LOMA 311 MODULE 1 CERTIFICATION
EXAM QUESTIONS WITH CORRECT
ANSWERS
alternative dispute resolution (ADR) methods - Answer-any nonjudicial method of
resolving civil disputes. For example, parties usually first try to settle their disputes
themselves by means of formal or informal negotiations. We commonly refer to disputes
resolved in this way as settled out of court. Mediation and arbitration are two other
common forms of dispute resolution in the United States.
Mediation - Answer-a process in which an impartial third party, known as a mediator,
facilitates negotiations between the parties in an effort to create a mutually agreeable
resolution of the dispute. If the parties are not able to resolve their dispute through
mediation, they typically have the right to arbitration or civil litigation.
Arbitration - Answer-a process in which impartial third parties, known as arbitrators,
evaluate the facts in dispute and render a decision that usually is binding on the parties.
Appeals of arbitrators' decisions are generally possible only if the arbitration was
conducted improperly. Contracts often require that any disputes that arise between the
contracting parties be resolved through arbitration rather than through civil litigation.
Conciliation - Answer-a dispute resolution method that is similar to mediation in that the
parties are encouraged to come to a mutually acceptable agreement; a third party
facilitates the parties' negotiations and helps them resolve the dispute themselves. If the
parties are not able to resolve their dispute through conciliation, they typically have the
right to resort to the courts. For example, in China, courts are required to promote the
process of mediation for resolving civil disputes. Another variation in some countries is
that the mediator's role is to present a nonbinding solution that the parties are
encouraged to accept.
Sole Proprietorship - Answer-a business that is owned and operated by one individual,
who is known as the sole proprietor. A sole proprietorship and the individual who owns
the business are one and the same legal person.
General Partnership - Answer-an association between two or more individuals, known
as the partners, who enter into an agreement to own and operate a business for profit.
A partnership agreement, which may be oral or written, governs the operation of the
partnership. State laws also govern most aspects of the operation of partnerships.
Corporation - Answer--Is a legal entity that is created by the authority of a governmental
unit, such as a state or nation
-Is separate and distinct from the people who own it
,-Continues beyond the death of any or all of its owners
- corporations are created by governmental action.
Two primary features:
1. A corporation is a legal entity that is separate from its owners. As such, a corporation
can sue or be sued, enter into contracts, and own property. The corporation's debts and
liabilities belong to the corporation itself. The owners are not personally responsible for
the corporation's debts. Instead, the personal liability of an owner for the corporation's
debts generally is limited to the amount of the owner's investment in the corporation.
Thus, the owner may lose no more than the amount of her investment in the
corporation.
2. A corporation continues beyond the death of any or all of its owners. This
characteristic of corporations provides an element of stability and permanence. Such
stability makes the corporation the ideal form of business organization for insurance
companies. For example, to protect the rights of policyowners, an insurer must be a
permanent and stable organization that can continue indefinitely. To ensure such
protection, laws in all states in the United States and in many countries require
insurance companies to operate as corporations.
Stock Insurance Company - Answer-an insurance company owned by its stockholders.
A stock company also may be classified according to how its stock is sold.
publicly traded corporation - Answer-a corporation whose stock is available for sale to
the general public.
close corporation - Answer-AKA closely held corp, a corporation that has issued stock
that is owned by a relatively small group of people, often members of the same family.
The stock of a close corporation is not available for sale to the general public.
Mutual Insurance Company - Answer-an insurance company that is owned by its
policyowners, the parties who own insurance policies issued by the company. Mutual
insurers do not issue stock to raise capital.
Fraternal Insurer - Answer-a nonprofit organization, also known as a fraternal benefit
society, that is operated solely for the benefit of its members. It provides its members
with social and insurance benefits. As such, a fraternal insurer may not be required to
become a corporation.
articles of incorporation - Answer-a document that describes some of the essential
features of the corporation. The following information usually must be included in the
articles of incorporation:
-The names and addresses of the incorporators.
,-The name of the proposed corporation. Each corporation must have a unique name.
