- Contract of adhesion. Aleski bought a house using money loaned to him by Jancy Home Mortgage (JHM). JHM obtained property insurance on Aleski's house but Aleski did not purchase any insurance. Six months later, the house was destroyed by fire. Which one of the following correctly states who is entitled to the proceeds under JHM's property policy? --------- Correct Answer --------- JHM, because it obtained the insurance for its own benefit Anna was recently diagnosed with a 95 percent blockage in an artery in her brain. She obtained life insurance coverage from Cromley's Life Insurance Company shortly after the diagnosis. Anna answered "no" to the questions on the life insurance application concerning preexisting conditions. She was aware the coverage might be rejected by Cromley if she shared the information about the probability of a stroke. If Anna dies from

a stroke, which one of the following must Cromley Life Insurance Company prove to deny Anna's beneficiary's claim? --------- Correct Answer --------- Concealment Nicolas applied for a homeowners policy with Etchley Insurance. Etchley's application asked if Nicholas' home had smoke detectors and he answered that it did. Etchley issued the policy and two years later, Nicholas' home was severely damaged by fire. During its claim investigation, Etchley discovered that although Nicholas did have smoke detectors in his home, they were not working at the time of the fire. If a court were to interpret Nicholas' application statement as a warranty, the court would most likely find it to be --------- Correct Answer --------- An affirmative warranty. Olivia applied for homeowner insurance with Fredine Insurance. Fredine's application asked about losses in the prior three years and Olivia said she had none. In fact, she had a small theft loss that occurred within the prior three years. Olivia thought the loss happened more than three years before. Fredine issued the policy and two years later, Olivia had a fire loss. Olivia lived in a state with a statute requiring intent to deceive to justify avoiding an insurance policy. If Fredine learns about Olivia's prior theft loss it should --------- Correct Answer --------- Do nothing—Olivia had no intent to deceive. Georgia applied for a homeowner policy with Insurance Company (IC). IC's application asked if Georgia's home had an alarm system and Georgia answered that it did. IC issued the policy to Georgia. Two months later, burglars entered Georgia's house and stole several personal property items. At that time, IC discovered that Georgia's home did not have an alarm system. If Georgia's application statement about the alarm were determined to be a warranty --------- Correct Answer --------- IC could avoid Georgia's policy, whether or not the statement was material. Kristian is insured under a commercial property policy written by Fredine Insurance. In Kristian's insurance application, Kristian warranted that he would maintain a private security guard on his premises at all times. Kristian failed to do so, and one night Kristian's property was severely damaged by vandals. If Kristian's statement about maintaining a security guard were interpreted to be a continuing warranty, Fredine should --------- Correct Answer --------- Deny Kristian's claim because a continuing warranty states that certain conditions will continue to exist during the policy term and Kristian violated this warranty. An insurance company may deny an insured's claim if the insured has misrepresented or concealed --------- Correct Answer --------- A material fact. Carolina, a lessee, leased business property from Millwright Property Management (MPM), a lessor. MPM had fire insurance through Pravalt Insurance Co. Carolina negligently caused a fire loss to the premises and Pravalt paid MPM for this loss. Pravalt then made a subrogation claim against Carolina. Carolina will have to reimburse Pravalt with her own funds, if --------- Correct Answer --------- Pravalt did not waive its subrogation rights against Carolina and she did not have separate insurance.

