AIC 303 QUESTIONS AND ANSWERS MIDTERM EXAM 2025

AIC 303 QUESTIONS AND ANSWERS MIDTERM EXAM 2025 A consent-to-settle clause is generally found only in which one of the following types of policy? A. Automotive liability B. Premises liability C. Products liability D. Professional liability D. Professional liability Physical evidence that is improperly handled or stored might be challenged in court because it is no longer A. Relevant. B. Consequential. C. Competent. D. Material. C. Competent. LeeAnn, a claims representative, is handling a claim with unusual coverage and liability issues, and believes her insurer would win if the case were to go to trial. She might wish to settle the claim instead A. To maintain goodwill with the insured. B. Because a case of that type is not likely to occur again. C. Because courts will generally favor the plaintiff. D. Because an unfavorable court decision might then be applied to many other claims with less merit. D. Because an unfavorable court decision might then be applied to many other claims with less merit. All of the following exclusions are found in a typical personal umbrella policy, EXCEPT: A. Personal injury B. Aircraft liability C. Professional liability D. Nuclear energy A. Personal injury Which one of the following statements is most accurate? A. Court decisions, statutes, and insurance regulations tend to vary from year to year but remain consistent from state to state. AIC 303 AIC 303 B. Court decisions, statutes, and insurance regulations may change from one year to the next and vary from one state to another. C. Court decisions, statutes, and insurance regulations tend to remain consistent from year to year and from state to state. D. Court decisions, statutes, and insurance regulations tend to remain consistent from year to year but vary from state to state. B. Court decisions, statutes, and insurance regulations may change from one year to the next and vary from one state to another. The typical personal umbrella policy includes coverage for personal injury liability, property damage liability, and A. Business pursuits. B. Professional liability. C. Defense costs. D. Intentional injury. C. Defense costs. Under the Additional Coverages in Section Il—Liability Coverages of the HO-3 policy, the insurer promises to pay certain claim expenses. These covered expenses include which one of the following? A. Any postjudgment interest that accrues before the plaintiff is paid by the insurer B. An unlimited amount of wages lost by the insured while assisting in defense of a claim or suit C. The face amount of any bond the insured is required by the court to obtain D. The premium on bonds in excess of the policy's Coverage E limit A. Any postjudgment interest that accrues before the plaintiff is paid by the insurer All of the following are included as insureds for Section Il coverages in the HO-3 policy, EXCEPT: A. Residents of the household who are under the age of 21 and in the care of the named insured B. Relatives of the named insured who are visiting in the household for the weekend C. Any person legally responsible for an animal owned by the named insured D. The spouse of the named insured, residing in the same household B. Relatives of the named insured who are visiting in the household for the weekend Which one of the following businesses would most likely be eligible for coverage under an ISO Businessowners Policy? A. Dry Cleaners — 20,000 square feet, gross sales of $2 million B. Henri's Gourmet Restaurant — gross sales of $3 million, 40,000 square feet C. Antique Auto Dealers — gross sales of $2 million D. Convenience Store — gasoline sales 60 percent of gross sales, 25,000 square feet D. Convenience Store — gasoline sales 60 percent of gross sales, 25,000 square feet The additional coverage for loss assessment of the HO-3 policy provides up to $1,000 coverage AIC 303 AIC 303 A. For charges assessed against the insured as a result of a hold harmless agreement to which the insured is a party. B. For charges assessed against the insured as a result of the insured rendering or failing to render professional services to a third party. C. For charges assessed against the insured for costs incurred by a volunteer fire department in fighting a fire at the insured location. D. For an assessment against the insured by a homeowners association for a part of damages awarded against the homeowners association and not otherwise excluded in Section Il—Liability Coverages. D. For an assessment against the insured by a homeowners association for a part of damages awarded against the homeowners association and not otherwise excluded in Section Il—Liability Coverages. Which one of the following statements is correct regarding most primary cyber risk policies? A. Subsidiaries acquired during the policy period are excluded. B. Cyber risk policies have an occurrence coverage trigger. C. Cyber risk policies have a high self-insured retention. D. The coverage territory for third-party liability claims is worldwide. D. The coverage territory for third-party liability claims is worldwide. Beatrice was injured in an auto accident and has a lawsuit with the driver. The court awarded her compensation for medical bills, lost wages, auto repairs, and emotional distress. Which one of Beatrice's damage awards is categorized as general damages? A. Emotional distress B. Medical bills C. Lost wages D. Auto repairs A. Emotional distress Which one of the following statements about architects and engineers professional liability insurance is true? A. Architects and engineers policies are usually subject to a per-claim limit and an annual aggregate limit. B. Defense costs are usually paid in addition to the stated liability limit. C. The coverage territory is usually the U.S., its territories and possessions, or Canada. D. Subcontractors of the named insured are automatically protected under most policies. A. Architects and engineers policies are usually subject to a per-claim limit and an annual aggregate limit. Sofia's computer is not working, so she takes it to Emil's computer repair shop to be repaired. With respect to the computer, Emil owes Sofia a duty of A. Great care. B. Ordinary care. AIC 303 AIC 303 C. Slight care. D. No care. B. Ordinary care. Combination excess liability insurance policies A. Always drop down to cover a claim excluded by the primary policy. B. Incorporate the provisions of the underlying policies and then modify those provisions with additional conditions or exclusions. C. Must contain a self-insured retention for those instances where the coverage afforded is broader than that of the primary policy. D. Do not drop down to replace depleted aggregate limits. B. Incorporate the provisions of the underlying policies and then modify those provisions with