AIC 302 SIMULATED EXAM | QUESTIONS & ANSWERS (VERIFIED) | LATEST UPDATE | GRADED A+

1 AIC 302 SIMULATED EXAM | QUESTIONS & ANSWERS (VERIFIED) | LATEST UPDATE | GRADED A+ Conor is handling an auto claim involving the death of a minor child in a state that recognizes the intrinsic value of children. Conor's proposed settlement amount will include Correct Answer: A calculated value of the child's future services to the parents. A calculated value of the child's future services to the parents. Intrinsic value of children is the assumption that parents invest in children knowing that they will provide for them when they are older Cristobal has several methods available to him as he evaluates the settlement range for his claim: individual case method, roundtable technique, formula method, and expert system. Which method should Cristobal use if he is dealing with a minor soft tissue claim and wants a simple approach to achieve an early, mutually agreeable settlement? Correct Answer: Formula method involves a mathematical formula set by actuaries to set reserves. Anna injured her back in a not-at-fault auto accident and has a bodily injury claim with the other driver's insurance company. Later, she fell and her back injury was aggravated. Her claims representative for the first accident told her that the aggravation of her back injury 2 Correct Answer: Was covered because it was an unavoidable consequence of the back injury. An intervening problem is covered if it is an unavoidable consequence of the first injury. Some personal auto policies provide that someone could reasonably expect to be allowed to use an insured's vehicle even if they did not ask specifically, such as a relative visiting from out of town. This is called Correct Answer: Implied permission. Some policies provide for implied permission for the use of an insured's auto. In determining coverage for emotional injury, a claims rep must understand applicable policy language. Which one of the following is correct? Correct Answer: The term "harm" is potentially broader than the term "injury" in determining coverage for emotional injury. Mehmet was seriously injured in an automobile collision and died after a stay in the hospital. His family is bringing a survival action claim for medical expenses, pain and suffering, loss of earnings, and automobile repairs. Which one of the following claims will be allowed only if the family can demonstrate that Mehmet was conscious after the accident but before dying? Correct Answer: Pain and suffering can only be claimed if the decedent was conscious of the pain and suffering before dying. 3 Claims reps can isolate specific coverage issues that should be investigated to determine whether exclusions apply by using a series of yes-or-no questions in the form of a Correct Answer: Decision tree. Claims reps can isolate specific coverage issues that should be investigated to determine whether exclusions apply by using a series of yes-or-no questions in the form of a decision tree. Caitlin was involved in a multi-car accident on a highway. The claims representative for her insurance company is making a case that distracted driving by Mike, one of the other drivers involved in the accident, was a contributing cause of the accident. The records indicate that Mike was using a hands-free device at the time of the accident. Which one of the following statements is true regarding the use of a hands-free device while driving? Correct Answer: The use of a hands-free device while driving can lead to a cognitive distraction. Sean is an auto liability claims representative. He is working on a claim involving an insured driver who rear-ended another vehicle while driving in heavy traffic. No one was injured, but there was $3,400 in damage to the other vehicle. Which one of the following statements is correct regarding this accident? Correct Answer: All four elements of negligence exist in this accident. There was a duty owed to others to operate the vehicle safely, that duty was breached, and was the proximate cause of the resulting $3,400 in damages. There is no clear evidence of negligence per se provided. 4 Hilltop Auto Dealership (Hilltop) is insured by the Auto Dealers Coverage Form (ADCF) with a $4 million limit for physical damage coverage on a nonreporting basis. The dealership experienced a fire loss that resulted in $100,000 in damage to the dealer's covered autos. The actual value of the inventory of covered autos at the time of the loss was $5 million. How much will Hilltop's ADCF insurer pay for this covered loss? Disregard any deductibles that may apply. Correct Answer: $80,000 Hilltop's insurer will pay $80,000 for this covered loss. The policy limit was 80% ($4 million/$5 million) of the actual value at the time of the loss, so the insurer will only pay 80% of the loss. $100,000 x .80 = $80,000 A technician repairing auto damage must replace a body panel as well as the running light/turn signal mounted within the panel. The replacement of the light assembly is called a(n) Correct Answer: Included operation. An included operation is any operation completed in its entirety while another, concurrent, operation is performed. One of the primary questions that must be answered in investigating an emotional injury claim is whether, under the applicable policy, emotional distress is considered a(n) Correct Answer: Bodily injury. Mark was involved in a rear-end collision on a highway, and is likely liable for not keeping a clear, assured distance from the other vehicle. Joe, a passenger in