Which one of the following types of insurance policies pays a stated amount, regardless of the actual value of the loss? --------- Correct Answer --------- Valued policy Miguel seeks to insure his personal auto to comply with state regulations. He contacts an insurance agent who provides Miguel with a personal auto policy with Atlas Motorist Insurance Company ("Atlas"). Which one of the following best describes the contractual relationship between Miguel and Atlas? ---------- Correct Answer ---------- An express contract Maria owns a commercial building and places insurance with Bastion Insurance. Because the annual premium is high, and cash is tight, Maria decides to enter into a premium finance agreement with Finance Co. ("Finance"). Under the premium finance agreement, Finance pays Bastion the full annual premium and Maria pays Finance a monthly amount for the premium, a fee and interest. At the midpoint of the policy year, which one of the following best describes Maria's premium finance agreement with Finance? ---------- Correct Answer ---------- A bilateral contract Daniel offers a ride to Lily, a ten-year-old, and takes her to his house where he locks her in his cellar and demands money from Lily's parents to secure her return. The parents agree to pay and Lily is returned, but Daniel never receives the money. He sues Lily's parents for breach of contract. Which one of the following explains why Daniel's contract with Lily's parents is not legally binding? ---------- Correct Answer ---------- It lacks a legal purpose. Tool Corporation has operated successfully for decades, but in recent years stiff price competition from overseas suppliers and a lack of skilled labor at affordable prices have made the company unprofitable. Tool Company has incurred substantial debt to keep the operation running and save jobs, but they can no longer access bank financing. Tool Company believes that it can return to profitability if it reorganizes. Under which chapter of the bankruptcy code should Tool Corporation file? ---------- Correct Answer ---------- Chapter 11 Located in a small midwestern town, Bin's Deli hires youthful workers and pays hourly wages. None of their employees are members of a protected class. Which one of the following legal concepts permits Bin's Deli to release any of its employees at any time for any reason, or no reason? ---------- Correct Answer ---------- Employment at will Fernanda runs a warehouse in New Jersey. The business is successful because it has major highway access and is close to major consumer markets. Manufacturers from around the country store goods bound for Northeastern customers at Fernanda's warehouse. Given the large amount of goods stored by others in her warehouse, Fernanda is concerned about her exposure if something happens to the warehouse or the goods, so she seek advice from a lawyer about how to limit her exposure to loss. Which one of the following best describes Fernanda's options in addressing this liability? ---------- Correct Answer ---------- UCC Article 7 permits Fernanda to limit her liability through terms in the warehouse receipt.

In February, Ann contracts with Mahdi to deliver clean garden top soil for $30 a cubic yard to Mahdi's farm in Pennsylvania. No time for delivery is stated in their contract but the parties understand that Mahdi wants to use the soil for this year's planting season. In March, Ann delivers garden soil that is contaminated and Mahdi refuses to pay because he believes Ann breached their agreement. Which one of the following best describes how a court would rule on Mahdi's claim that Ann breached their agreement? ---------- Correct Answer ---------- The court would find for Mahdi because Ann's goods are non-conforming. Diego and Georgia meet in a bar and enjoy cocktails together. Diego has many more drinks than Georgia and is stumbling and slurring his speech. Sensing an opportunity, Georgia proposes that Diego sell her his expensive Swiss wristwatch for a mere $ and Diego agrees. The next day, Georgia appears at Diego's office with $100 asking for the wristwatch. Which one of the following arguments is best for Diego to avoid the contract? ---------- Correct Answer ---------- Diego lacked capacity to enter into a contract because he was inebriated. Erin has worked full-time for the last five years as a librarian for a law firm with 100 attorneys located in a large downtown office building. Erin and her husband are happy to announce that Erin is expecting a baby in six months. She inquires with the law firm's human resources department about her rights for parental leave under the Family Medical Leave Act (FMLA). Which one of the following best describes what the law firm must offer Erin under the FMLA? ---------- Correct Answer ---------- The law firm must offer Erin up to 12 weeks of unpaid leave in a 12-month period, with no loss of accrued employment benefits. Tile Roofing is a contractor specializing in roof installation for homes and commercial accounts. Recently several Tile Roofing workers have fallen and suffered significant injuries because the workers do not have any safety harnesses preventing falls. Under which one of the following employee welfare laws would Tile Roofing potentially be subject to civil or criminal penalties? ---------- Correct Answer ---------- Occupational Safety and Health Act Mustafa met with his insurance agent Lucy to obtain a businessowners policy. Lucy helped Mustafa complete an application and sent the signed application along with Mustafa's premium check to Delmond Insurance Co. Delmond never responded to Mustafa. Ninety days later, Mustafa had a loss to his business that would have been covered by the Delmond policy. If Mustafa files suit against Delmond to receive compensation for his loss, ---------- Correct Answer ---------- Mustafa will win, if Delmond's s delay on his application was unreasonable. Larissa has a property policy covering her auto repair shop. The shop is totally destroyed by a fire. The process of determining whether and to what extent this specific loss is covered under Larissa's property policy is known as ---------- Correct Answer ------ ---- Policy analysis.

