CAIB 2 EXAM PRACTICE QUESTIONS AND
DETAILED SOLUTIONS
◉ What may an Insurer do when there has been a Breach of
Conditions in the policy?
Answer: the Insurer may have grounds to deny coverage
◉ Identify two instances when an Insurer may NOT deny coverage
when there has been a breach:
Answer: - the loss was not caused or contributed by the breach
- the breach condition occurred in a portion of the premises over
which the insured has no control
◉ Explain the effect of the Reinstatement clause:
Answer: The Reinstatement clause provides the insureds shall have
as much insurance after a loss as they did before.
◉ Do all Insurers treat the issue of 'unearned premium' the same in
the event of a total loss?
Answer: Some insurers are not willing to accept that the insureds
should be entitled to a refund premium when they have collected for
a loss under the policy.
,◉ Explain the operation of Subrogation:
Answer: it is the right of the insurer to sue the party at fault, after
paying the claim to the injured party
◉ Identify two parties against whom the Insurer will NOT exercise
Subrogation:
Answer: - individuals
- banks, trust companies
◉ Identify three types of Property Protection Systems:
Answer: - sprinkler, or other fire extinguishing system
- fire detection system
- intrusion detection system
◉ Identify three obligations placed upon Insured who have installed
any Property Protection Systems:
Answer: 1) the insured shall notify the insurer "forthwith" of any
INTERRUPTION, FLAW or DEFECT to the knowledge of the insured
IN ANY SUCH SYSTEMS.
2) the insured shall notify the insurer forthwith when any contract
providing MONITORING or MAINTENANCE SERVICES TO SYSTMS
HAS BEEN CANCELED OR NOT RENEWED.
,3) the insured shall notify the insurer forthwith when provided with
NOTIFICATION OF THE SUSPENSION OF POLICY SERVICE N
RESPONSE TO ANY OF THE ABOVE SYSTEMS
◉ Identify the class of property to which the Premium Adjustment
clause will apply:
Answer: Stock
◉ Identify two guidelines before a premium adjustment will be
permitted:
Answer: - claims for return of premium must be submitted no later
than 6 months after the policy expiry date
- claims must be presented on a Premium Adjustment Form,
showing actual cash value of stock on the last day of each month.
◉ Identify three things the Verification of Values clause allows the
|Insurer to do:
Answer: 1) allows the insurer THE RIGHT TO CONFIRM THE
VALUES INSURED UNDER THE POLICY ARE REASONAABLE AND
ACTUALLY EXIST
, 2) permits the insurer THE OPPORTUNITY TO DETERMINE VALUES
ON HAND AT THE TIME OF A PREVIOUS LOSS
3) enables the insurer to DETERMINE THE EXISTENCE OF ANY
OTHER POLICIES OF INSURANCE WHICH MIGHT BE CALLED UPON
TO SHARE IN THE PAYMENT OF A LOSS.
◉ Identify under Basis of Valuations how losses will be paid on
items of stock: UNSOLD & SOLD:
Answer: UNSOLD: restricted to its "actual cash value at the time of a
loss"
SOLD: the selling price charged to the purchaser, less any discounts
allowed.
◉ Identify three types of discounts that will be considered when
adjusting loss on sold stock:
Answer: 1) picked up by purchaser
2) trade-ins
3) any reduction in selling price because of negotiation between
seller and buyer
◉ Identify two types of property which are subject to a 'special basis
of settlement':
DETAILED SOLUTIONS
◉ What may an Insurer do when there has been a Breach of
Conditions in the policy?
Answer: the Insurer may have grounds to deny coverage
◉ Identify two instances when an Insurer may NOT deny coverage
when there has been a breach:
Answer: - the loss was not caused or contributed by the breach
- the breach condition occurred in a portion of the premises over
which the insured has no control
◉ Explain the effect of the Reinstatement clause:
Answer: The Reinstatement clause provides the insureds shall have
as much insurance after a loss as they did before.
◉ Do all Insurers treat the issue of 'unearned premium' the same in
the event of a total loss?
Answer: Some insurers are not willing to accept that the insureds
should be entitled to a refund premium when they have collected for
a loss under the policy.
,◉ Explain the operation of Subrogation:
Answer: it is the right of the insurer to sue the party at fault, after
paying the claim to the injured party
◉ Identify two parties against whom the Insurer will NOT exercise
Subrogation:
Answer: - individuals
- banks, trust companies
◉ Identify three types of Property Protection Systems:
Answer: - sprinkler, or other fire extinguishing system
- fire detection system
- intrusion detection system
◉ Identify three obligations placed upon Insured who have installed
any Property Protection Systems:
Answer: 1) the insured shall notify the insurer "forthwith" of any
INTERRUPTION, FLAW or DEFECT to the knowledge of the insured
IN ANY SUCH SYSTEMS.
2) the insured shall notify the insurer forthwith when any contract
providing MONITORING or MAINTENANCE SERVICES TO SYSTMS
HAS BEEN CANCELED OR NOT RENEWED.
,3) the insured shall notify the insurer forthwith when provided with
NOTIFICATION OF THE SUSPENSION OF POLICY SERVICE N
RESPONSE TO ANY OF THE ABOVE SYSTEMS
◉ Identify the class of property to which the Premium Adjustment
clause will apply:
Answer: Stock
◉ Identify two guidelines before a premium adjustment will be
permitted:
Answer: - claims for return of premium must be submitted no later
than 6 months after the policy expiry date
- claims must be presented on a Premium Adjustment Form,
showing actual cash value of stock on the last day of each month.
◉ Identify three things the Verification of Values clause allows the
|Insurer to do:
Answer: 1) allows the insurer THE RIGHT TO CONFIRM THE
VALUES INSURED UNDER THE POLICY ARE REASONAABLE AND
ACTUALLY EXIST
, 2) permits the insurer THE OPPORTUNITY TO DETERMINE VALUES
ON HAND AT THE TIME OF A PREVIOUS LOSS
3) enables the insurer to DETERMINE THE EXISTENCE OF ANY
OTHER POLICIES OF INSURANCE WHICH MIGHT BE CALLED UPON
TO SHARE IN THE PAYMENT OF A LOSS.
◉ Identify under Basis of Valuations how losses will be paid on
items of stock: UNSOLD & SOLD:
Answer: UNSOLD: restricted to its "actual cash value at the time of a
loss"
SOLD: the selling price charged to the purchaser, less any discounts
allowed.
◉ Identify three types of discounts that will be considered when
adjusting loss on sold stock:
Answer: 1) picked up by purchaser
2) trade-ins
3) any reduction in selling price because of negotiation between
seller and buyer
◉ Identify two types of property which are subject to a 'special basis
of settlement':
