CAIB 2 Mock Midterm Exam with
Complete Solutions
What is the insurer entitled to do when misrepresentation has been shown or has
contributed to the loss - ANS-The insurer is entitled to void the policy
What is the major single cause of fire and one of the leading caused of death in
Canada: - ANS-Mechanical or electrical failure of equipment
What is the exception to the coverage provided for in the peril of Impact by Aircraft,
Spacecraft and Land Vehicle under the Fire and EC form insures: - ANS-Damage to
insured's building caused by delivery van driven by an employee of the insured
Identify 2 underwriting conditions that must be satisfied by the insured before the insurer
will agree to replace the standard Co-insurance clause with the Stated Amount Co-
Insurance Clause: - ANS-1) insured must submit statement of values indicating values
of property insured as verified by an appraisal or other method of valuation acceptable
to the insurer
2) These values must be maintained throughout the term of the policy
Identify 5 hazards common to most commercial risks: - ANS-Heating
Occupancy
Protection
Electrical Services
Detachment
A client of your brokerage is receiving a rate credit for their automatic extinguishing and
burglary protection system. You have advised this client that the policy insured by the
insurer contains a condition which specifically outlines certain obligations of insureds in
respect to such property protection systems. Identify 2 obligations placed on the insured
by this policy condition: - ANS-1)Insured must report immediately any interruption, flaw
or defect coming to their knowledge of any property protection system;
2Insured must report immediately any cancellation or non-renewal of any monitoring to
maintenance contract of any property protection system
Identify 2 approaches used by insurers to insure all of a business' property under a
single limit of insurance: - ANS-1) Property of Every Description
2) All Property (Blanket) basis
Is a photocopier (leased) insured under equipment? - ANS-Yes
, Is a gas furnace used to heat buildings insured under stock? - ANS-No - it is insured
under building
Are advertising brochures insured under stock? - ANS-Yes
Are growing plants used for sale to the public insured under equipment? - ANS-No -
they are insured under stock
According to the Insurance Act, when does coverage take effect? - ANS-12:01 standard
time at the address of insured
What change can insurers make to their application to help eliminate the problem of
when the policy period takes effect? - ANS-They can include on their forms a space for
brokers to indicate the time the application was completed and coverage bound
Under the fire policy, is a fire loss to 200 dinner buns while being baked in the insureds
oven covered? - ANS-no, it is not covered
Would fire damage to insureds building by persons rioting in the streets be covered? -
ANS-No, it is not covered
Would fire loss to the building by careless handling of smoking materials be covered? -
ANS-Yes, it is covered
What circumstances must be present before the insurer is required to provide coverage
for property at an unspecified location? - ANS-Insured must remove property to new
unnamed location to protect it from loss or further loss
In the event an insureds stock was to suffer loss at its new location, how much
coverage would be provided? - ANS-the difference of the amount of insurance and total
lost (eg: (stock = $140,000 - value lost =$120,000) =$20,000
How long can the stock be kept at any unspecified location before coverage ceases? -
ANS-7 days or the unexpired term of the policy, whichever is the least
Would loss of food being processed in large vats due to disruption of power by striking
employees be covered? - ANS-No
Would gradual discolouration of paint on the building due to smoke emissions from the
plants main chimney be covered? - ANS-No
Is breakage of exterior window due to earth movement be covered under the Stock
Broad form? - ANS-No
Would hail damage to permanently installed outside electrical pedestal sign be covered
under the Broad Form? - ANS-Yes
Complete Solutions
What is the insurer entitled to do when misrepresentation has been shown or has
contributed to the loss - ANS-The insurer is entitled to void the policy
What is the major single cause of fire and one of the leading caused of death in
Canada: - ANS-Mechanical or electrical failure of equipment
What is the exception to the coverage provided for in the peril of Impact by Aircraft,
Spacecraft and Land Vehicle under the Fire and EC form insures: - ANS-Damage to
insured's building caused by delivery van driven by an employee of the insured
Identify 2 underwriting conditions that must be satisfied by the insured before the insurer
will agree to replace the standard Co-insurance clause with the Stated Amount Co-
Insurance Clause: - ANS-1) insured must submit statement of values indicating values
of property insured as verified by an appraisal or other method of valuation acceptable
to the insurer
2) These values must be maintained throughout the term of the policy
Identify 5 hazards common to most commercial risks: - ANS-Heating
Occupancy
Protection
Electrical Services
Detachment
A client of your brokerage is receiving a rate credit for their automatic extinguishing and
burglary protection system. You have advised this client that the policy insured by the
insurer contains a condition which specifically outlines certain obligations of insureds in
respect to such property protection systems. Identify 2 obligations placed on the insured
by this policy condition: - ANS-1)Insured must report immediately any interruption, flaw
or defect coming to their knowledge of any property protection system;
2Insured must report immediately any cancellation or non-renewal of any monitoring to
maintenance contract of any property protection system
Identify 2 approaches used by insurers to insure all of a business' property under a
single limit of insurance: - ANS-1) Property of Every Description
2) All Property (Blanket) basis
Is a photocopier (leased) insured under equipment? - ANS-Yes
, Is a gas furnace used to heat buildings insured under stock? - ANS-No - it is insured
under building
Are advertising brochures insured under stock? - ANS-Yes
Are growing plants used for sale to the public insured under equipment? - ANS-No -
they are insured under stock
According to the Insurance Act, when does coverage take effect? - ANS-12:01 standard
time at the address of insured
What change can insurers make to their application to help eliminate the problem of
when the policy period takes effect? - ANS-They can include on their forms a space for
brokers to indicate the time the application was completed and coverage bound
Under the fire policy, is a fire loss to 200 dinner buns while being baked in the insureds
oven covered? - ANS-no, it is not covered
Would fire damage to insureds building by persons rioting in the streets be covered? -
ANS-No, it is not covered
Would fire loss to the building by careless handling of smoking materials be covered? -
ANS-Yes, it is covered
What circumstances must be present before the insurer is required to provide coverage
for property at an unspecified location? - ANS-Insured must remove property to new
unnamed location to protect it from loss or further loss
In the event an insureds stock was to suffer loss at its new location, how much
coverage would be provided? - ANS-the difference of the amount of insurance and total
lost (eg: (stock = $140,000 - value lost =$120,000) =$20,000
How long can the stock be kept at any unspecified location before coverage ceases? -
ANS-7 days or the unexpired term of the policy, whichever is the least
Would loss of food being processed in large vats due to disruption of power by striking
employees be covered? - ANS-No
Would gradual discolouration of paint on the building due to smoke emissions from the
plants main chimney be covered? - ANS-No
Is breakage of exterior window due to earth movement be covered under the Stock
Broad form? - ANS-No
Would hail damage to permanently installed outside electrical pedestal sign be covered
under the Broad Form? - ANS-Yes