Which one of the following statements distinguishes estoppel from waiver? ---------- Correct Answer ---------- Waiver is contractual in nature and rests upon agreement between parties. With a contract of indemnity, the insurer agrees, in the event of a covered loss, to pay -- -------- Correct Answer ---------- An amount directly related to the amount of loss. Which one of the following statements is true regarding warranties? ---------- Correct Answer ---------- Warranties may be either material or immaterial and are part of the final contract. If an insurance producer tells an insured that the insured's policy covers something that it does not, the producer might be liable ---------- Correct Answer ---------- For misrepresentation. Cintriell Insurance issued a commercial property insurance policy to Oscar. Cintriell's insurance application asked applicants to rate the condition of their buildings and Oscar stated that his building was in "good" condition. The Cintriell application did not explicitly label the insured's building rating as a warranty and the application did not state that it is considered part of the insurance policy. If a dispute arose, a court would most likely view Oscar's statement about the condition of his building as a ---------- Correct Answer - --------- Representation, because it is not clear that the parties intended it to be a warranty and the statement was not incorporated into the policy. Magnus, an agent for Insurance Company, received a call from Carla about orally binding coverage on her home at closing which was today. To be effective an agreement to insure must have, whether oral or written, which one of the following components? ---------- Correct Answer ---------- The object or premises if any to be insured Which one of the following reinforces the principle of indemnity? ---------- Correct Answer ---------- Subrogation Cian purchased a house with money loaned to him by Keithly Mortgage Co. (KMC). Cian obtained a homeowner policy from Melfor Insurance—containing a standard mortgage clause—which covered the house for damage due to windstorm. A windstorm destroyed Cian's house three years later. Which one of the following correctly states who is entitled to the proceeds payable under Cian's homeowner policy? ---------- Correct Answer ---------- KMC, as its interests appear. Aaron had recently purchased a home. He called an insurance agent to secure a policy. Aaron told the agent that he needed immediate homeowners coverage for $345,000. The agent told Aaron that his home was covered. Under these circumstances, is Aaron covered? ---------- Correct Answer ---------- Yes, there is coverage because the agent's oral agreement is binding.

Anna had an auto insurance policy written by Hallbinger Insurance Co. Anna had an accident with Beatrice. Beatrice sued Anna and was awarded $100,000 by a jury and the verdict was entered as a judgment against Anna. Beatrice demanded that Hallbinger pay this judgment. Hallbinger refused and Beatrice sued Hallbinger. Hallbinger moved to dismiss the lawsuit, claiming that Beatrice had no right to sue Hallbinger. Which one of the following correctly states how the court will rule on Hallbinger's motion? ---------- Correct Answer ---------- The motion will be denied and the suit against Hallbinger will continue if the state allows garnishment actions. Which one of the following special characteristics of insurance contracts reflects the idea that insurance companies should be able to select persons who will be insured by them? ---------- Correct Answer ---------- Nontransferable contract Linnea has a liability policy covering her auto repair shop. Someone slips and falls on the premises. One policy analysis question to ask to make a determination of whether the slip and fall claim is covered under Linnea's liability insurance policy is ---------- Correct Answer ---------- Does an exclusion apply? Tobias applied for business insurance with Gulford Insurance. Gulford's application asked if Tobias had been refused insurance previously and he replied he had not. In fact, he was refused by Argot Insurance five years ago due to poor credit history. Gulford issued the policy to Tobias. Tobias lived in a state with a contribute-to-loss statute. If Gulford ultimately discovers Tobias' incorrect statement about prior refusal of insurance, it should ---------- Correct Answer ---------- Do nothing—Tobias' misrepresentation could not contribute to destruction of the property. Which one of the following is the result of an insurer's waiver, estoppel, or election? ----- ----- Correct Answer ---------- The insurer is prevented from reviving a defense it forfeited earlier. Which one of the following would most likely be recognized by a court as something that an insurer could properly waive? ---------- Correct Answer ---------- Policy notice of loss requirements Samuel applied for auto insurance with Barnley Insurance. The application asked Samuel to estimate his annual mileage. He drove 10,000 miles last year, and believing that he would do the same next year he placed this mileage on the application. Barnley issued an auto policy, but Samuel ended up driving 15,000 miles. Samuel's mileage estimate will result in Barnley ---------- Correct Answer ---------- Taking no action because Samuel gave an opinion and had no fraudulent intent. Martin visited his insurance agent Laura to discuss his insurance needs. Laura recommended that Martin purchase a businessowners policy and Martin agreed with Laura's recommendation. Laura helped Martin complete an insurance application and she sent the completed and signed application to Blythe Insurance Co., along with

