California Commercial Insurance Exam with complete solutions

What is a Modular Policy? - ANSWER-A modular policy is a policy consisting of several different documents, none of which by itself forms a complete contract. What is a Commercial Package Policy (CPP)? - ANSWER-A Commercial Package Policy is a modular policy that combines different forms and more than one line of coverage. What must a CPP policy consist of? - ANSWER-A Declaration Page (stating premium charges and coverage limits) A Policy Conditions (six conditions that apply to the entire contract) Two or more Coverage Modules/Parts What is the purpose of an Interline form? - ANSWER-An Interline form is used to eliminate redundancy and minimize the number of pages. EXAMPLE: A CPP policy only contains one Declarations page listing all of the separate coverages. In this case the Declaration page would be considered an interline form. What is a Monoline form? - ANSWER-A Monoline form only contains one 1 coverage part. (A single coverage policy) In a Commercial policy, who can cancel, request changes, is responsible for premium, and will be the only person named on a refund of premium? - ANSWER-The first named insured. NOTE: This may be an individual or a company. What are the 6 common conditions in a Commercial policy? - ANSWER-Cancellation, Changes, Inspections and Surveys, Premiums, How many days does the Insurer have to provide written notice to the Insured before cancellation of their policy? - ANSWER-10 days prior to the date of cancellation for nonpayment of premium. 30 days prior to the date of cancellation for any other allowable reason. NOTE: The insure must be able to prove it has mails the cancellation notice to the address on file, although no proof of delivery of this notice is required. When can an insurer cancel a policy? - ANSWER-An insurer can cancel a policy at anytime but only under certain conditions. When can Examination of Books and Records be completed? - ANSWER-At anytime during the policy period and for up to three years after the policy ends/expires. This is done to verify that the insure has collected the appropriate premium. What is the Inspections and Surveys condition? - ANSWER-The insurer has the right but is not obligated to inspect the property and make recommendations. This is done for insurability and rating only. It does not warrant the place safe or in compliance. What is the Premium condition? - ANSWER-The Premium condition states that the first named insured is responsible to make timely payment of premiums and will also be the payee on any refunds the insurer may send. What is the Transfer of Rights and Duties Under the Policy condition? - ANSWER-This condition allows for the transfer of the insured's rights and duties to his or her legal representative, but only at death. In no other instance is transfer allowed without written consent from the insurer. What is assignment? - ANSWER-Assignment is the transfer of rights and duties under a policy if the first named insured dies. What is a Coverage Part? - ANSWER-A Coverage Part is a component of a CPP or a Monoline Policy that contains the policy provisions relating to a particular line of business, such as commercial property or commercial auto. What are the 7 Coverage Parts? - ANSWER-Commercial Property, Commercial General Liability, Commercial Automobile Insurance, Commercial Crime, Commercial Inland Marine, Boiler and Machinery Insurance (Equipment Breakdown), and Farm Coverage. What are the California Amendatory Endorsements? - ANSWER-It states that if the policy has been in effect for less than 60 days and is not a renewal, the insurer can cancel for any reason. If the policy has been in effect for atleast 60 days or is a renewal, then the insurer may only cancel for one or more of the allowable reasons. It also states that if the insurer decides to non renew the policy, the insurer must provide notice atleast 60 days in advance, but not more than 120 days before the expiration date. What does "You" refer to a Commercial Policy? - ANSWER-The named insured. What does "Your" refer to a Commercial Policy? - ANSWER-The named insured on the declarations page and a resident spouse. What does "We" "Us" and "Our" refer to in a Commercial Policy? - ANSWER-The insurance company providing the coverage. What are the 9 property conditions? - ANSWER-Concealment, Misrepresentation or Fraud Coverage, Control of Property, Insurance Under Two or More Coverages, Other Insurance, Legal Action Against the Insurer, Liberalization. No benefit to Bailee, Policy Period and Coverage Territory, and Transfer of Rights of Recovery Against Others (Subrogation). What is the Concealment, Misrepresentation or Fraud Coverage condition? - ANSWER-this condition states that, if intentional concealment, misrepresentation, or