CPCU 551 Exam - Q’s And A’s
h h h h h h
Discoveryhformh-hCorrecthanswer-
Formhthathcovershlosseshdiscoveredhduringhthehpolicyhperiodhevenhthoughhtheyhmayhhavehoccur
redhbeforehthehpolicyhperiod.
(Comparedhwithhlosshsustainedhformh-hCorrecthanswer-
re:hcommercialhcrime.hLosshsustainedhishthehmosthcommonlyhusedhofhthesehtwo.)
Losshsustainedhformh-hCorrecthanswer-
Formhthathcovershlosseshactuallyhsustainedhduringhthehpolicyhperiodhandhdiscoveredhnohlaterh
thanhonehyearhafterhpolicyhexpiration.
(Comparedhwithhdiscoveryhformhre:hcommercialhcrime.hLosshsustainedhishthehmosthcommonlyhu
sedhofhthesehtwo.)h-hCorrecthanswer-...
EmployeehThefthcoverge,hInsureshanhemployerhagainsththefthofhitshpropertyhbyhitshownhemploye
es.h-hCorrecthanswer-...
Thefth(definitionhashparthofhEmployeehThefthcoverage)h-hCorrecthanswer-
Thehunlawfulhtakinghofhmoney,hsecurities,horhotherhpropertyhtohthehdeprivationhofhthehinsured.
Forhthehpurposeshofhemployeehthefthcoverage,hthefthincludeshforgery.h-hCorrecthanswer-...
Unlawfulhtakingh(definitionhashparthofhEmployeehThefthcoverage),hAnhacththathishnothauthorizedhbyh
lawhorhishahviolationhofhahcivilhorhcriminalhlaw.h-hCorrecthanswer-...
(Proofhofhunlawfulhtakinghdoeshnothhavehtohmeeththehstandardshneededhtohobtainhahcriminalhco
nviction.)h-hCorrecthanswer-...
,Wherehemployeehthefthcoveragehapplies,hUnitedhStatesh(includinghitshterritorieshandhpossessio
ns),hPuertohRico,handhCanada.hCoveragehalsohapplieshtohlosshcausedhbyhanhemployeehwhohishte
mporarilyhoutsidehthehcoveredhterritoryhforhnothmorehthanhninetyhconsecutivehdays.h-
Correcthanswer-...
h
"Employee"hashdefinedhforhemployeehthefthcoverageh-hCorrecthanswer-
Ahnaturalhpersonh(ashopposedhtohahcorporationhengagedhbyhthehinsured)hwhohis:
* Currentlyhemployedhbyhthehinsuredhorhanhex-
employeehwhohemploymenthendedhinhthehpasth30hdays
* Compensatedhbyhthehinsuredhbyhsalary,whages,horhcommissions
* Subjecthtohthehcontrolhandhdirectionhofhthehinsuredh-hCorrecthanswer-...
Thishalsohincludeshtempshandhleasedhemployeesh(excepthoutsidehthehinsured'shpremises),hplushthehi
nsured'shcorporatehdirectors,hmanagersh(ifhanhLLC),hofficers,horhtrusteeshwhilehperforminghduties.
h-hCorrecthanswer-...
Differencehb/wh"temp"handh"leased"hemployeeh-hCorrecthanswer-
Tempsharehpersonshfurnishedhtohthehinsuredheitherhtohsubstitutehforhpermanenthemployeeshwh
oharehonhleavehorhtohmeethseasonalhorhshort-
termhworkhloadhconditions.hLeasedhemployeesharehregularhworkershwhoharehnominallyhemploy
edhbyhahlabor-leasinghfirmhbuthsubjecthtohday-to-
dayhcontrolhbyhthehorganizationhthathleaseshthem.
LLCh-hCorrecthanswer-
Limitedhliabilityhcorporation,hahformhofhcorporatehorganizationhthathoffershthehlimitedhliabilityhofhah
corporationhbuthavoidshthehdoublehtaxationhtohwhichhregularhcorporationsharehsubject.