additional conditions or exclusions. In most cyber risk policies, the coverage territory for third-party liability claims is A. Limited to the countries served by the insured. B. Limited to areas specifically noted in the Declarations. C. Worldwide. D. Limited to the United States. C. Worldwide. A following form excess liability policy will treat a loss caused by a peril excluded by the underlying policy in which one of the following ways? A. It will provide coverage subject to a self-insured retention. B. It will provide coverage subject to a buffer layer. C. It will exclude coverage except for punitive damages. D. It will exclude coverage. D. It will exclude coverage. The Upsilon Corporation has a Commercial General Liability (CGI) Coverage Form with an each occurrence limit of $1 million for liability coverage. It also has an additional policy that provides another $1 million of coverage if the CGL limits are inadequate. The additional policy only applies if the commercial general liability policy covers the loss. This additional policy is an example of A. An aggregate liability policy. B. An excess liability policy. C. Underlying liability coverage. D. An umbrella liability policy. B. An excess liability policy. Which one of the following describes the coverage territory found in most professional liability policies? A. In the United States or Canada, as long as suit is brought in one of those jurisdictions B. Anywhere in the world, regardless of where a suit is brought C. Anywhere in the world, as long as suit is brought in the United States, its territories or possessions, or Canada AIC 303 AIC 303 D. In jurisdictions where the insured is legally licensed, regardless of where a suit is brought C. Anywhere in the world, as long as suit is brought in the United States, its territories or possessions, or Canada As an underwriter, Jill is often asked to explain the difference between an umbrella liability policy and an excess liability policy. Which one of the following is the major characteristic that distinguishes an umbrella liability policy from an excess liability policy? A. The umbrella liability policy eliminates the requirement for an insured to carry underlying coverages. B. The umbrella liability policy provides coverage for certain types of losses that are not available in underlying coverages. C. The umbrella liability policy is written by non-U.S. domiciled rather than by domestic insurers. D. The umbrella liability policy must be written before an insured is eligible for an excess liability policy. B. The umbrella liability policy provides coverage for certain types of losses that are not available in underlying coverages. Shun is handling a wrongful death claim and is calculating benefits for the surviving spouse. For the pecuniary loss portion, Shun includes A. Medical cost and property loss. B. Loss of consortium and loss of companionship. C. Earnings and household services. D. Pain and suffering and mental anguish. C. Earnings and household services. In executing a claim settlement with a corporation, the claims representative must have the release signed by A. The corporation's chief financial officer. B. An authorized officer of the corporation. C. The individual responsible for the loss. D. A majority of the board members. B. An authorized officer of the corporation. The legal doctrine that provides that damages owed to a victim should not be reduced because the victim is entitled to recover money from another source is called the A. Coordination of benefits rule. B. Contribution rule. C. Collateral source rule. D. Double indemnification rule. C. Collateral source rule. Shannon operates a home-based business making decorative rugs, and carries homeowners liability but no commercial liability coverage. After purchasing one of Shannon's rugs, a customer slips on a defect in the rug and falls in her own home, AIC 303 AIC 303 injuring herself. Which one of the following statements regarding Shannon's liability and coverage in this situation is most likely to be correct? A. Shannon is neither liable nor covered. B. Shannon is both liable and covered. C. Shannon is liable but not covered. D. Shannon is covered but not liable. C. Shannon is liable but not covered. Freja's sister was killed after an automobile accident and a long stay in the hospital and she is making a claim for what her sister would have recovered if she had survived the accident. Freja's claim is termed a A. Decedent action. B. Survival action. C. Wrongful death action. D. Pecuniary loss action. B. Survival action. Dan and Laura, a married couple, jointly own a vehicle that is damaged in an accident while Dan is driving alone. Who should sign the release upon settlement of the claim? A. Dan only B. No signature is required since there were no injuries C. Both Dan and Laura D. Either Dan or Laura C. Both Dan and Laura The two most common ways to conclude claims involving minors are through a parent guardian release and A. Through litigation. B. Through subrogation. C. Through a fund established by the state insurance commissioner's office. D. Through court-approved settlements. D. Through court-approved settlements. In certain circumstances where a claimant is nonresponsive, a claims rep may issue a payment with a release form to be signed, concluding the claim. This is called a(n) A. Drop draft settlement. B. First-call settlement. C. Presumptive settlement. D. Advance payment. A. Drop draft settlement. Sho is a claims representative who is assessing the degree of the insured's liability in an auto claim. The legal department tells him that they feel liability is questionable. Sho takes this to mean that A. It is unclear which party bears primary responsibility. AIC 303 AIC 303 B. The insured was probably at fault for the accident. C. There is no question the insured was entirely at fault. D. In all likelihood the insured was not liable for the accident. A. It is unclear which party bears primary responsibility. Which one of the following terms describes the right of a tortfeasor who had paid more than his or her proportionate share of damages to collect from other tortfeasors? A. Indemnity B. Contribution C. Subrogation D. First refusal B. Contribution Katie owns a public storage facility that has been the scene of multiple crimes involving theft of property from the units and attacks on customers. Samuel is a customer of the storage facility and was injured in one such attack as he was retrieving items from his storage unit. Samuel brought a lawsuit against Katie based on the legal theory of A. Special relationship. B. Statutory duty to provide security. C. Special circumstances. D. Voluntary assumption of liability. C. Special circumstances. Erin has entered Harry's property for a social event. Being m