AdjusterPro - Practice Exam Questions & Answers

Stephen's insurer denied his claim because the peril was not covered. But, according to Stephen's understanding of the policy, his loss should be covered, so he filed a dispute. During the trial, the jury agreed that the policy language was open to interpretation, so they decided in favor of Stephen. This is because: A. insurance policies are contracts of adhesion. B. insurance policies are conditional contracts. C. insurance policies are contracts of utmost good faith. D. insurance policies are personal contracts. - ANSWERSA. insurance policies are contracts of adhesion. "We will provide the insurance described in this policy in return for the premium and compliance with all applicable provisions of this policy." In which section of the insurance policy would this statement be found? A. Definitions B. Declarations C. Insuring Agreement D. Endorsements - ANSWERSC. Insuring Agreement Melinda's home sustained $6,500 in damage when Jared ran into it with his truck. Melinda received $6,500 from her insurance company, and Jared also paid her $5,000. Melinda has now profited from this loss and is in violation of: A. the principle of subrogation. B. federal law. C. the principle of indemnity. D. state law. - ANSWERSC. the principle of indemnity. Sandra rear-ended Randy's car when he stopped quickly for a yellow light that she was sure they were both going to make. The damage was minor, but Sandra was worried her premiums would increase if the accident was reported, so she gave Randy $500 in an effort to keep it just between the two of them. However, Randy filed the claim with his insurance company and received a settlement check for $750. What has Randy violated? A. The principle of insurable interest B. The principle of subrogation C. The principle of indemnity D. The principle of loss minimization - ANSWERSC. The principle of indemnity Darnell is applying for auto insurance with his agent. Currently, he only wants to get a minimal amount of coverage to keep his premiums as low as possible, so he decides not to include uninsured motorist coverage on his policy. His agent has him sign a document giving up his right to this coverage. What is this called? A. A warranty B. An express waiver C. A binder D. An implied waiver - ANSWERSB. An express waiver An insurance policy's declarations page contains all of the following, EXCEPT: A. the deductible. B. the dates of the policy term. C. the perils insured against. D. the coverage limit. - ANSWERSC. the perils insured against. An economic device used to protect against the risk of realizing unforeseen and extraordinary financial loss is called: A. risk avoidance. B. insurance. C. indemnification. D. subrogation. - ANSWERSB. insurance. Which of the following does NOT constitute a legal termination of a contract offer? A. Rejection by offeree B. Request for more information C. Termination by operation of law D. Revocation by offeror - ANSWERSB. Request for more information The Principle of Indemnity is designed to prevent: A. having multiple payees on a policy. B. an insured from making a profit. C. insurers from making a profit. D. subrogation. - ANSWERSB. an insured from making a profit. Jason's auto policy states that the insurer may cancel coverage if Jason pays a premium more than 30 days late. However, Jason is currently more than 30 days late, and has been so five times in the last year, and his insurer has done nothing about it. When Jason gets into an accident and files a claim, which of the following would be true? A. The principle of utmost good faith prevents the insurer from denying coverage in this case. B. The principle of utmost good faith allows the insurer to deny coverage in this case. C. The principle of estoppel prevents the insurer from denying coverage in this case. D. The principle of estoppel allows the insurer to deny coverage in this case. - ANSWERSC. The principle of estoppel prevents the insurer from denying coverage in this case. Lee, the owner of Antonia's Bakery, wants to expand operations and start catering. He hires Geoffrey to manage the new catering department and quickly realizes that he might have made a mistake. Geoffrey makes inappropriate comments to other employees, seems to be dishonest in his dealings with money, and is a reckless driver. How would Lee effectively practice risk avoidance in this case? A. Fire Geoffrey B. Have a company-wide meeting about appropriate language in the workplace C. Purchase employee theft coverage D. Hire another new employee to be Geoffrey's supervisor - ANSWERSA. Fire Geoffrey Natalie's brakes have been squealing for