CAIB 3 Practice Exam Questions with Answers
Define the following insurance terms.
Bill of Lading - ✔✔Documents issued by carriers responsible for transporting or forwarding
goods
Constructive Total Loss (MARINE INSURANCE) - ✔✔Occurs when the cost of salvaging the cargo
is too high relative to the value saved
Working Capital - ✔✔Amounts of funds available to pay continuing business operating
expenses until payment is received for work being undertaken by the contractor
Penalty (SURETY BOND) - ✔✔Amount of credit given to the principal by the surety or the
amount which the surety is prepared to pay in the event the principal should default
Going Concern Value - ✔✔Difference in the value of property which must be sold after a loss
and its value had the business continued
Question #2
All of the following statements in regards to the coverages provided under Coverage A. Bodily
Injury and Property Damage Liability (Commercial General Liability Policy) are true, except one.
Pick the Exception.
a) Coverage provided only for such sums as the insured is legally obligated to pay as damages.
b) Insurer has both a right and duty to defend the insured.
c) Coverage is provided only for losses which occur during the policy period.
d) Only those losses which occur in Canada and the United States of America(including its
territories and possessions) are insured. - ✔✔d) Only those losses which occur in Canada and
the United States of America(including its territories and possessions) are insured.
Question #3
, Peter's Perogie and Pizza Den, Inc. does almost one-half of its business from take-out orders.
High school and university students handle most of the deliveries. They supply their own
vehicles and are paid $2.25 per delivery. Two months ago, one of the students was involved in a
serious accident when he tried to run a red light at a busy intersection. The three persons
injured in the accident have filed an action against both the student and Peter's Perogie and
Pizza Den, Inc. The following automobile coverage will respond to protect the business in the
event it is found liable for damages:
a) S.P.F. No. 1 Owner's Form
b) S.P.F. No. 2 Drivers Policy
c) S.P.F. No. 6 Standard Non-Owned Automobile Policy
d) S.E.F. No.31 Non-Owned Equipment Endorsement - ✔✔c) S.P.F. No. 6 Standard Non-Owned
Automobile Policy
Question #4
The local Historical Society is a client of yours. Three days ago, a demolitions contractor moved
onto the site of a building which the society believes should be preserved. All efforts to
persuade the owner of the building and the contractor to stop such work failed. Your client has
appealed to the court to stop the work until such time as arguments can be presented showing
the historical value of the building. Before agreeing to such action, the court would require that
the society post the following bond:
a) Injunction Bond
b) Attachment Bond
c) Appeal Bond
d) Land Restoration Bond. - ✔✔a) Injunction Bond
Question #5
Which of the following is the preferred accounting method for reporting earned income on
work-in-progress re: construction activities:
a) percentage of completion method
b) first in, first out method
c) cash basis method
Define the following insurance terms.
Bill of Lading - ✔✔Documents issued by carriers responsible for transporting or forwarding
goods
Constructive Total Loss (MARINE INSURANCE) - ✔✔Occurs when the cost of salvaging the cargo
is too high relative to the value saved
Working Capital - ✔✔Amounts of funds available to pay continuing business operating
expenses until payment is received for work being undertaken by the contractor
Penalty (SURETY BOND) - ✔✔Amount of credit given to the principal by the surety or the
amount which the surety is prepared to pay in the event the principal should default
Going Concern Value - ✔✔Difference in the value of property which must be sold after a loss
and its value had the business continued
Question #2
All of the following statements in regards to the coverages provided under Coverage A. Bodily
Injury and Property Damage Liability (Commercial General Liability Policy) are true, except one.
Pick the Exception.
a) Coverage provided only for such sums as the insured is legally obligated to pay as damages.
b) Insurer has both a right and duty to defend the insured.
c) Coverage is provided only for losses which occur during the policy period.
d) Only those losses which occur in Canada and the United States of America(including its
territories and possessions) are insured. - ✔✔d) Only those losses which occur in Canada and
the United States of America(including its territories and possessions) are insured.
Question #3
, Peter's Perogie and Pizza Den, Inc. does almost one-half of its business from take-out orders.
High school and university students handle most of the deliveries. They supply their own
vehicles and are paid $2.25 per delivery. Two months ago, one of the students was involved in a
serious accident when he tried to run a red light at a busy intersection. The three persons
injured in the accident have filed an action against both the student and Peter's Perogie and
Pizza Den, Inc. The following automobile coverage will respond to protect the business in the
event it is found liable for damages:
a) S.P.F. No. 1 Owner's Form
b) S.P.F. No. 2 Drivers Policy
c) S.P.F. No. 6 Standard Non-Owned Automobile Policy
d) S.E.F. No.31 Non-Owned Equipment Endorsement - ✔✔c) S.P.F. No. 6 Standard Non-Owned
Automobile Policy
Question #4
The local Historical Society is a client of yours. Three days ago, a demolitions contractor moved
onto the site of a building which the society believes should be preserved. All efforts to
persuade the owner of the building and the contractor to stop such work failed. Your client has
appealed to the court to stop the work until such time as arguments can be presented showing
the historical value of the building. Before agreeing to such action, the court would require that
the society post the following bond:
a) Injunction Bond
b) Attachment Bond
c) Appeal Bond
d) Land Restoration Bond. - ✔✔a) Injunction Bond
Question #5
Which of the following is the preferred accounting method for reporting earned income on
work-in-progress re: construction activities:
a) percentage of completion method
b) first in, first out method
c) cash basis method