the other vehicle, suffered a serious head injury when his head hit the windshield. Mark's auto insurer is trying to defend against the claim by arguing that the head injury would not have occurred if Joe had been wearing his seat belt, as is required by law. Based on the 5 laws that apply in most states, the lack-of-seat-belt defense will result in which one of the following? Correct Answer: Joe's failure to wear a seat belt will not diminish or minimize Mark's liability. When a claim involves a minor, the claims rep must resolve two independent claims: the minor's claim for damages resulting from injury and Correct Answer: The parent's or guardian's claim to recover medical expenses. When a claim involves a minor, the claims rep must resolve two independent claims: the minor's claim for damages resulting from injury and the parent's or guardian's claim to recover medical expenses incurred for the minor's care. Sean and Rick live in a large city. They own 5 SUVs and provide discounted services to students at a number of the colleges in the area. They transport students between campus and the airport and local train stations. They also will transport the students' belongings and deliver them right to their rooms or apartments. Which one of the following is the appropriate auto coverage form for Sean and Rick? Correct Answer: The Motor Carrier Coverage Form is correct coverage form for Sean and Rick because they are in the business of providing transportation by property and passengers by auto. Paul left his car at a valet parking garage. When he returned to pick up his car several hours later, he noticed that there was a large scratch and dent along the driver's side of the car. Paul asked what happened, and the valet said that based on the signs posted at the entrance and on the parking receipt, the parking garage disclaimed all liability. Which one of the following statements is correct regarding this bailment situation? 6 Correct Answer: Many courts would consider this disclaimer an illegal contract issue, contrary to public policy. In this situation the parking garage is the bailee and owes at least an ordinary degree of care. Chelsea is injured in an accident caused by an uninsured motorist and signs a UM release. Which one of the following is correct? Correct Answer: She must cooperate with her insurer in pursuing subrogation. A UM release requires the insured to cooperate with the insurer in pursuing subrogation. Larry owns two trucks and works as an owner-operator. Larry was hired by Carrier A to transport a trailer of goods from Texas to Maine. Rather than bobtailing back to Texas, Larry entered into a trip lease to haul a return load of cargo for Carrier Z. Which one of the following will provide liability coverage for Larry's backhaul trip? Correct Answer: Carrier Z's MCCF would provide the liability coverage for Larry's backhaul trip. Carla is evaluating a bodily injury claim for a claimant who was injured in an auto accident. She is considering the claimant's occupation and wages, age, expected work life, life expectancy, education and training, and previous job history. Carla is evaluating the claimant's damages for Correct Answer: Diminished earning capacity. This occurs when permanent injuries or disabilities prevent claimants from working in the same capacity as they did before the loss occurred. Jackson Manufacturing covers its commercial auto exposure with the Business Auto Coverage Form (BACF). Because it has operations in several no-fault states, it has 7 Personal Injury Protection (PIP) endorsements added to its BACF. While the endorsements vary by state, a typical PIP endorsement provides coverage for all of the following benefits, EXCEPT: Correct Answer: Substitute vehicle expenses The typical PIP endorsement includes benefits for medical and rehabilitation expenses, lost wages, and death benefits to survivors. It does not include benefits for substitute vehicle expenses. Jose was injured in an auto accident caused by the other driver. Jose's injuries were covered by his medical insurance. At trial, the court did not allow the insurer to reduce Jose's award by the amount his medical insurance paid. Its decision was based on the Correct Answer: Collateral source rule. This bars the introduction of evidence that a claimant has other sources of recover. Pete's car is stopped at a red light behind Cindy's car. Tony fails to stop for the red light, and his car his Pete's car which is then pushed into Cindy's car. Cindy is injured and all of the cars are damaged. Under joint and several liability, which one of the following statements is correct? Correct Answer: Tony is the lone tortfeasor. There are no joint tortfeasors. James Industries is insured by the Business Auto Coverage Form. The auto policy includes the Medical Payments endorsement with a $10,000 limit. Lisa, one of the executives at James Industries, is provided with a private passenger vehicle for business and personal use. She was in a multi-car accident while driving three clients from the airport to a meeting at the office. Two of the passengers were injured, one with medical expenses of $4,500 and the other $9,000. Lisa also suffered a minor injury with 8 medical expenses of $3,500. How much will the insurer for James Industries pay under the Medical Payments endorsement? Correct Answer: The insure will pay $13,500 ($4,500 + $9,000) under the Medical Payments endorsement regardless of fault. The $10,000 limit applies per person and coverage is excluded for employees injured in the course