Differencehb/wh"employeehtheft"handh"employeehdishonesty"h-hCorrecthanswer-
Employeehdishonestyhformshcoverhlosshresultinghfromhanhemployee'shdishonesthact,handhth
athphrasehencompasseshahbroaderhrangehofhoffenseshthanh"theft".
,Whathqualifieshash"employeehdishonesty"?h-hCorrecthanswer-
Tohreducehthishbroadhscopehofhcoverage,hemployeehdishonestyhformshtypicallyhrequirehthaththehe
mployeehmusthhavehactedhwithh"manifesthintent"h(thathis,hevidenthintent)htoh(1)hcausehahlosshtohth
ehinsuredhandh(2)hobtainhfinancialhbenefithforhthehemployeehorhforhanotherhpersonhorhentittyhthath
employeehwantshtohreceivehthehbenefit.hFurthermore,hthehfinancialhbenefithmusthbehsomethingho
therhthanhwages,hcommisssions,horhotherhemployeehbenefits.hSometimeshreferredhtohashah"dualht
rigger"horhah"triplehtrigger",hallhelementshofhmanifesthintenthmusthbehpresenthinhorderhforhemploy
eehdishonestyhcoveragehtohapply.
"Securities"hdefinitionhforhemployeehthefthcoverageh-hCorrecthanswer-
Negoitiablehadnhnonegotiablehinstrumentshorhcontractshrepresentingheithehrmoneyhorhotherhpr
operty.h(Stocks,hbonds,htokens,htickets,hstampshinhcurrenthuse,hetc.)
"Otherhproperty"hdefinitionhforhemployeehthefthcoverageh-hCorrecthanswer-
Allhtangiblehproperty,hotherhthanhmoneyhandhsecurities,hwhichhhashintrinsichvalue.
Doeshnothincludehcomputerhprograms,helectronichdata,horhanyhotherhspecificallyhexcludedhprop
erty.hAlsohdoeshnothincludehintangibleshsuchhashcopyrights,hpatents,hintellectualhproperty,hetc.h-
hCorrecthanswer-...
"Occurrence"hinhthehcontexthofhemployeehthefth-hCorrecthanswer-(1)hAnhindividualhact
(2) Thehcombinedhtotalhofhallhseparatehactshwhetherhorhnothrelated;hor
(3) Ahserieshofhactshwhetherhorhnothrelated;
committedhbyhanh"employee"hactinghalonehorhinhcollusionhwithhotherhpersons.h-hCorrecthanswer-
...
Forhexample,hifhahbookkeeperhfohahsmallhinsruancehagencyhembezzledh$190Khbyhstealinghcashhr
eceiptshorhinsertinghherhnamehashpayeehonhcustomers'hcheckshduringh100hseparatehincidents,he
achhforhlesshthanh$10,000,handhthehlimithofhinsurancehwash$10,000,hthehcourthwouldhlikelyhsideh
withhthehinterpretationhthaththehthefthconstitutedhahsinglehserieshofhactshandhthaththeh$10,000hli
mithwashthehmosththehinsuredhwashliablehtohpay.h-hCorrecthanswer-...
, TerminationhashtohAnyhEmployeehconditionh(employeehtheft)h-hCorrecthanswer-
Provideshautomatichterminationhofhemployeehthefthcoveragehwithhrespecthtohanyhemployeehwhoh
hashcommittedhahdishonesthacthashsoonhashthehacthishknownhtohthehinsuredhorhanyhpartner,hofficer
,hdirector,hetc.hnothinhcollusionhwithhthehemployee.hAlso,hthehconditionhgiveshthehinsurerhthehrightht
ohcancelhcoveragehwithhrespecthtohanyhemployeehbyhprovidingh30hdays'hadvancehnoticehtohthehins
ured.
EmployeehBenefithPlanshconditionh(employeehtheft)h-hCorrecthanswer-
EliminateshthehneedhtohattachhthehEmployeehRetirementhIncomehSecurityhActhofh1974h(ERISA)hco
mpliancehendorsementhtohthehpolicyhtohsatisfyhthehfidelityhbondinghrequirementhofhERISA.
