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AIC 304 STUDY EXAM TEST | 2026 COMPLETE AIC
304 ACTUAL EXAM WITH CORRECT VERIFIED
ANSWERS | ALREADY GRADED A+ | BRAND NEW
Which one of the following describes how the payment of interest may
be factored into bad-faith claims?
Select one:
A. Some courts have found that insureds that pay excess judgments
have been deprived of the money, while the insurer has had the use of
the money to earn interest.
B. Some courts have found that an excess insurer may not claim
prejudgment interest if the underlying insurer has negligently refused
to settle.
C. If an insured pays an excess judgment and wins a bad-faith lawsuit
against the insurer to recover that excess judgment, the insurer must
pay interest on the amount the insured paid.
D. An insurer's obligation to pay interest on a bad-faith award is
dependent on how badly the insurer breached its duty.
......ANSWER......A. Some courts have found that insureds that pay
excess judgments have been deprived of the money, while the insurer
has had the use of the money to earn interest.
In addition to compensatory damages, courts can award punitive
damages when a plaintiff wins a bad-faith suit. Which one of the
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following statements is true regarding factors affecting a court's
decision to assess punitive damages?
Select one:
A. If claim representatives receive incentive-based compensation to
close claims quickly or to reduce claim payments, the insurer might run
a lesser risk of punitive damages.
B. Candor in admitting mistakes and being open and honest can
increase insurer exposure to punitive damages.
C. Punitive damages must be assessed whether or not the insurer
actually intended to cause the plaintiff economic loss or emotional
distress.
D. Courts usually require insurer behavior that is worse than ordinary
wrongdoing, such as malicious, fraudulent or oppressive behavior.
......ANSWER......D. Courts usually require insurer behavior that is worse
than ordinary wrongdoing, such as malicious, fraudulent or oppressive
behavior.
Bernice and Sally first met when they were both employed by the same
company five years ago. Recently insured Sally and claimant Bernice
have been working together to obtain an excess judgment for Bernice in
a lawsuit resulting from an insurance claim that Bernice filed against
Sally. Bernice and Sally have agreed to split any proceeds. Which one of
the following could be used a as a defense by the insurer in this legal
action? ......ANSWER......Insured's collusion with the claimant
Activity logs, correspondence, and documented evidence such as policy
reports, medical bills and damage reports can all be included in which
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one of the following insurer defenses against bad faith?
......ANSWER......Fair dealing and good documentation
Insured Kelly ran a red light and was involved in a motor vehicle
accident. She was slow in reporting the claim to her insurer and refused
to cooperate by allowing the insurer to inspect her vehicle. When the
insurer delayed the claim payment, Kelly sued for bad faith. A defense
the insurer could use in defending against Kelly's bad-faith claim is
......ANSWER......Comparative bad faith.
Generally a contributory negligence defense is available only in states
that permit which one of the following as a basis for bad-faith claims?
Select one:
A. Strict liability
B. Imputed liability
C. Breach of contract
D. Negligence ......ANSWER......D. Negligence
Which one of the following statements about defenses to bad-faith
claims is correct?
Select one:
A. Comparative bad faith as a defense is recognized in most
jurisdictions.
B. Following lawyers' advice is usually a complete defense to a bad-faith
claim.
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C. Contributory negligence is usually asserted in states using a
comparative negligence approach.
D. Statutes of limitations that apply to a particular lawsuit can vary by
state. ......ANSWER......D. Statutes of limitations that apply to a
particular lawsuit can vary by state.
Competent legal advice is considered evidence that the insurer acted in
good faith. Which one of the following statements about a defense
lawyer is correct?
Select one:
A. Defense lawyers should be selected based in part on their ability to
achieve good results in the courtroom.
B. Defense lawyers are required to periodically communicate with claim
representatives.
C. Defense lawyers should resolve coverage questions that arise in the
case.
D. Defense lawyers are responsible for meeting good-faith claim
handling standards. ......ANSWER......A. Defense lawyers should be
selected based in part on their ability to achieve good results in the
courtroom.
Which one of the following statements about claim evaluation is
correct?
Select one:
A. The limit of liability should be considered when evaluating a liability
claim.