of employment. Seriously injured in an auto accident, Damien accepts a settlement agreement that offers some immediate payment, with the bulk of the payment disbursed over a number of years. This is called a(n) Correct Answer: A structured settlement gives the claimant some payment immediately but defers much of the payment into the future. All states require that denials be prompt, timely and Correct Answer: Fair. All states require that denials be prompt, timely and fair. While driving a rental car, Arthur has an accident and is found to have been intoxicated. Which one of the following scenarios regarding primary coverage is likely to occur? Correct Answer: His PAP would become primary. Most rental car agreements will void coverage in the case of impaired driving, so the insured's PAP would become primary. In handling an auto claim, subrogation by an insurer may be warranted if Correct Answer: The insured party is paid by the insurer and a party other than the insured is at fault. 9 Goshen Trucking is insured under a Motor Carrier Coverage Form (MCCF). It has a lease agreement with owner-operator Anthony to use his trucks to haul cargo for Goshen Trucking during its peak seasons. The lease agreement does not include a hold harmless requirement. Which one of the following is correct regarding the coverage that will be provided for Anthony under Goshen Trucking's MCCF? Correct Answer: Anthony is automatically a named insured under Goshen's MCCF while driving his trucks as part of Goshen Trucking's operations under the lease agreement. Luis is completing an impairment rating report for a patient. This includes the anticipated effect of the medical condition on the patient's daily activities, a comparison of clinical findings with the AMA guide's criteria, his conclusion on whether the medical condition will result in incapacitation, and the expected recovery date and prediction of full or partial recovery. Which one of the following is a component of Luis's report relating to the impairment criteria? Correct Answer: Comparison of clinical findings with the AMA guide's criteria relates to the impairment criteria. Joe insures his auto under a personal auto policy (PAP) with Part C-Uninsured Motorists (UM) split limits of $25,000/$100,000/$10,000. He is struck by a hit-and-run driver while driving his children to school. Joe was seriously injured with $20,000 in medical expenses and $10,000 in lost wages. His daughter had medical expenses of $12,000 and his son suffered minor injuries with medical expenses of $1,500. Joe's car also had $15,000 in damages. How much would be paid under the UM limits of Joe's PAP? Correct Answer: $48,500 Joe's PAP would pay $48,500 under the UM split limits. The per person limit of $25,000 would limit the payments for Joe to $25,000. It would pay the full amounts of $12,000 and $1,500 for his children because that total would still be 10 under the $100,000 per accident limit. The payment for the damage to the auto would be limited to $10,000. ($25,000 + $12,000 + $1,500 + $10,000 = $48,500) Kevin was driving to work when another car, driven by Jack, ran a red light and struck his car. Kevin was seriously injured and out of work for a month. It was determined that Jack was the at-fault driver, but the Part A-Liability limit on his personal auto policy (PAP) was below the minimum limits required by the state. Kevin decided to collect the lower liability payment under Jack's policy, and then collect the remaining expenses under Part C-Uninsured Motorists of his own PAP. Which one of the following UM exclusions could apply in this situation? Correct Answer: Claim Settlement That Prejudices Insurer's Right of Recovery Kevin's PAP insurer could apply the Claim Settlement That Prejudices Insurer's Right of Recovery exclusion. By accepting a settlement with Jack, Kevin could limit his insurer's rights of recovering payments from Jack. Laura was injured in an auto accident due to the fault of the other driver. Her injury will involve permanent impairment and will decrease her opportunity to earn a living. She has incurred medical expenses and will continue to experience pain and suffering. Which one of Laura's damages is considered a natural and necessary result of her bodily injury? Correct Answer: Pain and suffering are considered a "natural and necessary" result of a claimant's bodily injury. A claimant is entitled to recover for pain and suffering from an injury caused by the tortfeasor. Aaron is a claims representative who has completed an investigation of a bodily injury claim. Throughout the process, he gathered injury information and documents; monitored and updated the plan; assessed treatment, disability, and impairment; and analyzed records and reports. The first step in Aaron's investigation was to 11 Correct Answer: Gather injury information and documents. This is the first of four steps in the bodily injury investigation process. Which one of the following best defines an advance payment? Correct Answer: A partial claim payment issued without obtaining a signed release. An advance payment is a partial claim payment issued without obtaining a signed release, usually for the purpose of helping the claimant to cover immediate expenses. Juan is calculating a settlement in an auto liability claim and is determining a reasonable estimate of the damages the claimant is likely to be able to prove. In estimating the initial probable verdict range, Juan bases his calculations Correct Answer: Solely on provable damages without considering liability