This name cannot be the same as or deceptively similar to the name of any other
domestic corporation. To let the public know that the business is incorporated, the name
also must include one of these words (or an abbreviation of one): corporation,
incorporated, company, or limited.
-The street address of the corporation's registered office and the name of the
corporation's registered agent at that address. The registered agent is the person the
corporation has appointed as its agent within the state for purposes of service of
process. As we saw in Chapter 2, service of process is the act of delivering—or
serving—a complaint to a defendant in a civil lawsuit.
-For a stock company, the number of shares of stock that the corporation is authorized
to issue. The number of shares would be determined based on the corporation's value
and the price per share. The individuals and businesses that buy the corporation's stock
become the owners of the corporation. ****** Unless the articles of incorp indicate
otherwise, the corp's existence BEGINS when the articles of incorp. are FILED with the
state agency.
certificate of incorporation - Answer-or corporate charter, is a document issued by a
state agency that grants a corporation its legal existence and its right to operate as a
corporation.
domicile - Answer-In the United States, an insurer must select a state in which to
incorporate. That state is then the insurer's domicile or domiciliary state. From the point
of view of a given state, an insurer that incorporates
-In that state is a domestic insurer
-Under the laws of another state is a foreign insurer. so they are incorp. in one state and
do biz in state y and z.
-Under the laws of another country is an alien insurer
In contrast to the United States, most other countries classify insurers as either
domestic or foreign. In these countries, a domestic insurer is incorporated within the
country and a foreign insurer is incorporated under the laws of another country.
Certificate of Authority - Answer-a document issued by the state insurance department
that grants the insurer the right to conduct insurance business in the state. This
licensing requirement enables the insurance department to examine the insurer's
finances and ability to pay policy benefits. The requirement also enables the department
to oversee the insurer's operations.
Model Law - Answer-sometimes called a model act or a uniform law, is a sample law
created and adopted by a national or international organization of regulators,
lawmakers, lawyers, and/or academics. The organization encourages legislatures to
enact laws based on the model. A model law is only a proposed law. To become
effective, the law must be enacted by a legislature.
, NAIC - Answer-a nonprofit association of the insurance commissioners of all U.S. states
and territories. A primary function of the NAIC is to promote uniformity of state
regulation by developing model insurance laws and regulations. ***** to be accredited, a
state must adopt certain laws regarding financial standards and oversight that are
substantially similar to those put forth by the NAIC.
Naic Uniform certificate of Authority Application (UCAA) - Answer-a standardized
application created by the NAIC that allows an insurer to submit the same application to
all states where it intends to do business. Thus, the insurer does not have to submit a
different application to each insurance department. However, the specific requirements
for a certificate of authority vary by state.
Bylaws - Answer-the basic rules under which a corporation operates.
corporations or companies - Answer-They typically have the following characteristics in
common with U.S. corporations:
-The business exists as a legal entity that is separate from its owners. It has the legal
rights and liabilities of a natural person, including the right to sue and be sued and the
right to own property.
-The owners of the business have limited liability for the debts of the business.
-The business continues to exist beyond the death of its owners. In some countries,
however, the business has a life of only a specific number of years. For example, a
corporation in the Philippines has a 50-year lifetime, after which time the corporation
can be renewed for another 50 years.
-A board of directors, described in the following section, is responsible for managing the
affairs of the business.
-The owners (typically stockholders) have the right to make certain important decisions
for the business.
Differences in laws - Answer--Some countries impose minimum capital requirements for
all corporations. In the United States, insurance and financial services companies must
meet minimum capital requirements, but most other types of U.S. businesses are not
subject to such requirements.
-Some countries, such as India, recognize two forms of companies that provide their
owners with limited liability. In these countries, an owner's liability may be either limited
by shares or limited by guarantee. A company limited by shares is a company whose
owners' liability is limited to their investment in the company's stock. A company limited
by guarantee is a company whose owners agree to pay up to a stated amount if the
company is liquidated.