Martin's premium payment check. Blithe cashed Martin's check, issued the policy, and mailed the policy to Martin. Blythe's actions were ---------- Correct Answer ---------- An acceptance. Hanna is insured under a life insurance policy written by Cromley Insurance, with a two- year contestable period. Hanna made a material misrepresentation about her health in her insurance application. Hanna died five years after Cromley issued the policy to her. Which one of the following statements correctly describes how Cromley should handle a claim under Hanna's life insurance policy submitted by Hanna's survivors? ---------- Correct Answer ---------- Pay the claim because more than two years have passed without contest An insurance contract is often said to be a contract of adhesion. Which one of the following is the basis of this characteristic of insurance contracts? ---------- Correct Answer ---------- The insurer writes the insurance policy so the insured must "take or leave" the policy. Katie met with her insurance agent Luke to discuss Katie's insurance needs. Luke recommended that Katie purchase a renter's policy and Katie agreed with Luke's recommendation. Luke helped Katie complete a renter's insurance application, Katie signed the application, and Luke sent the application to the Argot Insurance Company. The submission of the application to Argot was ---------- Correct Answer ---------- An offer. Noncompliance with a warranty concerning one type of covered property will not defeat coverage for another type of property to which the warranty does not relate, because courts generally interpret insurance policies as ---------- Correct Answer ---------- Severable. Delmond Insurance is a large life insurance company. It is required by state law to include an incontestable clause in all life insurance policies. Delmond publicly advocated changing state law so that it can remove this clause from its policies. Which one of the following is Delmond's best argument for repealing the state law requiring inclusion of the incontestable clause in all life insurance policies? ---------- Correct Answer ---------- The clause is inconsistent with the maxim that fraud vitiates consent. Sebastian applied for homeowner insurance with Blithe Insurance. Blithe's application asked if Sebastian had any damage to his house within the last three years. Sebastian had two losses four years ago but none in the last three years so Sebastian answered "no" to this question. Blithe issued the homeowner policy. Which one of the following statements about Sebastian's response to the application question is true? ---------- Correct Answer ---------- It was neither a warranty nor a misrepresentation. Which one of the following statements correctly describes how courts treat insurance policy provisions that require all waivers to be in writing? ---------- Correct Answer ---------

• They generally do not enforce them.

Kenta has a liability insurance policy that has multiple types of provisions. Which one of the following statements best illustrates a policy condition in Kenta's policy? ---------- Correct Answer ---------- You must notify the insurer promptly if a claim has been made against you. Under Ella's will, Fatima received a life estate in a house located at 1 Salem Street and Harry received a remainder interest in the property. Fatima lived in the house but did not obtain property insurance. The house was destroyed in a windstorm. Harry sued Fatima for failing to have obtained adequate insurance on the property. The court will decide this lawsuit in favor of ---------- Correct Answer ---------- Fatima, because she was not obligated to obtain insurance. Mehmet met with insurance agent Leila to obtain homeowners insurance. Leila had binding authority through Cintriel Insurance and she issued a written binder to Mehmet, submitting a signed homeowners insurance application to Cintriel at the same time. The binder stated that it provided homeowners coverage for 30 days, pending issuance of the policy. Five days later, before Cintriel acted on Mehmet's application, Mehmet's house was damaged by fire. Which one of the following statements about Mehmet's insurance is true? ---------- Correct Answer ---------- Mehmet has homeowners insurance, as provided by the binder. Which one of the following statements correctly expresses a distinction between waiver and estoppel? ---------- Correct Answer ---------- Estoppel requires resulting injury or detriment by the party asserting it. Shota submitted an auto insurance application to Cromley Insurance. The application asked if anyone lived with Shota and Shota answered "no." In fact, two other people lived with Shota, each with poor driving records. Cromley issued a policy to Shota, which it would not have done had it known about the other residents. Which one of the following statements about Shota's application for auto insurance is true? ---------- Correct Answer ---------- Shota made a material misrepresentation, which would allow Cromley to avoid his policy. Insurance agent Benjamin has previously placed business with Etchley Insurance Company for Magnus. Benjamin has also issued oral agreements for coverage for Etchley's Insurance Company on auto policies for Magnus. Benjamin has recently issued an oral binder for Magnus and has made a note on his calendar to place business with Etchley Insurance Company for Magnus. If a loss occurred for Magnus before Benjamin contacted Etchley, what would be the outcome for Benjamin's coverage with Etchley? ---------- Correct Answer ---------- Etchley Insurance Company would provide coverage since Benjamin had placed previous business with Etchley for Magnus. Juanita paid in advance for her six-month automobile policy but sold her vehicle to Peter after three months. As a part of the sale agreement, Juanita gave Peter the remaining