several months. Every time she drives her car, she's reminded that she needs to have them replaced, but she forgets all about it as soon as she gets out of the car. Natalie's actions can be considered a: A. physical hazard. B. peril. C. morale hazard. D. risk. - ANSWERSC. morale hazard. The law of large numbers states that: A. insuring a greater number of units increases the likelihood of loss for the insurer. B. insuring a greater number of units increases the accuracy of the insurer's loss predictions. C. insuring a greater number of units increases the effect of statistical outliers on loss predictions. D. insuring a greater number of units makes the insurer's losses less predictable. - ANSWERSB. insuring a greater number of units increases the accuracy of the insurer's loss predictions. A hailstorm moves over Erin's restaurant. Large hailstones break through a skylight and water pours in, damaging the flooring in the restaurant. Additionally, the electrical system shorts out and Erin has to close for three days. The hail would be considered: A. a direct loss. B. an indirect loss. C. the physical hazard. D. the proximate cause of the loss. - ANSWERSD. the proximate cause of the loss. Which of the following is NOT typically associated with strict liability? A. Housing exotic or wild animals B. Working with electronics C. Using firearms D. Handling explosives - ANSWERSB. Working with electronics A retail store institutes a training program for all cashiers, to help them identify and deter shoplifters. This is an example of: A. risk avoidance. B. risk transference. C. risk reduction. D. risk retention. - ANSWERSC. risk reduction. A lion at a zoo escaped when a zoo employee failed to follow protocol. The lion injured a zoo patron. In court, the injured patron's lawyer could invoke the doctrine of: A. Contributory negligence. B. Res Ipsa Loquitur. C. Comparative negligence. D. Assumption of Risk. - ANSWERSB. Res Ipsa Loquitur. Jim is completely "upside down" financially on his car. He owes the finance company $8,000. If he sells the car, he knows he'll only get about $4,000 for it. But Jim knows that if the car was somehow stolen, his insurance company would pay him somewhere in the neighborhood of $7,000. Jim decides to have a friend steal the car and "make it disappear." Jim then files a claim with his insurance company to report his car stolen. Which best represents Jim's actions? A. Concealment B. Factual misrepresentation C. Soft fraud D. Hard fraud - ANSWERSD. Hard fraud A few weeks ago, Grace's garage was destroyed by an out-of-control motorist named Zach. Fortunately, Zach had sufficient liability insurance to cover the damages, but Zach's insurer is giving Grace the runaround negotiating the claim. Grace finally files a complaint, forcing Zach to: A. issue a judgement. B. pay Grace more than her garage is worth. C. submit an answer. D. pay the claim in full. - ANSWERSC. submit an answer. A hailstorm moves over Erin's restaurant. Large hailstones break through a cracked skylight, and water pours in and damages the flooring in the restaurant. Additionally, the electrical system in the building shorts out, and Erin has to close the restaurant for three days. The restaurant's income lost because of the physical damages would be considered: A. the proximate cause. B. a direct loss. C. an indirect loss. D. a physical hazard. - ANSWERSC. an indirect loss. A reservation of rights: A. lets the insurer begin to investigate a claim, without later being forced to pay it if it turns out not to be covered. B. is a letter that needs to be signed by the policyholder. C. informs the policyholder that his claim has been denied. D. means that the insurer does not need to defend a policyholder in court. - ANSWERSA. lets the insurer begin to investigate a claim, without later being forced to pay it if it turns out not to be covered. A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system. The water from the sprinklers soaks the carpets and shorts-out all the computers, causing thousands of dollars in damage. The office must close for two months during repairs. The cost of renting a temporary office space while the physical damage is repaired is considered: A. a direct loss. B. an indirect loss. C. a physical loss. D. an occurrence. - ANSWERSB. an indirect loss. Sine Nomine insurance exists in order to generate a profit. Based on this information, we can conclude that Sine Nomine is: A. a reciprocal insurer. B. a captive insurer. C. a social insurance program. D. a private insurer. - ANSWERSD. a private insurer. Zach totaled his car in an accident. The insurer offered him $60,000 to replace