AFSB 151 Study Guide Questions With Correct Answers.
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Course
AFSB 151
Institution
AFSB 151
AFSB 151 Study Guide Questions With Correct Answers.
Anthony is the surety producer for Coyle Construction (CC). CC has a pre-set annual surety credit line of $5 million/$30 million. About 3 months into the fiscal year, the contractor is bidding on an $8 million job and needs a bid bond. Which o...
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AFSB 151 Study Guide Questions With Correct
Answers.
Anthony is the surety producer for Coyle Construction (CC). CC has a pre-set
annual surety credit line of $5 million/$30 million. About 3 months into the fiscal
year, the contractor is bidding on an $8 million job and needs a bid bond. Which
one of the following correctly describes Anthony's responsibility as the surety
producer?
Select one:
A. Anthony should arrange a back-up surety with adequate capacity because CC
appears to be outgrowing the capacity of the current surety.
B. Anthony should execute the bid bond because it is within the $30 million
annual line of credit.
C. Anthony should seek underwriting approval before executing the bid bond
because it falls outside the $5 million job contract limit.
D. Anthony should execute the bid bond, but will need to seek approval if CC is
awarded the job.
C. Anthony should seek underwriting approval before executing the bid bond because it
falls outside the $5 million job contract limit.
Contract bond claims
Select one:
A. Require that, once the claim is made, the construction project and all affiliated
activity, such as materials and other resource delivery, must be halted until the
loss is determined and paid.
B. Generally require that the surety consult fewer sources to determine the bond
loss than are required when investigating commercial surety and fidelity claims.
C. That are not handled promptly are not affected by variables such as the
construction project, materials, and weather conditions.
D. Can raise questions as to fault in the loss, whether the bonded principal or the
obligee was responsible.
D. Can raise questions as to fault in the loss, whether the bonded principal or the
obligee was responsible.
Which one of the following statements regarding fidelity bond claims is true?
Select one:
A. There are no time limits for bringing claims under a fidelity bond, so an insurer
does not need to be concerned about whether the loss was discovered during the
policy term.
B. The insured's prompt notice of loss and the fidelity's prompt investigation has
no impact on the insurer's liability, the cause of loss, or the insured's
minimization of damages.
C. Mishandling of funds by people or entities not employed by the insured, such
as auditors, lawyers, or financial institutions, cannot be pursued by the insurer as
a source of recovery.
D. By promptly investigating a bond loss, an insurer may discover that it has
,recourse against persons or entities whose conduct caused or contributed to the
loss, but is not relevant to the proof of loss.
D. By promptly investigating a bond loss, an insurer may discover that it has recourse
against persons or entities whose conduct caused or contributed to the loss, but is not
relevant to the proof of loss.
Which one of the following statements regarding legal research and unfair claims
practices acts is true?
Select one:
A. Even when fidelity and surety businesses are not affected by unfair claims
practices laws that originate from individual consumers' concerns, state
lawmakers require that they adhere to these laws.
B. Unfair claims practices acts can prevent sureties from adequately investigating
fidelity and surety claims so that standards for prompt settlement or denial can
be met.
C. Because sureties can retain attorneys experienced in the fidelity and surety
legal matters, claims personnel do not require knowledge of legal rules and
theories that govern such coverage and liability.
D. Unfair claims practices acts prohibit sureties and insurers from
misrepresenting pertinent facts or policy provisions relating to coverages at
issue.
D. Unfair claims practices acts prohibit sureties and insurers from misrepresenting
pertinent facts or policy provisions relating to coverages at issue.
Which one of the following statements regarding surety compliance with statutes
and regulations is true?
Select one:
A. Courts may interpret any bond or fidelity policy provision to the insured's
benefit whether or not it prejudices an insurer's ability to investigate the claim.
B. Surety and fidelity contracts are often prescribed by statute or regulation,
including requirements for many license and permit bonds, fidelity coverages,
and public official bonds.
C. Insurance policy forms are often subject to regulatory approval; however, laws
cannot affect the enforcement of rights and remedies under the policies.
D. When an obligee drafts a surety bond with provisions that are onerous to the
surety, if the surety executes the bond without objections, courts will interpret
any dispute in the surety's favor.
B. Surety and fidelity contracts are often prescribed by statute or regulation, including
requirements for many license and permit bonds, fidelity coverages, and public official
bonds.
Surety claims against principals who appear to have resources to pay the claims
can be referred to the principals and indemnitors who can respond before the
surety must pay and before the surety seeks indemnification from them. This
practice is called
Select one:
A. Exoneration.
B. Look-see money distribution.
,C. Quia timet.