three months of the insurance policy on the vehicle. Which one of the following statements is true regarding the validity of the insurance policy transfer? ---------- Correct Answer ---------- It is invalid because insurance policies generally cannot be transferred. Which one of the following is an element that must be present for a reservation of rights notice to be effective? ---------- Correct Answer ---------- The notice must inform the insured fairly of the insurer's position. Sue has submitted a claim to her insurer for fire damage to a building insured under a property policy. Which one of the following questions must be answered in the affirmative to determine whether any coverage applies? ---------- Correct Answer ---------- Was the loss caused by a covered peril? Logan has a fully paid insurance policy that covers liability and physical damage for his vehicle. Logan lends this vehicle to a neighbor who has an accident and is found legally liable. There were injuries to the not-at-fault driver and damage to that vehicle as well. In this case, which one of the following is considered to be third-party to the automobile insurance policy? ---------- Correct Answer ---------- Only the accident victim Which one of the following special characteristics of insurance contracts may result in a court interpreting ambiguous insurance contract provisions in favor of the insured? ------- --- Correct Answer ---------- Contract of adhesion Certain elements must be present for a reservation of rights notice or nonwaiver agreement to be effective. Which one of the following is one of these elements? ---------- Correct Answer ---------- Must communicate the notice by letter to the insured in a timely manner Sho submitted a business insurance application to Blithe Insurance. Sho answered all application questions correctly. Blithe issued the policy. After Sho sustained a covered loss, Blithe realized that there were a number of things about Sho's business that would have caused it not to issue the policy. Based on this, Blithe ---------- Correct Answer ----- -----. Cannot deny coverage because Sho's answers were correct and he made no misrepresentation. Oliver contacted his insurance agent Maria about homeowners insurance. Oliver said: "I want homeowners insurance." Maria responded: "You got it." Which one of the following is the best statement of why no agreement to provide insurance was likely reached by the parties? ---------- Correct Answer ---------- The agreement was not sufficiently specific on key terms. Mitsuki applied for property insurance with Cintriell Insurance. Cintriell's application asked about the type of roof on Mitsuki's building. Mitsuki answered that her building had a tile roof. In fact, the building had a wood shingle roof. Cintriell issued the policy. Two months later, Mitsuki's building was destroyed by fire. Cintriell can deny coverage if

Mitsuki's statement about the roof ---------- Correct Answer ---------- Involved a material fact. Rin applied for auto insurance with Jancy Insurance. Jancy's application asked about any youthful drivers in Rin's household. Rin said there was one youthful driver living with her but in fact there were two, each with excellent driving records. Jancy issued the insurance policy and it would also have issued the policy had it known about both youthful drivers. If Jancy ultimately learns about Rin's incorrect application statement, it should ---------- Correct Answer ---------- Do nothing because Rin's misrepresentation was not material. Kenta is insured under a property insurance policy. He sustained a loss covered by the policy, but did not notify his insurance company until over a year later. The insurance company denied coverage because of Kenta's failure to promptly report the loss. Which one of the following special characteristics of insurance contracts is the basis of the insurance company's denial? ---------- Correct Answer ---------- Conditional contract The premium for any particular insurance policy should reflect ---------- Correct Answer - --------- The insured's share of estimated losses that the insurer must pay. Mikael, a new insurance agent, sent a letter to all residents of his apartment complex that set out the basic terms of a renter's policy and stated: "I will issue this policy to you and expect your $300 annual premium if I don't hear from you to the contrary within 30 days." Linnea, a neighbor, received this letter but did not respond. Which one of the following statements about Linnea's legal obligation under contract law is true? ---------- Correct Answer ---------- Linnea has no legal obligation to pay Mikael $300 because no prior course of dealing supports this. Elin purchased insurance coverage for her florist business. She received her mulit-page policy from the carrier and calls her agent Olivia to find where the amounts of insurance and the premium is found in the policy. Olivia should tell Elin to look in which section of the policy? ---------- Correct Answer ---------- Declarations. For an insurer to waive the insured's breach of condition under the insurer's policy, the insurer ---------- Correct Answer ---------- Must know of the breach of the condition. Leah called her insurance agent Matthias right after Leah purchased her first car. Leah said: "I need coverage on my car (which she described in detail)—$100,000 liability and $250 deductible collision and comprehensive." Mathias responded: "Great—you have this insurance effective immediately." Which one of the following statements about this conversation is true? ---------- Correct Answer ---------- It resulted in a binding oral insurance contract. Oscar purchased a term life insurance policy from TLife, Inc. The policy included a renewal option. If Oscar chose to renew, TLife had the right to require a detailed medical examination. At the end of the term, Oscar decided to renew the policy, and