the vehicle, which Zach rejected. The insurer even went up to $70,000, but Zach stuck by his demand for $95,000. The case eventually went to trial and the jury awarded Zach $65,000. Which of the following statements is TRUE? A. Zach can appeal the decision to try to get the $70,000 offered by the insurer during negotiation. B. Zach can reopen negotiations with his insurer. C. Zach will only get the $65,000, because the offer of $70,000 was inadmissible in court. D. Zach will get $70,000, because that was the last offer given by the insurer. - ANSWERSC. Zach will only get the $65,000, because the offer of $70,000 was inadmissible in court. Which of the following would not be true of a typical insurance claims dispute in litigation? A. For the plaintiff to win, at least 50% of the evidence must support his case. B. The insurer is usually the defendant. C. Guilt must be proved beyond a reasonable doubt. D. The adjuster may be called as witness. - ANSWERSC. Guilt must be proved beyond a reasonable doubt. Cindy falls down the stairs at Jane's house and breaks her arm, resulting in $2,500 in medical expenses. Jane's homeowner's insurance will cover the liability, but Cindy is particularly mad at Jane for not keeping her house in order and is seeking punitive damages. Jane's insurance adjuster informs the two of them that they will likely have to go to court to settle the dispute because: A. falling down stairs is not covered under punitive damages in Jane's policy. B. punitive damages can only be determined by a court of law. C. the adjuster does not hold a "punitive damages" certification. D. only the insurer himself can negotiate punitive damages, not an adjuster. - ANSWERSB. punitive damages can only be determined by a court of law. When a claimant submits a claim to an insurer, the insurer has several options for responding. Which option does the insurer want to avoid? A. Having a court of law dictate the proper settlement B. Accepting the claim and paying what the claimant requests C. Rejecting the claim and refusing to pay D. Letting the claim go to arbitration - ANSWERSA. Having a court of law dictate the proper settlement Steve is an agent for XYZ Insurance. As a fiduciary agent, Steve's primary role is to: A. investigate the financial health of XYZ Insurance. B. protect the financial interests of XYZ Insurance. C. ensure XYZ Insurance increases its annual revenues. D. analyze his conflicts of interest with XYZ Insurance. - ANSWERSB. protect the financial interests of XYZ Insurance. Julio has filed a claim for fire damage to his home, but he is worried that his insurer may not cover the loss. When the insurance adjuster has finished investigating and evaluating the damage, she tells Julio that his loss is covered. However, he remains skeptical and wonders aloud whether the insurer will feel the same way as she does. The adjuster quickly assures Julio that he does not need to worry about that. Why might she be so sure of herself? A. She is wrong to speak with confidence, because the claim should be reviewed by the insurer before deciding if loss is covered. B. As the adjuster, she is responsible for making the claimant happy, regardless of the outcome. C. As the insurer's fiduciary agent, she has the authority to make decisions on behalf of the insurer. D. As a fiduciary agent, she is only responsible for reporting the outcome of the claim once an executive has made a final decision about it. - ANSWERSC. As the insurer's fiduciary agent, she has the authority to make decisions on behalf of the insurer. Stephanie is in the process of adjusting George's auto claim. Currently, she is trying to close the claim, but George is being uncooperative. He disagrees with the settlement amount that Stephanie has offered and is demanding much more. At this point, Stephanie should do all of the following, EXCEPT: A. acknowledge and address George's concerns. B. provide a step-by-step justification for her decision. C. give George her supervisor's phone number so he can escalate his complaint. D. explain in clear terms how she arrived at this amount. - ANSWERSC. give George her supervisor's phone number so he can escalate his complaint. Carol is adjusting a liability claim. After thoroughly examining the case, Carol comes up with what she believes is a fair and equitable amount of indemnification for the claimant. However, the claimant may reject her offer, so she prepares a second offer, just in case. Which function of an insurance adjuster might Carol be preparing for? A. Negotiating a claim B. Reporting a claim C. Evaluating a claim D. Investigating a claim - ANSWERSA. Negotiating a claim