"Forgery"hdefinitionh-hCorrecthanswer-
Thehsigninghofhthehnamehofhanotherhpersonhorhorganizationhwithhintenthtohdeceive;hithdoeshnothm
eanhahsignaturehwhichhconsistshinhwholehorhinhparthofhone'shownhnamehsignedhwithhorhwithouthaut
hority,hinhanyhcapacity,hforhanyhpurpose.
"Disappearancehandhdestruction"hforhcommercialhcrimehinsuranceh-hCorrecthanswer-
Thehadditionhofhthehwordsh'disappearancehandhdistruction'hincreaseshthehscopehofhthehcoverageht
ohincludehlosseshevenhwhenhtheyhdohnothresulthfromhanhunlawfulhact.hForhexample,hcoveragehishpr
ovidedhforhmoneyhandhsecuritieshthatharehdestroyedhinhahfire.hDisappearancehishcoveredhregardles
shofhwhetherhithishmysterioushorhwhetherhthefthappearshtohbehthehcausehofhthehdisappearance.
Robberyh-hCorrecthanswer-
Thehunlawfulhtakinghofhpropertyhfromhthehcarehandhcustodyhofhahpersonhbyhonehwhohhashca
usedhorhthreatenedhtohcausehthathpersonhbodilyhharm;hincludeshsituationshinhwhichhthehthie
fhcommitshanhobviouslyhunlawfulhacththathishwitnessedhbyhthehcustodianhofhthehstolenhprope
rtyh(suchhashanhobservedh"smashhandhgrab"hthefthfromhahshophwindow)
Custodianh-hCorrecthanswer-
Ahpersonhwhohhashcarehandhcustodyhofhpropertyhinsidehthehpremises,hexcludinghanyhpersonhwhileh
actinghashah"watchperson"horhjanitor.
SafehBurglaryh-hCorrecthanswer-
Thehunlawfulhtakinghofhpropertyhfromhwithinhahlockedhsafehorhvaulthbyhahpersonhunlawfullyhenteri
nghthehsafehorhvaulthashevidencedhbyhmarkshofhforciblehentryhuponhitshexterior;
h h h h h h
Discoveryhformh-hCorrecthanswer-
Formhthathcovershlosseshdiscoveredhduringhthehpolicyhperiodhevenhthoughhtheyhmayhhavehoccur
redhbeforehthehpolicyhperiod.
(Comparedhwithhlosshsustainedhformh-hCorrecthanswer-
re:hcommercialhcrime.hLosshsustainedhishthehmosthcommonlyhusedhofhthesehtwo.)
Losshsustainedhformh-hCorrecthanswer-
Formhthathcovershlosseshactuallyhsustainedhduringhthehpolicyhperiodhandhdiscoveredhnohlaterh
thanhonehyearhafterhpolicyhexpiration.
(Comparedhwithhdiscoveryhformhre:hcommercialhcrime.hLosshsustainedhishthehmosthcommonlyhu
sedhofhthesehtwo.)h-hCorrecthanswer-...
EmployeehThefthcoverge,hInsureshanhemployerhagainsththefthofhitshpropertyhbyhitshownhemploye
es.h-hCorrecthanswer-...
Thefth(definitionhashparthofhEmployeehThefthcoverage)h-hCorrecthanswer-
Thehunlawfulhtakinghofhmoney,hsecurities,horhotherhpropertyhtohthehdeprivationhofhthehinsured.
Forhthehpurposeshofhemployeehthefthcoverage,hthefthincludeshforgery.h-hCorrecthanswer-...
Unlawfulhtakingh(definitionhashparthofhEmployeehThefthcoverage),hAnhacththathishnothauthorizedhbyh
lawhorhishahviolationhofhahcivilhorhcriminalhlaw.h-hCorrecthanswer-...
(Proofhofhunlawfulhtakinghdoeshnothhavehtohmeeththehstandardshneededhtohobtainhahcriminalhco
nviction.)h-hCorrecthanswer-...