TLife accepted his renewal without demanding a medical exam. One week into the renewal term, Oscar became seriously ill. TLife began an investigation and asked Oscar to sign a nonwaiver agreement. When he complied, TLife insisted that Oscar participate in the medical exam that was TLife's right under the renewal option. Which one of the following answers best explains whether TLife has the right to demand a medical exam? ---------- Correct Answer ---------- TLife waived its right to demand a medical exam when it accepted the renewed policy. Luis leases a house from Daniel, the lessor. Luis, the lessee, is concerned about what would happen if he negligently burned down the premises. Which one of the following describes protection that may be available for Luis? ---------- Correct Answer ---------- A provision is included in the lease that makes the lessor financially responsible to pay for damage to the property. Matt was an insurance applicant. Matt included untrue information on his application for insurance and the insurer agreed to insure Matt based on this false information. Which one of the following special characteristics of insurance contracts will provide Matt's insurer a basis to deny coverage under Matt's policy? ---------- Correct Answer ---------- Contract of utmost good faith Frederik has an insurance policy with a provision stating, "We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy." Which one of the following parts of Frederik's policy does this represent? ---------- Correct Answer ---------- Insuring agreement Maja is purchasing a home and has plans to finance it with Gulford Mortgage Company. At closing Maja and Gulford Mortgage Company have not agreed on who will obtain insurance on the property. If such a provision has not been included on the mortgage which one of the following situations could occur? ---------- Correct Answer ---------- Gulford Mortgage Company can obtain separate insurance on Maja's property, solely for the mortgagee's benefit. An insurance company determines that inaccurate information has been provided by an insurance applicant. Which one of the following statements is true concerning whether the contract is voidable? ---------- Correct Answer ---------- If the information was false and related to a material fact and relied upon by the insurer, the contract is voidable. If the information was false or misleading and material, the contract is voidable. ---------- Correct Answer ---------- Argot cannot deny coverage because Mia made no misrepresentation on her application. Estoppel arises in insurance law from the following sequence of events: false representation of a material fact, reasonable reliance on that representation, and the ---- ------ Correct Answer ---------- Resulting injury or detriment to the insured.

After a windstorm which opened a hole in the roof, an insured was required to place a tarp over the hole. This requirement is an example of an insurance policy being a -------- -- Correct Answer ---------- Conditional contract. Which one of the following statements correctly describes the effect of an agent's oral promise—made before or during the finalizing of a policy—to waive an insured's future breach of any policy condition? ---------- Correct Answer ---------- It is ineffective due to the parol evidence rule Furkan, who was insured with Argot Insurance Company, ran a stop sign and hit Katie, injuring her severely. Katie sued Furkan and Argot Insurance Company jointly. This action is known as ---------- Correct Answer ---------- Direct action, pursuant to statute. Vincente applied for business insurance with Hallbinger Insurance. Hallbinger's application asked if Vincente had any prior "serious accidents or losses." Vincente had a small water loss five years ago, but believing it wasn't serious, he answered "no." Hallbinger issued the policy. If Hallbinger subsequently discovers Vincente's prior water loss, Hallbinger should ---------- Correct Answer ---------- Do nothing because Vincente's statement was not a material misrepresentation. Which one of the following statements describes a waiver? ---------- Correct Answer ----- ----- The intentional relinquishment of a known right Joe bought insurance on his vehicle with a new insurance carrier. When the insurer inquired about the physical condition of the vehicle, Joe replied that the vehicle had no physical damage. Subsequently, the insurer issued a policy that included physical damage coverage. A month later Joe made a claim for hail damage. During the loss investigation, it was determined that hail had not fallen on the date Joe claimed. An inspection of the vehicle conclusively proved that the damage occurred well before the policy was issued. What will be the likely outcome of the claim? ---------- Correct Answer ---------- Because there was misrepresentation of a material fact, the insurer may avoid the policy. Which one of the following statements correctly states the effect of consideration on whether waivers are binding under insurance law? ---------- Correct Answer ---------- Some waivers are binding without consideration Ida desperately needed to purchase homeowners insurance on her newly purchased dwelling. When she talked with Grace, an agent with Jancy's Insurance Company, Ida lied on the application when she denied having previous total fire losses. She also told Grace she had not had any previous total fire losses. Ida had recently been declined by three other companies for having previous total fire losses that were caused by physical hazards under Ida's control. The type of behavior that Ida has exhibited is called - --------- Correct Answer ---------- Concealment.