D. The vouching-in procedure.
D. The vouching-in procedure.
When a claim is pending on a cosurety bond,
Select one:
A. Each cosurety may establish a reserve for its cosurety share of the loss.
B. The controlling cosurety is normally obligated to pay the full loss and request
reimbursement from the cosureties.
C. Each cosurety is allowed to take credit for the reinsurer's share of the reserve
that the cosurety establishes.
D. The controlling cosurety is not allowed to establish a reserve for any part of
the loss.
A. Each cosurety may establish a reserve for its cosurety share of the loss.
Fidelity bond claims
Select one:
A. Can expose an insurer to waiver of a condition precedent of bond contracts
and defamation actions, if they are not handled properly.
B. Have variable circumstances; therefore, the fidelity insurer's ultimate loss is
rarely fixed when the insured gives notice of the loss.
C. Offer protections to the fidelity insurer when a late notice of loss occurs, as
late notice is typically a valid defense for the insurer.
D. Require a proof of loss filed by the insured before an investigation begins, the
claim is verified, and the insured can be confronted.
A. Can expose an insurer to waiver of a condition precedent of bond contracts and
defamation actions, if they are not handled properly
In proper handling of a fidelity loss, when can an insurer begin the loss
investigation and when can claims personnel confront the insured?
Select one:
A. The insurer can begin the investigation, but claims personnel should not
confront the insured before the insured has provided an executed proof of loss.
B. The insurer cannot begin the investigation until the insured has provided an
executed proof of loss; but claims personnel can confront the insured without the
proof of loss.
C. The insurer can begin the investigation and claims personnel can confront the
insured at any time before the insured has provided an executed proof of loss.
D. The insurer cannot begin the investigation and claims personnel cannot
confront the insured until the insured has provided an executed proof of loss.
A. The insurer can begin the investigation, but claims personnel should not confront the
insured before the insured has provided an executed proof of loss.
Which one of the following statements regarding gathering information for surety
claims is true?
Select one:
A. Principals and obligees are usually more cooperative after the claim has been
paid than during the information-gathering process.
B. Separate information gathering sessions—to help resolve questions of liability
and to determine the possibility of enforcing rights the surety acquired—is more
, efficient and productive than one session.
C. When gathering claims information, the producer is the best source of
evidence for recovery from others.
D. Claims personnel can gather most of the needed information for a surety claim
by applying the questions of who, what, when, where, why, and how to the claim.
D. Claims personnel can gather most of the needed information for a surety claim by
applying the questions of who, what, when, where, why, and how to the claim.
Which one of the following statements is true regarding subrogation when a
contract default has occurred and when the principal has admitted to it?
Select one:
A. Obligees cannot refuse to pay the principal's creditors and instead claim
offsets for debts owed to them by the principal, including damages allegedly due
on the project.
B. The surety's most important right acquired through subrogation is the right of
the obligee to use the contract consideration to complete the contract.
C. The unpaid and unearned contract money is part of the contractor's property
and may be used to satisfy the principal's debts.
D. If the surety directly or indirectly remedies the contract defaults, it has no
claim to any of the obligee's rights.
B. The surety's most important right acquired through subrogation is the right of the
obligee to use the contract consideration to complete the contract.
Cosureties on a bond
Select one:
A. Have no right to individually investigate, negotiate, and resolve claims against
the bond or to seek recovery of their individual losses and expenses.
B. Often appoint one cosurety as the controlling cosurety to investigate,
negotiate, and resolve the same claim and seek recovery of the same losses and
expenses.
C. Each establish their own reserve for the total estimated loss covered by the
cosurety bond, taking credit for the other cosureties' losses.
D. Are subject to the same accounting rules for reserves that relate to reinsurers
when a claim is pending on a cosurety bond.
B. Often appoint one cosurety as the controlling cosurety to investigate, negotiate, and
resolve the same claim and seek recovery of the same losses and expenses.
Which one of the following is true regarding contract bond claims?
Select one:
A. Issues in a contract bond claim include payment to subcontractors and
suppliers as well as the ultimate completion of the construction project.
B. The contract bond obligee must prove its right to recover from the surety by
producing relevant data about the circumstances that produced the loss.
C. Once the surety has appraised the status of the construction contract,
changes in the contractor's situation and the contract have no influence on the
loss amount.
D. A construction contract bond loss is generally fixed at a certain point in time,
so the loss amount can be determined quickly and easily.
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