AU62 EXAM UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. A farmer is angry that the neighbor's children ride all-terrain vehicles (ATVs) across
the farmer's fields. The farmer sets a fire behind the storage shed for the ATVs in
order to destroy the ATVs. A child is in the shed when it burns and is injured. A
court decides the farmer is liable for the child's injury based on which one of the
following?
Select one:
A. Intentional tort
B. Strict liability
C. Local ordinance
D. Breach of duty
Answer:
A
Question:
2. The Better Hardware Store recently installed new floors to minimize the chance
that customers will slip and injure themselves. This risk management technique is
an example of
Select one:
A. Loss reduction.
B. Avoidance.
C. Claim management.
D. Loss prevention
Answer:
D
Question:
3. Kate is a commercial lines underwriter. She is evaluating the commercial general
liability application for the Meyer Family Restaurant. Which one of the following
hazards identified in the loss control report would Kate consider to be a special
hazard of the class?
Select one:
A. The cooking grill in the kitchen
B. The dim lighting in the bathrooms
C. The poorly maintained parking lot
D. The amusement rides outside the building
Answer:
A
,Question:
4. Which of the following statements regarding self-insuring healthcare benefits is
true?
Select one:
A. Since the passage of the Employee Retirement Income Security Act (ERISA),
organizations have not been allowed to self-insure healthcare benefits.
B. Self-insured healthcare benefit plans are funded entirely on contributions from
the employer and investment income from the plan year.
C. Employer-based health plans are new to the insurance market and make up a
small percentage, under 1 million, of the employees in the United States.
D. Self-insured healthcare benefit plans are handled by third-party administrators
and usually include purchasing excess insurance.
Answer:
D
Question:
5. Lawn Chemical Company applies fertilizer and weed killer to lawns and shrubs.
Which one of the following is a liability loss exposure to which Lawn Chemical
Company likely has a significant exposure?
Select one:
A. Professional liability
B. Premises liability
C. Vicarious liability
D. Completed operations liability
Answer:
D
Question:
6. Large-account underwriters differ from underwriters with other types of accounts
in the products they offer to their potential accounts. Which one of the following
statements is true regarding servicing large accounts?
Select one:
A. Insurers often use facultative reinsurance to help hedge the financial risk of
potentially large liability losses associated with large accounts
B. Significant loss experience eliminates the need for loss sensitive plans with
large accounts.
C. There are too many variables adding to the loss experience of large accounts,
so most underwriters rely solely on financial statements to establish an account's
credibility.
D. There is more emphasis on the evaluation of large accounts as a member of a
larger category than attention to their individual risk characteristics.
Answer:
A
, Question:
7. Riley Electric is an electrical contractor insured by Stanton Insurance. The
company had been hired to update the wiring in an old bank that was being
turned into a restaurant. A month after the restaurant opened, it suffered a
devastating fire causing minor injuries and significant property damage. An
investigation by the fire department and Stanton Insurance, determined that the
fire was caused by faulty electrical work done by Riley Electric. Which one of the
following primary general liability loss exposures would be responsible for this
loss?
Select one:
A. Completed operations liability
B. Products Liability
C. Premises liability
D. Operations liability
Answer:
A
Question:
8. Charlene's Clothing is a retail store selling expensive women's clothing. It is
insured under an unendorsed Commercial General Liability (CGL) Coverage Form.
One day an employee suspects that a customer is about to shoplift an expensive
handbag, so she grabs the customer and detains her until the police arrive. The
customer files a suit against Charlene's for humiliation and minor bruising. This is an
example of which one of the following CGL loss exposures?
Select one:
A. Premises and operations
B. Personal and advertising injury
C. Medical payments
D. Products and completed operations
Answer:
B
Question:
9. Nicholas is trying to determine the proper general liability classification for a new
account which is described as a door manufacturer. Which one of the following
should Nicholas use as the principal determinant of the classification for this
account?