-Some countries have created state-owned businesses, which are operated by the
government for the benefit of the people. These countries include China, Malaysia, and
EXAM QUESTIONS WITH CORRECT
ANSWERS
alternative dispute resolution (ADR) methods - Answer-any nonjudicial method of
resolving civil disputes. For example, parties usually first try to settle their disputes
themselves by means of formal or informal negotiations. We commonly refer to disputes
resolved in this way as settled out of court. Mediation and arbitration are two other
common forms of dispute resolution in the United States.
Mediation - Answer-a process in which an impartial third party, known as a mediator,
facilitates negotiations between the parties in an effort to create a mutually agreeable
resolution of the dispute. If the parties are not able to resolve their dispute through
mediation, they typically have the right to arbitration or civil litigation.
Arbitration - Answer-a process in which impartial third parties, known as arbitrators,
evaluate the facts in dispute and render a decision that usually is binding on the parties.
Appeals of arbitrators' decisions are generally possible only if the arbitration was
conducted improperly. Contracts often require that any disputes that arise between the
contracting parties be resolved through arbitration rather than through civil litigation.
Conciliation - Answer-a dispute resolution method that is similar to mediation in that the
parties are encouraged to come to a mutually acceptable agreement; a third party
facilitates the parties' negotiations and helps them resolve the dispute themselves. If the
parties are not able to resolve their dispute through conciliation, they typically have the
right to resort to the courts. For example, in China, courts are required to promote the
process of mediation for resolving civil disputes. Another variation in some countries is
that the mediator's role is to present a nonbinding solution that the parties are
encouraged to accept.
Sole Proprietorship - Answer-a business that is owned and operated by one individual,
who is known as the sole proprietor. A sole proprietorship and the individual who owns
the business are one and the same legal person.
General Partnership - Answer-an association between two or more individuals, known
as the partners, who enter into an agreement to own and operate a business for profit.
A partnership agreement, which may be oral or written, governs the operation of the
partnership. State laws also govern most aspects of the operation of partnerships.
Corporation - Answer--Is a legal entity that is created by the authority of a governmental
unit, such as a state or nation
-Is separate and distinct from the people who own it
,-Continues beyond the death of any or all of its owners
- corporations are created by governmental action.
Two primary features:
1. A corporation is a legal entity that is separate from its owners. As such, a corporation
can sue or be sued, enter into contracts, and own property. The corporation's debts and
liabilities belong to the corporation itself. The owners are not personally responsible for
the corporation's debts. Instead, the personal liability of an owner for the corporation's
debts generally is limited to the amount of the owner's investment in the corporation.
Thus, the owner may lose no more than the amount of her investment in the
corporation.
2. A corporation continues beyond the death of any or all of its owners. This
characteristic of corporations provides an element of stability and permanence. Such
stability makes the corporation the ideal form of business organization for insurance
companies. For example, to protect the rights of policyowners, an insurer must be a
permanent and stable organization that can continue indefinitely. To ensure such
protection, laws in all states in the United States and in many countries require
insurance companies to operate as corporations.
Stock Insurance Company - Answer-an insurance company owned by its stockholders.
A stock company also may be classified according to how its stock is sold.
publicly traded corporation - Answer-a corporation whose stock is available for sale to
the general public.
close corporation - Answer-AKA closely held corp, a corporation that has issued stock
that is owned by a relatively small group of people, often members of the same family.
The stock of a close corporation is not available for sale to the general public.
Mutual Insurance Company - Answer-an insurance company that is owned by its
policyowners, the parties who own insurance policies issued by the company. Mutual
insurers do not issue stock to raise capital.
Fraternal Insurer - Answer-a nonprofit organization, also known as a fraternal benefit
society, that is operated solely for the benefit of its members. It provides its members
with social and insurance benefits. As such, a fraternal insurer may not be required to
become a corporation.
articles of incorporation - Answer-a document that describes some of the essential
features of the corporation. The following information usually must be included in the
articles of incorporation:
-The names and addresses of the incorporators.
,-The name of the proposed corporation. Each corporation must have a unique name.
