California Property & Casualty Insurance
Examination with Practice Questions And
Correct
1. Under the California Insurance Code, which of the following best describes the
requirement for an insurer to provide a written explanation when denying a claim
based on a policy exclusion?
A. The insurer must provide a written explanation only if the claimant requests it in
writing within 30 days of denial.
B. The insurer must provide a written explanation citing the specific policy provision and
facts supporting the denial within 40 days of receiving proof of claim.
C. The insurer is not required to provide a written explanation for denial based on
exclusions if the denial is communicated verbally.
D. The insurer must provide a written explanation only for claims exceeding $10,000.
Answer: B. The insurer must provide a written explanation citing the specific policy
provision and facts supporting the denial within 40 days of receiving proof of claim.
Rationale: California Fair Claims Settlement Practices Regulations (10 CCR § 2695.7(b))
require insurers to provide a written explanation for denial, citing the specific policy
provision and facts, within 40 calendar days of receiving proof of claim. Options A, C, and
D misstate the requirement, either adding unnecessary conditions or omitting the
mandatory written explanation.
Page 1 of 100
,2. A homeowner's policy includes a replacement cost provision for dwelling and
personal property. After a total loss, the insured decides not to rebuild and instead
sells the vacant lot. How does the insurer typically settle the dwelling loss?
A. Pay the replacement cost of the dwelling without deduction for depreciation,
regardless of rebuild intent.
B. Pay the actual cash value of the dwelling at the time of loss, as the insured did not
rebuild.
C. Pay the market value of the property, including land value.
D. Pay the original purchase price of the home adjusted for inflation.
Answer: B. Pay the actual cash value of the dwelling at the time of loss, as the insured
did not rebuild.
Rationale: Under replacement cost coverage, the insured must actually repair or rebuild to
receive full replacement cost; otherwise, settlement is limited to actual cash value (ACV).
Options A, C, and D incorrectly assume full replacement cost, market value including land,
or purchase price, none of which apply when the dwelling is not rebuilt.
Page 2 of 100
,3. In commercial general liability (CGL) insurance, which of the following scenarios
would trigger the 'personal and advertising injury' coverage rather than 'bodily
injury' or 'property damage'?
A. A customer slips and falls in the insured's store, sustaining a back injury.
B. The insured's employee accidentally damages a client's computer during a service call.
C. The insured publishes a newsletter falsely accusing a competitor of fraud, causing
reputational harm.
D. The insured's delivery truck collides with a pedestrian, causing medical expenses.
Answer: C. The insured publishes a newsletter falsely accusing a competitor of fraud,
causing reputational harm.
Rationale: Personal and advertising injury covers offenses such as libel, slander, and
disparagement, as in option C. Options A, B, and D involve bodily injury or property
damage, which are covered under other sections of the CGL policy.
4. An insured has a personal auto policy with liability limits of 100/300/50. The insured
causes an accident with total damages of $150,000 for one injured party and $200,000
for another. How will the insurer pay, assuming no other coverage?
A. Pay $100,000 to the first party and $200,000 to the second, totaling $300,000.
B. Pay $100,000 to the first party and $100,000 to the second, totaling $200,000.
C. Pay $150,000 to the first party and $150,000 to the second, totaling $300,000.
D. Pay $100,000 to the first party and $50,000 to the second, totaling $150,000.
Answer: B. Pay $100,000 to the first party and $100,000 to the second, totaling
$200,000.
Rationale: The policy limits are $100,000 per person and $300,000 per accident. The
insurer pays up to $100,000 per person, so the first party receives $100,000 (not $150,000)
and the second receives $100,000, totaling $200,000, which is within the $300,000
aggregate. Options A and C exceed the per-person limit; option D incorrectly applies the
property damage limit.
Page 3 of 100
, 5. Which of the following statements accurately reflects the California requirement for
continuing education for property and casualty insurance licensees?
A. Licensees must complete 24 hours of continuing education every two years, including
3 hours of ethics.
B. Licensees must complete 30 hours of continuing education annually, with no ethics
requirement.
C. Licensees must complete 12 hours of continuing education every year, including 1
hour of ethics.
D. Licensees are exempt from continuing education if they have over 20 years of
experience.
Answer: A. Licensees must complete 24 hours of continuing education every two
years, including 3 hours of ethics.
Rationale: California Insurance Code § 1749.3 requires property and casualty licensees to
complete 24 hours of continuing education every two-year license term, including at least 3
hours of ethics. Options B, C, and D misstate the hours, frequency, or exemptions.
6. A commercial property policy includes a coinsurance clause of 80%. The insured
has a building with a replacement cost of $1,000,000 but insures it for $600,000. A loss
of $200,000 occurs. Ignoring deductibles, how much will the insurer pay?
A. $200,000
B. $150,000
C. $120,000
D. $160,000
Answer: B. $150,000
Rationale: The coinsurance penalty applies: (insured value / required value) × loss =
($600,000 / $800,000) × $200,000 = 0.75 × $200,000 = $150,000. Options A, C, and D
miscalculate the ratio or ignore the penalty.