Select one:
A. The materials used in the process
B. The end use of the product
C. The equipment used in the process
D. The distribution method used
Answer:
B
CORRECT ANSWERS
Question:
1. A farmer is angry that the neighbor's children ride all-terrain vehicles (ATVs) across
the farmer's fields. The farmer sets a fire behind the storage shed for the ATVs in
order to destroy the ATVs. A child is in the shed when it burns and is injured. A
court decides the farmer is liable for the child's injury based on which one of the
following?
Select one:
A. Intentional tort
B. Strict liability
C. Local ordinance
D. Breach of duty
Answer:
A
Question:
2. The Better Hardware Store recently installed new floors to minimize the chance
that customers will slip and injure themselves. This risk management technique is
an example of
Select one:
A. Loss reduction.
B. Avoidance.
C. Claim management.
D. Loss prevention
Answer:
D
Question:
3. Kate is a commercial lines underwriter. She is evaluating the commercial general
liability application for the Meyer Family Restaurant. Which one of the following
hazards identified in the loss control report would Kate consider to be a special
hazard of the class?
Select one:
A. The cooking grill in the kitchen
B. The dim lighting in the bathrooms
C. The poorly maintained parking lot
D. The amusement rides outside the building
Answer:
A
,Question:
4. Which of the following statements regarding self-insuring healthcare benefits is
true?
Select one:
A. Since the passage of the Employee Retirement Income Security Act (ERISA),
organizations have not been allowed to self-insure healthcare benefits.
B. Self-insured healthcare benefit plans are funded entirely on contributions from
the employer and investment income from the plan year.
C. Employer-based health plans are new to the insurance market and make up a
small percentage, under 1 million, of the employees in the United States.
D. Self-insured healthcare benefit plans are handled by third-party administrators
and usually include purchasing excess insurance.
Answer:
D
Question:
5. Lawn Chemical Company applies fertilizer and weed killer to lawns and shrubs.
Which one of the following is a liability loss exposure to which Lawn Chemical
Company likely has a significant exposure?
Select one:
A. Professional liability
B. Premises liability
C. Vicarious liability
D. Completed operations liability
Answer:
D
Question:
6. Large-account underwriters differ from underwriters with other types of accounts
in the products they offer to their potential accounts. Which one of the following
statements is true regarding servicing large accounts?
Select one:
A. Insurers often use facultative reinsurance to help hedge the financial risk of
potentially large liability losses associated with large accounts
B. Significant loss experience eliminates the need for loss sensitive plans with
large accounts.
C. There are too many variables adding to the loss experience of large accounts,
so most underwriters rely solely on financial statements to establish an account's
credibility.
D. There is more emphasis on the evaluation of large accounts as a member of a
larger category than attention to their individual risk characteristics.
Answer:
A
, Question:
7. Riley Electric is an electrical contractor insured by Stanton Insurance. The
company had been hired to update the wiring in an old bank that was being
turned into a restaurant. A month after the restaurant opened, it suffered a
devastating fire causing minor injuries and significant property damage. An
investigation by the fire department and Stanton Insurance, determined that the
fire was caused by faulty electrical work done by Riley Electric. Which one of the
following primary general liability loss exposures would be responsible for this
loss?
Select one:
A. Completed operations liability
B. Products Liability
C. Premises liability
D. Operations liability
Answer:
A
Question:
8. Charlene's Clothing is a retail store selling expensive women's clothing. It is
insured under an unendorsed Commercial General Liability (CGL) Coverage Form.
One day an employee suspects that a customer is about to shoplift an expensive
handbag, so she grabs the customer and detains her until the police arrive. The
customer files a suit against Charlene's for humiliation and minor bruising. This is an
example of which one of the following CGL loss exposures?
Select one:
A. Premises and operations
B. Personal and advertising injury
C. Medical payments
D. Products and completed operations
Answer:
B
Question:
9. Nicholas is trying to determine the proper general liability classification for a new
account which is described as a door manufacturer. Which one of the following
should Nicholas use as the principal determinant of the classification for this
account?
Select one:
A. The materials used in the process
B. The end use of the product
C. The equipment used in the process
D. The distribution method used
Answer:
B