This name cannot be the same as or deceptively similar to the name of any other
domestic corporation. To let the public know that the business is incorporated, the name
also must include one of these words (or an abbreviation of one): corporation,
incorporated, company, or limited.
-The street address of the corporation's registered office and the name of the
corporation's registered agent at that address. The registered agent is the person the
corporation has appointed as its agent within the state for purposes of service of
process. As we saw in Chapter 2, service of process is the act of delivering—or
serving—a complaint to a defendant in a civil lawsuit.
-For a stock company, the number of shares of stock that the corporation is authorized
to issue. The number of shares would be determined based on the corporation's value
and the price per share. The individuals and businesses that buy the corporation's stock
become the owners of the corporation. ****** Unless the articles of incorp indicate
otherwise, the corp's existence BEGINS when the articles of incorp. are FILED with the
state agency.
certificate of incorporation - Answer-or corporate charter, is a document issued by a
state agency that grants a corporation its legal existence and its right to operate as a
corporation.
domicile - Answer-In the United States, an insurer must select a state in which to
incorporate. That state is then the insurer's domicile or domiciliary state. From the point
of view of a given state, an insurer that incorporates
-In that state is a domestic insurer
-Under the laws of another state is a foreign insurer. so they are incorp. in one state and
do biz in state y and z.
-Under the laws of another country is an alien insurer
In contrast to the United States, most other countries classify insurers as either
domestic or foreign. In these countries, a domestic insurer is incorporated within the
country and a foreign insurer is incorporated under the laws of another country.
Certificate of Authority - Answer-a document issued by the state insurance department
that grants the insurer the right to conduct insurance business in the state. This
licensing requirement enables the insurance department to examine the insurer's
finances and ability to pay policy benefits. The requirement also enables the department
to oversee the insurer's operations.
Model Law - Answer-sometimes called a model act or a uniform law, is a sample law
created and adopted by a national or international organization of regulators,
lawmakers, lawyers, and/or academics. The organization encourages legislatures to
enact laws based on the model. A model law is only a proposed law. To become
effective, the law must be enacted by a legislature.
, NAIC - Answer-a nonprofit association of the insurance commissioners of all U.S. states
and territories. A primary function of the NAIC is to promote uniformity of state
regulation by developing model insurance laws and regulations. ***** to be accredited, a
state must adopt certain laws regarding financial standards and oversight that are
substantially similar to those put forth by the NAIC.
Naic Uniform certificate of Authority Application (UCAA) - Answer-a standardized
application created by the NAIC that allows an insurer to submit the same application to
all states where it intends to do business. Thus, the insurer does not have to submit a
different application to each insurance department. However, the specific requirements
for a certificate of authority vary by state.
Bylaws - Answer-the basic rules under which a corporation operates.
corporations or companies - Answer-They typically have the following characteristics in
common with U.S. corporations:
-The business exists as a legal entity that is separate from its owners. It has the legal
rights and liabilities of a natural person, including the right to sue and be sued and the
right to own property.
-The owners of the business have limited liability for the debts of the business.
-The business continues to exist beyond the death of its owners. In some countries,
however, the business has a life of only a specific number of years. For example, a
corporation in the Philippines has a 50-year lifetime, after which time the corporation
can be renewed for another 50 years.
-A board of directors, described in the following section, is responsible for managing the
affairs of the business.
-The owners (typically stockholders) have the right to make certain important decisions
for the business.
Differences in laws - Answer--Some countries impose minimum capital requirements for
all corporations. In the United States, insurance and financial services companies must
meet minimum capital requirements, but most other types of U.S. businesses are not
subject to such requirements.
-Some countries, such as India, recognize two forms of companies that provide their
owners with limited liability. In these countries, an owner's liability may be either limited
by shares or limited by guarantee. A company limited by shares is a company whose
owners' liability is limited to their investment in the company's stock. A company limited
by guarantee is a company whose owners agree to pay up to a stated amount if the
company is liquidated.
-Some countries have created state-owned businesses, which are operated by the
government for the benefit of the people. These countries include China, Malaysia, and