AIC 304 STUDY EXAM TEST | 2026 COMPLETE AIC
304 ACTUAL EXAM WITH CORRECT VERIFIED
ANSWERS | ALREADY GRADED A+ | BRAND NEW
Which one of the following describes how the payment of interest may
be factored into bad-faith claims?
Select one:
A. Some courts have found that insureds that pay excess judgments
have been deprived of the money, while the insurer has had the use of
the money to earn interest.
B. Some courts have found that an excess insurer may not claim
prejudgment interest if the underlying insurer has negligently refused
to settle.
C. If an insured pays an excess judgment and wins a bad-faith lawsuit
against the insurer to recover that excess judgment, the insurer must
pay interest on the amount the insured paid.
D. An insurer's obligation to pay interest on a bad-faith award is
dependent on how badly the insurer breached its duty.
......ANSWER......A. Some courts have found that insureds that pay
excess judgments have been deprived of the money, while the insurer
has had the use of the money to earn interest.
In addition to compensatory damages, courts can award punitive
damages when a plaintiff wins a bad-faith suit. Which one of the
,2|Page
following statements is true regarding factors affecting a court's
decision to assess punitive damages?
Select one:
A. If claim representatives receive incentive-based compensation to
close claims quickly or to reduce claim payments, the insurer might run
a lesser risk of punitive damages.
B. Candor in admitting mistakes and being open and honest can
increase insurer exposure to punitive damages.
C. Punitive damages must be assessed whether or not the insurer
actually intended to cause the plaintiff economic loss or emotional
distress.
D. Courts usually require insurer behavior that is worse than ordinary
wrongdoing, such as malicious, fraudulent or oppressive behavior.
......ANSWER......D. Courts usually require insurer behavior that is worse
than ordinary wrongdoing, such as malicious, fraudulent or oppressive
behavior.
Bernice and Sally first met when they were both employed by the same
company five years ago. Recently insured Sally and claimant Bernice
have been working together to obtain an excess judgment for Bernice in
a lawsuit resulting from an insurance claim that Bernice filed against
Sally. Bernice and Sally have agreed to split any proceeds. Which one of
the following could be used a as a defense by the insurer in this legal
action? ......ANSWER......Insured's collusion with the claimant
Activity logs, correspondence, and documented evidence such as policy
reports, medical bills and damage reports can all be included in which
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one of the following insurer defenses against bad faith?
......ANSWER......Fair dealing and good documentation
Insured Kelly ran a red light and was involved in a motor vehicle
accident. She was slow in reporting the claim to her insurer and refused
to cooperate by allowing the insurer to inspect her vehicle. When the
insurer delayed the claim payment, Kelly sued for bad faith. A defense
the insurer could use in defending against Kelly's bad-faith claim is
......ANSWER......Comparative bad faith.
Generally a contributory negligence defense is available only in states
that permit which one of the following as a basis for bad-faith claims?
Select one:
A. Strict liability
B. Imputed liability
C. Breach of contract
D. Negligence ......ANSWER......D. Negligence
Which one of the following statements about defenses to bad-faith
claims is correct?
Select one:
A. Comparative bad faith as a defense is recognized in most
jurisdictions.
B. Following lawyers' advice is usually a complete defense to a bad-faith
claim.
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C. Contributory negligence is usually asserted in states using a
comparative negligence approach.
D. Statutes of limitations that apply to a particular lawsuit can vary by
state. ......ANSWER......D. Statutes of limitations that apply to a
particular lawsuit can vary by state.
Competent legal advice is considered evidence that the insurer acted in
good faith. Which one of the following statements about a defense
lawyer is correct?
Select one:
A. Defense lawyers should be selected based in part on their ability to
achieve good results in the courtroom.
B. Defense lawyers are required to periodically communicate with claim
representatives.
C. Defense lawyers should resolve coverage questions that arise in the
case.
D. Defense lawyers are responsible for meeting good-faith claim
handling standards. ......ANSWER......A. Defense lawyers should be
selected based in part on their ability to achieve good results in the
courtroom.
Which one of the following statements about claim evaluation is
correct?
Select one:
A. The limit of liability should be considered when evaluating a liability
claim.