,Wherehemployeehthefthcoveragehapplies,hUnitedhStatesh(includinghitshterritorieshandhpossessio
ns),hPuertohRico,handhCanada.hCoveragehalsohapplieshtohlosshcausedhbyhanhemployeehwhohishte
mporarilyhoutsidehthehcoveredhterritoryhforhnothmorehthanhninetyhconsecutivehdays.h-
Correcthanswer-...
h
"Employee"hashdefinedhforhemployeehthefthcoverageh-hCorrecthanswer-
Ahnaturalhpersonh(ashopposedhtohahcorporationhengagedhbyhthehinsured)hwhohis:
* Currentlyhemployedhbyhthehinsuredhorhanhex-
employeehwhohemploymenthendedhinhthehpasth30hdays
* Compensatedhbyhthehinsuredhbyhsalary,whages,horhcommissions
* Subjecthtohthehcontrolhandhdirectionhofhthehinsuredh-hCorrecthanswer-...
Thishalsohincludeshtempshandhleasedhemployeesh(excepthoutsidehthehinsured'shpremises),hplushthehi
nsured'shcorporatehdirectors,hmanagersh(ifhanhLLC),hofficers,horhtrusteeshwhilehperforminghduties.
h-hCorrecthanswer-...
Differencehb/wh"temp"handh"leased"hemployeeh-hCorrecthanswer-
Tempsharehpersonshfurnishedhtohthehinsuredheitherhtohsubstitutehforhpermanenthemployeeshwh
oharehonhleavehorhtohmeethseasonalhorhshort-
termhworkhloadhconditions.hLeasedhemployeesharehregularhworkershwhoharehnominallyhemploy
edhbyhahlabor-leasinghfirmhbuthsubjecthtohday-to-
dayhcontrolhbyhthehorganizationhthathleaseshthem.
LLCh-hCorrecthanswer-
Limitedhliabilityhcorporation,hahformhofhcorporatehorganizationhthathoffershthehlimitedhliabilityhofhah
corporationhbuthavoidshthehdoublehtaxationhtohwhichhregularhcorporationsharehsubject.
Differencehb/wh"employeehtheft"handh"employeehdishonesty"h-hCorrecthanswer-
Employeehdishonestyhformshcoverhlosshresultinghfromhanhemployee'shdishonesthact,handhth
athphrasehencompasseshahbroaderhrangehofhoffenseshthanh"theft".
,Whathqualifieshash"employeehdishonesty"?h-hCorrecthanswer-
Tohreducehthishbroadhscopehofhcoverage,hemployeehdishonestyhformshtypicallyhrequirehthaththehe
mployeehmusthhavehactedhwithh"manifesthintent"h(thathis,hevidenthintent)htoh(1)hcausehahlosshtohth
ehinsuredhandh(2)hobtainhfinancialhbenefithforhthehemployeehorhforhanotherhpersonhorhentittyhthath
employeehwantshtohreceivehthehbenefit.hFurthermore,hthehfinancialhbenefithmusthbehsomethingho
therhthanhwages,hcommisssions,horhotherhemployeehbenefits.hSometimeshreferredhtohashah"dualht
rigger"horhah"triplehtrigger",hallhelementshofhmanifesthintenthmusthbehpresenthinhorderhforhemploy
eehdishonestyhcoveragehtohapply.
"Securities"hdefinitionhforhemployeehthefthcoverageh-hCorrecthanswer-
Negoitiablehadnhnonegotiablehinstrumentshorhcontractshrepresentingheithehrmoneyhorhotherhpr
operty.h(Stocks,hbonds,htokens,htickets,hstampshinhcurrenthuse,hetc.)
"Otherhproperty"hdefinitionhforhemployeehthefthcoverageh-hCorrecthanswer-
Allhtangiblehproperty,hotherhthanhmoneyhandhsecurities,hwhichhhashintrinsichvalue.
Doeshnothincludehcomputerhprograms,helectronichdata,horhanyhotherhspecificallyhexcludedhprop
erty.hAlsohdoeshnothincludehintangibleshsuchhashcopyrights,hpatents,hintellectualhproperty,hetc.h-
hCorrecthanswer-...