Julio had a commercial insurance policy with Barnley Insurance. In Julio's application for this policy, Julio said that his building had a sprinkler system. Julio's insurance policy had a provision stating that the application is part of the insurance policy. Which one of the following factors would most likely result in a court finding that Julio's statement about the sprinkler system constituted a warranty? ---------- Correct Answer ---------- The statement was clearly and unmistakably intended by the parties to be a warranty A claim representative is working with Karl to settle a water damage claim. The loss was extensive and Karl fears retaining the wet property for inspection as required by his policy will cause a mold problem. The claim representative informs Karl that he does not need to retain the wet property. Is the action of the claim representative appropriate? --- ------- Correct Answer ---------- Yes, because the claim representative may grant the insured a waiver of rights from the contract. Unless state law provides otherwise, which one of the following determines whether a policy statement is a warranty or a representation? ---------- Correct Answer ---------- The parties' intention Sandy is insured under an insurance policy. She has paid premiums for ten years and has never made a claim. Sandy says that her purchase of insurance has been an unfair trade and that the insurance company has taken advantage of her by collecting premiums but not paying any claims. Which one of the following is the best explanation of why Sandy's insurance transactions have been a fair trade? ---------- Correct Answer - --------- The insurer could have paid claims for much higher amounts than Sandy's premiums. The insured must fulfill certain duties before a claim is paid under an insurance policy because ---------- Correct Answer ---------- Insurance policies are conditional contracts. Alva had an auto insurance policy written by Guilford Insurance Co. Alva had an auto accident with Furkan. Furkan was injured in the accident and he filed suit against Guilford for his damages. Guilford filed a motion to dismiss the lawsuit, claiming that Furkan had no right to sue Guilford. Which one of the following correctly states how the court will rule on Guilford's motion? ---------- Correct Answer ---------- The motion will be denied, if a direct-action statute has been enacted. Which one of the following legal doctrines would most effectively provide a defense against a party who asserts a legal remedy when that party had previously chosen another, inconsistent, legal remedy? ---------- Correct Answer ---------- Election Miu applied for auto insurance with Etchley Insurance. Etchley's application asked if Miu had any accidents in the prior three years and she said she had not. In fact she had two at-fault accidents, one of which involved alcohol. Etchley's underwriting guidelines state that it will not write insurance for applicants with more than one accident in the last three years. Etchley issued the policy. If Miu has an accident and Etchley learns about the

prior accidents at that time, Etchley should ---------- Correct Answer ---------- Deny Miu's claim due to her material misrepresentation on which Etchley justly relied. Which one of the following is a legal principle that prohibits a party from asserting a claim or right that is inconsistent with that party's past statement or conduct on which another party has detrimentally relied? ---------- Correct Answer ---------- Estoppel When the insurance policy wording is ambiguous, a court generally applies the interpretation that favors the insured. This is because the insurance policy is a ---------- Correct Answer ---------- Contract of adhesion. Aleski bought a house using money loaned to him by Jancy Home Mortgage (JHM). JHM obtained property insurance on Aleski's house but Aleski did not purchase any insurance. Six months later, the house was destroyed by fire. Which one of the following correctly states who is entitled to the proceeds under JHM's property policy? ---------- Correct Answer ---------- JHM, because it obtained the insurance for its own benefit Anna was recently diagnosed with a 95 percent blockage in an artery in her brain. She obtained life insurance coverage from Cromley's Life Insurance Company shortly after the diagnosis. Anna answered "no" to the questions on the life insurance application concerning preexisting conditions. She was aware the coverage might be rejected by Cromley if she shared the information about the probability of a stroke. If Anna dies from a stroke, which one of the following must Cromley Life Insurance Company prove to deny Anna's beneficiary's claim? ---------- Correct Answer ---------- Concealment Nicolas applied for a homeowners policy with Etchley Insurance. Etchley's application asked if Nicholas' home had smoke detectors and he answered that it did. Etchley issued the policy and two years later, Nicholas' home was severely damaged by fire. During its claim investigation, Etchley discovered that although Nicholas did have smoke detectors in his home, they were not working at the time of the fire. If a court were to interpret Nicholas' application statement as a warranty, the court would most likely find it to be ---------- Correct Answer ---------- An affirmative warranty. Olivia applied for homeowner insurance with Fredine Insurance. Fredine's application asked about losses in the prior three years and Olivia said she had none. In fact, she had a small theft loss that occurred within the prior three years. Olivia thought the loss happened more than three years before. Fredine issued the policy and two years later, Olivia had a fire loss. Olivia lived in a state with a statute requiring intent to deceive to justify avoiding an insurance policy. If Fredine learns about Olivia's prior theft loss it should ---------- Correct Answer ---------- Do nothing—Olivia had no intent to deceive. Georgia applied for a homeowner policy with Insurance Company (IC). IC's application asked if Georgia's home had an alarm system and Georgia answered that it did. IC issued the policy to Georgia. Two months later, burglars entered Georgia's house and stole several personal property items. At that time, IC discovered that Georgia's home did not have an alarm system. If Georgia's application statement about the alarm were