fraud on the part of the insured is discovered, the insurer has cause to void the contract and deny coverage. NOTE: This condition relates only to the Property Coverage portion of the policy. What is the Control of Property condition? - ANSWER-This condition expresses the understanding that the insured may not alway have control over what happens to the insureds property. (E.G. If someone else creates a hazard that causes a loss to the property). As long as the condition is outside of the insured's control, the coverage is not voided under these conditions. What is the Insurance Under Two or More Coverages condition? - ANSWER-If more than one of the policy coverages apply to the same loss, the insurer will not pay more that the actual amount of the loss or damage. This provision is necessary because a loss to property might be covered under two or more coverage parts that can be included in a single package. This supports the principle of indemnity by preventing double recovery. What is the Other Insurance condition? - ANSWER-This provision applies when there is more than one policy that applies to the loss. This condition has two parts: Pro Rata Liability and Other Insurance condition. Pro Rata Liability states that, if the insured had more than one policy insuring the same property with the same terms, conditions, perils, etc., then each company will pay its share of the loss. Under the Other Insurance condition, if the terms, conditions, perils, etc., are different on each policy, one will be considered primary and tyne other excess. What is the Legal Action Against the Insurer condition? - ANSWER-An insured may bring legal action against an insurer if the insured feels coverage was denied when it should have been allowed, as long as two conditions have been met: 1) The suit is within two years of the loss date, and 2) All conditions and terms of the policy have been adhered to. What is the Liberalization condition? - ANSWER-This provision states that if the insurer broadens the coverage without any additional premium being charged, the revision will automatically apply to the coverage part. As long as it is during the policy period or within 45 days prior to the effective date. What is the No Benefit to Bailee condition? - ANSWER-The insurance will not ignore the obligations of the bailee for a loss to customers; property. The insurer will still pay the insured for covered losses, but this clause preserves the insurer's right to subrogate against the negligent bailee for the amount of the claim paid. What is a Bailee? - ANSWER-A person who has possession, care, custody , or control of the property of customers for business purposes. What is the Policy period, Coverage Territory condition? - ANSWER-This Condition states that loss must occur during the policy period and within the covered territory. Coverage begins on the effective/inception date and ends on the expiration date shown in the declarations. The time is determined by standard time at the insured's mailing address shown in the declaration, even when the risk is located in a different time zone. THe covered territory consists of the United States, its possessions and territories, Puerto Rico, or Canada. NOTE: Incase of Earthquake Insurance, coverage may apply up to 168 hours after an initial quake. What is the Transfer of Rights of Recovery Against Others condition? - ANSWER-If the insurer makes payments to the insured for a covered loss, the insured is obligated to cooperate with the company in seeking recovery from the responsible party.(Subrogation) NOTE: The insured has the right too waive subrogation rights against another party in writing if the waiver is made prior to the loss. Waiver of recovery may be given by the insured after the loss, but only to someone insured by the coverage part, a tenant of the insure, or a parent, or subsidiary company. What is the Building and Personal Property Coverage Form? (BPP) - ANSWER-The BPP is the most commonly used commercial property coverage Form. What are the 9 sections of a Building and Personal Property Coverage Form? - ANSWER-Covered property, property not covered, additional coverages, coverage extensions, limits of insurance, deductible, loss conditions, additional conditions, and optional coverages. What are the 3 categories the BPP form is designed to provide physical damage coverage for? - ANSWER-Building Personal property Property of others NOTE: Each will need a cause of loss form attached. Either: Basic, Broad, or Special form. What is Coverage A under the BPP? - ANSWER-Building coverage. Building coverage applies to buildings and other separate structures described on the Declarations Page. It also includes any permanently installed air conditioning units and other machinery and equipment, indoor and out