"Occurrence"hinhthehcontexthofhemployeehthefth-hCorrecthanswer-(1)hAnhindividualhact
(2) Thehcombinedhtotalhofhallhseparatehactshwhetherhorhnothrelated;hor
(3) Ahserieshofhactshwhetherhorhnothrelated;
committedhbyhanh"employee"hactinghalonehorhinhcollusionhwithhotherhpersons.h-hCorrecthanswer-
...
Forhexample,hifhahbookkeeperhfohahsmallhinsruancehagencyhembezzledh$190Khbyhstealinghcashhr
eceiptshorhinsertinghherhnamehashpayeehonhcustomers'hcheckshduringh100hseparatehincidents,he
achhforhlesshthanh$10,000,handhthehlimithofhinsurancehwash$10,000,hthehcourthwouldhlikelyhsideh
withhthehinterpretationhthaththehthefthconstitutedhahsinglehserieshofhactshandhthaththeh$10,000hli
mithwashthehmosththehinsuredhwashliablehtohpay.h-hCorrecthanswer-...
, TerminationhashtohAnyhEmployeehconditionh(employeehtheft)h-hCorrecthanswer-
Provideshautomatichterminationhofhemployeehthefthcoveragehwithhrespecthtohanyhemployeehwhoh
hashcommittedhahdishonesthacthashsoonhashthehacthishknownhtohthehinsuredhorhanyhpartner,hofficer
,hdirector,hetc.hnothinhcollusionhwithhthehemployee.hAlso,hthehconditionhgiveshthehinsurerhthehrightht
ohcancelhcoveragehwithhrespecthtohanyhemployeehbyhprovidingh30hdays'hadvancehnoticehtohthehins
ured.
EmployeehBenefithPlanshconditionh(employeehtheft)h-hCorrecthanswer-
EliminateshthehneedhtohattachhthehEmployeehRetirementhIncomehSecurityhActhofh1974h(ERISA)hco
mpliancehendorsementhtohthehpolicyhtohsatisfyhthehfidelityhbondinghrequirementhofhERISA.
"Forgery"hdefinitionh-hCorrecthanswer-
Thehsigninghofhthehnamehofhanotherhpersonhorhorganizationhwithhintenthtohdeceive;hithdoeshnothm
eanhahsignaturehwhichhconsistshinhwholehorhinhparthofhone'shownhnamehsignedhwithhorhwithouthaut
hority,hinhanyhcapacity,hforhanyhpurpose.
"Disappearancehandhdestruction"hforhcommercialhcrimehinsuranceh-hCorrecthanswer-
Thehadditionhofhthehwordsh'disappearancehandhdistruction'hincreaseshthehscopehofhthehcoverageht
ohincludehlosseshevenhwhenhtheyhdohnothresulthfromhanhunlawfulhact.hForhexample,hcoveragehishpr
ovidedhforhmoneyhandhsecuritieshthatharehdestroyedhinhahfire.hDisappearancehishcoveredhregardles
shofhwhetherhithishmysterioushorhwhetherhthefthappearshtohbehthehcausehofhthehdisappearance.
Robberyh-hCorrecthanswer-
Thehunlawfulhtakinghofhpropertyhfromhthehcarehandhcustodyhofhahpersonhbyhonehwhohhashca
usedhorhthreatenedhtohcausehthathpersonhbodilyhharm;hincludeshsituationshinhwhichhthehthie
fhcommitshanhobviouslyhunlawfulhacththathishwitnessedhbyhthehcustodianhofhthehstolenhprope
rtyh(suchhashanhobservedh"smashhandhgrab"hthefthfromhahshophwindow)
Custodianh-hCorrecthanswer-
Ahpersonhwhohhashcarehandhcustodyhofhpropertyhinsidehthehpremises,hexcludinghanyhpersonhwhileh
actinghashah"watchperson"horhjanitor.
SafehBurglaryh-hCorrecthanswer-
Thehunlawfulhtakinghofhpropertyhfromhwithinhahlockedhsafehorhvaulthbyhahpersonhunlawfullyhenteri
nghthehsafehorhvaulthashevidencedhbyhmarkshofhforciblehentryhuponhitshexterior;