determined to be a warranty ---------- Correct Answer ---------- IC could avoid Georgia's policy, whether or not the statement was material. Kristian is insured under a commercial property policy written by Fredine Insurance. In Kristian's insurance application, Kristian warranted that he would maintain a private security guard on his premises at all times. Kristian failed to do so, and one night Kristian's property was severely damaged by vandals. If Kristian's statement about maintaining a security guard were interpreted to be a continuing warranty, Fredine should ---------- Correct Answer ---------- Deny Kristian's claim because a continuing warranty states that certain conditions will continue to exist during the policy term and Kristian violated this warranty. An insurance company may deny an insured's claim if the insured has misrepresented or concealed ---------- Correct Answer ---------- A material fact. Carolina, a lessee, leased business property from Millwright Property Management (MPM), a lessor. MPM had fire insurance through Pravalt Insurance Co. Carolina negligently caused a fire loss to the premises and Pravalt paid MPM for this loss. Pravalt then made a subrogation claim against Carolina. Carolina will have to reimburse Pravalt with her own funds, if ---------- Correct Answer ---------- Pravalt did not waive its subrogation rights against Carolina and she did not have separate insurance. Which one of the following types of insurance policies pays a stated amount, regardless of the actual value of the loss? ---------- Correct Answer ---------- Valued policy After buying a 30-acre tract of land, Jerry registered the property deed in a local government office. The purpose of recording or registering his deed was to ---------- Correct Answer ---------- Give notice to the world that the transfer of real property had occurred. Will had not paid Theodore for work on a building addition so Theodore filed a mechanic's lien. Once Will pays for the work the mechanic's lien ---------- Correct Answer ---------- May be cleared by Will. In bailments for mutual benefit, the bailee can use the property ---------- Correct Answer ---------- Only as specified within the bailment agreement or contract. Patty and Bert, who are not married, are tenants in common who own a four-acre plot of land with a log cabin on it. Patty put up capital for the estate while Bert contributed labor and skills. Patty has a son and Bert has a daughter. If Bert, who has no will, predeceases Patty, it is most likely that ---------- Correct Answer ---------- Bert's heirs will receive his portion of the estate as tenants in common. Abby has invented a new media storage device and wants to have exclusive use and control of her new invention. To do this, Abby needs a ---------- Correct Answer ---------- Patent.

Bailors and bailees have rights and duties related to property in bailment. The principal consideration in determining these rights and duties is ---------- Correct Answer ---------- The identification of the intended beneficiary of the bailment. June's employer has a gift program in December of each year that allows employees to select one gift from a catalog of items. These employees are taxed according to the retail value of the item selected and may opt to take cash or even reject the gift option. In this situation the most significant element of the employee's gift is ---------- Correct Answer ---------- June's acceptance of the gift. Johnny sold a cabin to Hannah for $15,000. Two days later he sold the same cabin to Arnie for $10,000. A week later, Johnny sold the cabin to Brenda and signed a contract of sale for $22,000. That same day, Johnny sold the cabin to his sister Kate for $5,000. Kate registered the deed but later learned of the other purchase arrangements. Which one of the purchasers has priority ownership of the cabin? ---------- Correct Answer ------ ---- Kate Carrie's parents own a cottage near a lakeshore. Her parents want Carrie to possess the property and any income produced from it during Carrie's life and then the property will pass on to the grandchildren. What Carrie's parents want for her is best described as ---------- Correct Answer ---------- A life estate. Zach purchased a home through realtor Josephine who arranged a loan with Bank B. Zach will use his new home as security for the bank loan and he has insured the loan with Insurer X. The mortgagee is ---------- Correct Answer ---------- Bank B. A gift requires which one of the following elements? ---------- Correct Answer ---------- Delivery Corporation T owns an office building that it leases to occupants. Cooperative ownership provides for operation and maintenance by someone other than the tenant while guaranteeing a right of occupancy for as long as desired. An advantage of this arrangement for Corporation T is that ---------- Correct Answer ---------- Corporation T has control, in that the corporation ordinarily obtains the mortgage, constructs the building, and then operates it. A land contract is a type of interest in real property. Which one of the following statements about a land contract is true? ---------- Correct Answer ---------- The seller retains title under a land contract. The standard of care owed by bailees in most situations for property of others in their possession because of mutual benefit bailments is ---------- Correct Answer ---------- Reasonable care.