CAIB 2 Chapter 1 Practice Exam 2 Questions and Answers

Identify the company which assumes the greatest portion of an account - Answer- Lead Company What is re-insurance - Answer- an insurance company 'ceding' part of the risk to a re-insurer What are three considerations used when determining amounts of indemnity? - Answer- i) Actual Cash Value of the property as it existed immediately prior to the loss ii) The interest of the insured in the property iii) The amount of insurance as shown on the policy i) Actual Cash Value of the property as it existed prior to the loss ii) The interest of the insured in the property iii) The amount of insurance as shown on the policy Which of the above amounts will be paid in the event of insured losses? - Answer- Insureds will receive whichever is the least Why do co-insurance clauses contain waiver provisions? - Answer- To waive application of the co-insurance clause when the loss is less than the amounts indicated in the waiver. These waivers are applied because to determine amounts in the co-insurance clause would cause too much work and expense for the insured given the size of the loss What are the provisions of "waiver of co-insurance" clauses? - Answer- When losses are less than 2% of the amount of insurance and less than $5,000 the provision of co-insurance clauses will not be applied Will the "waiver of co-insurance clause" apply to the following loss? Loss - $1,200 Policy Limit - $150,000 ACV of Property - $250,000 - Answer- Yes What is the purpose of "stated amount" co-insurance clause - Answer- to replace the provisions of the standard co-insurance clause with the requirements of the stated amount co-insurance clause What requirements must be met by the insured when co-insurance clauses are replaced by 'stated amount' co-insurance clauses? - Answer- i) Insureds must submit a statement of values indicating 100% of all property insured ii) Values indicated on statements of values must be verified by appraisal or other method acceptable to insurer iii) These values must be insured for the duration of the policy period All policies contain exclusions. List five types of exclusions and provide 2 examples of each - Answer- i) War - commercially uninsurable ii) Flood & earthquake - may be catastrophic iii) Automobile & Valuable papers - Other forms of insurance may be available iv) Wear and Tear / Mechanical Breakdown - May be expected by the insured and/or in the control of the insured v) Exterior communication towers & buildings under construction - Not 'common' exposures What is a condition? - Answer- requires insureds to do or not do something Insurers will not exercise their right of subrogation against certain parties. Explain. - Answer- When persons responsible for a loss have an interest in the proceeds of the policy, the insurer will not exercise their right of subrogation against these parties... (eg. bank or other person who lent money to insured and are shown as a loss payable on the policy) Identify stipulations of property protection systems clauses placed upon clients - Answer- i) The insured must notify insurer forthwith of any interruption, flaw or defect in any property protection system that comes to their knowledge ii) The insured must notify insurer forthwith of any lapse, cancellation or non-renewal of any maintenance or monitoring contract of any property protection system iii) The insured must notify insurer forthwith when notification of suspension of police service is received regarding response to any property protection systems How are losses paid on... 1) unsold stock 2) sold stock 3) Customer's property upon which work is being performed? - Answer- 1) unsold stock - losses are paid on the basis of ACV 2) Sold stock - are paid on the basis of selling price less any discounts given to the customer 3) Customer's property upon which work is being performed? These losses are paid on the basis of value of the parts used to repair and the values of the labour. Customers will be paid ACV on the property when initially dropped off for repair What are two types of property receiving 'special basis of settlement'? - Answer- i) Tenants improvements ii) records What is a warranty? - Answer- A promise made by insureds that certain facts are as represented and will remain so Describe four elements of 'locked vehicle warranties' - Answer- i) All property must be in vehicle or in a fully enclosed metal compartment ii) All doors and windows of the vehicle containing the property insured must be securely closed and locked iii) Force was used to gain access to vehicle containing the property insured iv) Visible signs of use of force are present on the vehicle contaning the property insured Material facts include matters concerning the property being covered and personal information about the client. What are four facts considered 'material' relative to the personal information of clients? - Answer- i) previous claims ii) Number of loss payables iii) Previous declination or cancellations from the insurers iv) fear of persons harbouring ill will against the insured What rights do the insurers have when misrepresentation occurs? - Answer- Insurers may void the policy on which the misrepresentation was linked Provide a summary of: i) Notice of authorities ii) sue and Labour iii) pair and set iv) Parts - Answer- i) Any loss involving a criminal act must be reported to authorities ii) Insureds must take all steps reasonable to recover lost or damaged property after insured losses iii) When losses involve property in a pair, the remaining item continues to have value and this amount will be deducted from any loss iv) When losses involve property which are part of a set only the lost or damaged part of the set will be insured Identify three reasons why commercial property policies have exclusions. - Answer- i) some losses are commercially unisurable ii) Some losses may be catastrophic iii) Some properties have more specialized forms