Page 4 of 100
Examination with Practice Questions And
Correct
1. Under the California Insurance Code, which of the following best describes the
requirement for an insurer to provide a written explanation when denying a claim
based on a policy exclusion?
A. The insurer must provide a written explanation only if the claimant requests it in
writing within 30 days of denial.
B. The insurer must provide a written explanation citing the specific policy provision and
facts supporting the denial within 40 days of receiving proof of claim.
C. The insurer is not required to provide a written explanation for denial based on
exclusions if the denial is communicated verbally.
D. The insurer must provide a written explanation only for claims exceeding $10,000.
Answer: B. The insurer must provide a written explanation citing the specific policy
provision and facts supporting the denial within 40 days of receiving proof of claim.
Rationale: California Fair Claims Settlement Practices Regulations (10 CCR § 2695.7(b))
require insurers to provide a written explanation for denial, citing the specific policy
provision and facts, within 40 calendar days of receiving proof of claim. Options A, C, and
D misstate the requirement, either adding unnecessary conditions or omitting the
mandatory written explanation.
Page 1 of 100
,2. A homeowner's policy includes a replacement cost provision for dwelling and
personal property. After a total loss, the insured decides not to rebuild and instead
sells the vacant lot. How does the insurer typically settle the dwelling loss?
A. Pay the replacement cost of the dwelling without deduction for depreciation,
regardless of rebuild intent.
B. Pay the actual cash value of the dwelling at the time of loss, as the insured did not
rebuild.
C. Pay the market value of the property, including land value.
D. Pay the original purchase price of the home adjusted for inflation.
Answer: B. Pay the actual cash value of the dwelling at the time of loss, as the insured
did not rebuild.
Rationale: Under replacement cost coverage, the insured must actually repair or rebuild to
receive full replacement cost; otherwise, settlement is limited to actual cash value (ACV).
Options A, C, and D incorrectly assume full replacement cost, market value including land,
or purchase price, none of which apply when the dwelling is not rebuilt.
Page 2 of 100
,3. In commercial general liability (CGL) insurance, which of the following scenarios
would trigger the 'personal and advertising injury' coverage rather than 'bodily
injury' or 'property damage'?
A. A customer slips and falls in the insured's store, sustaining a back injury.
B. The insured's employee accidentally damages a client's computer during a service call.
C. The insured publishes a newsletter falsely accusing a competitor of fraud, causing
reputational harm.
D. The insured's delivery truck collides with a pedestrian, causing medical expenses.
Answer: C. The insured publishes a newsletter falsely accusing a competitor of fraud,
causing reputational harm.
Rationale: Personal and advertising injury covers offenses such as libel, slander, and
disparagement, as in option C. Options A, B, and D involve bodily injury or property
damage, which are covered under other sections of the CGL policy.
4. An insured has a personal auto policy with liability limits of 100/300/50. The insured
causes an accident with total damages of $150,000 for one injured party and $200,000
for another. How will the insurer pay, assuming no other coverage?
A. Pay $100,000 to the first party and $200,000 to the second, totaling $300,000.
B. Pay $100,000 to the first party and $100,000 to the second, totaling $200,000.
C. Pay $150,000 to the first party and $150,000 to the second, totaling $300,000.
D. Pay $100,000 to the first party and $50,000 to the second, totaling $150,000.
Answer: B. Pay $100,000 to the first party and $100,000 to the second, totaling
$200,000.
Rationale: The policy limits are $100,000 per person and $300,000 per accident. The
insurer pays up to $100,000 per person, so the first party receives $100,000 (not $150,000)
and the second receives $100,000, totaling $200,000, which is within the $300,000
aggregate. Options A and C exceed the per-person limit; option D incorrectly applies the
property damage limit.
Page 3 of 100
, 5. Which of the following statements accurately reflects the California requirement for
continuing education for property and casualty insurance licensees?
A. Licensees must complete 24 hours of continuing education every two years, including
3 hours of ethics.
B. Licensees must complete 30 hours of continuing education annually, with no ethics
requirement.
C. Licensees must complete 12 hours of continuing education every year, including 1
hour of ethics.
D. Licensees are exempt from continuing education if they have over 20 years of
experience.
Answer: A. Licensees must complete 24 hours of continuing education every two
years, including 3 hours of ethics.
Rationale: California Insurance Code § 1749.3 requires property and casualty licensees to
complete 24 hours of continuing education every two-year license term, including at least 3
hours of ethics. Options B, C, and D misstate the hours, frequency, or exemptions.
6. A commercial property policy includes a coinsurance clause of 80%. The insured
has a building with a replacement cost of $1,000,000 but insures it for $600,000. A loss
of $200,000 occurs. Ignoring deductibles, how much will the insurer pay?
A. $200,000
B. $150,000
C. $120,000
D. $160,000
Answer: B. $150,000
Rationale: The coinsurance penalty applies: (insured value / required value) × loss =
($600,000 / $800,000) × $200,000 = 0.75 × $200,000 = $150,000. Options A, C, and D
miscalculate the ratio or ignore the penalty.
Page 4 of 100