or other variables. The initial probable verdict range is based solely on provable damages, without considering liability of other variables, such as characteristics of the insured or claimant or venue of the case. Fox Auto Dealership (Fox) is insured under the Auto Dealers Coverage Form (ADCF). Section III - Acts, Errors, or Omissions Liability Coverage of the ADCF would provide coverage for damages resulting from which one of the following? Correct Answer: The sale of an auto that was later discovered to have a defective title would be covered under Section III - Acts, Errors, or Omissions Liability Coverage of the ADCF. Cassidy was involved in an intersectional collision with another vehicle. Kevin, the driver of the other vehicle, has filed a suit against Cassidy for medical injuries and damages to his car. He claims that Cassidy struck his vehicle after failing to stop at a stop sign. 12 Which one of the following parts of Cassidy's personal auto policy (PAP) would provide her with coverage for this suit? Correct Answer: Part A--Liability provides Cassidy with coverage from suits for bodily injury and property damages arising out of her operation of the vehicle. In investigating an auto physical damage claim, Howard determines that the estimate for repairs exceeds the vehicle's actual cash value less its salvage value. This results in Correct Answer: A constructive total loss occurs when the loss estimate equals or exceeds the vehicle's actual cash value (ACV) less its salvage value. Fernanda is a defense attorney for an insurer. She is working on a claim in which the claimant was injured in an accident and is claiming to have depression and anxiety as a result. Fernanda was able to uncover records of the claimant's treatment for depression and anxiety several years before the accident. Fernanda's defense should be that Correct Answer: The condition existed before the injury. In order for a psychological injury to be covered, it must be causally related to the physical injury. Diminished value auto claims generally involve Correct Answer: Autos that, although properly repaired, may not be worth as much as comparable autos due to their accident history. In some situations of overlapping coverage, each insurer pays the proportion of the claim that its limit bears. This is called Correct Answer: In pro rata contribution, each insurer pays the proportion of the claim that its limit bears to the total of all applicable insurance. 13 Ciara is a claims rep investigating an automotive damage claim. In the course of her investigation, she begins to suspect fraud. Which one of the following actions should she take? Correct Answer: Engage the special investigation unit (SIU) If fraud is suspected, the claims rep should engage the special investigation unit (SIU). In a partial auto physical damage loss, the damage can be repaired without Correct Answer: Exceeding the value of the auto. In a partial auto physical damage loss, the damage can be repaired without exceeding the value of the auto. The hospital that treated Dante following a car accident notifies his insurer of a lien on the claim for medical services rendered. Having been formally communicated to the insurer, the lien is now known as Correct Answer: A perfected lien. Liens that have been formally communicated to insurers are known as perfected, or recorded, liens. Leila is estimating settlement values for a claim that is going to a jury trial. She estimates the settlement range to be $20,000 to $40,000. She further estimates that the trial venue is likely to increase any award by 50 percent. Leila's settlement estimate should then be Correct Answer: $30,000 to $60,000. The original estimate should be increased by 0.50. 14 Francesca's car was damaged in an auto accident. Afterwards, Francesca did not take the car to be fixed promptly. As a result, rain entered the car's interior through the broken windows and caused more damage. At trial, the court did not allow Francesca to collect money for the rain damage. Which one of the following rules did the court impose on Francesca? Correct Answer: Mitigation of damages rule requires claimants to make efforts to prevent damages that are avoidable. Luke is handling a bodily injury claim and is determining the following: ongoing pain and/or inconvenience, future medical bills/issues, effect on future earnings, and effect on future lifestyle. On which one of the following sections of the bodily injury plan is Luke working? Correct Answer: When permanency is being claimed, the claims rep should obtain the permanent impairment rating and determine each of these factors. Jack insures his car for liability, medical payments, uninsured/underinsured motorists, and physical damage coverage under a personal auto policy (PAP). When he began driving for a transportation network company (TNC), three nights a week, he assumed that his PAP would provide coverage. Which one of the following statements is correct regarding how his PAP will respond to this exposure? Correct Answer: His PAP excludes coverage while he is logged on to the TNC application, regardless of whether he has passengers in his car or not. Generally, the insuring agreements in a personal auto policy (PAP) include which one of the following as insureds? Correct Answer: Family members 15 Generally, the insuring agreements in a personal auto policy (PAP) include family members as insureds. In the event of a vehicle fire, the claims rep may determine how the fire started by assigning Correct Answer: An origin and cause expert.