Insurance Policy and Regulations Flashcards
7 cards from real CALA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance Policy and Regulations flashcards as text
What is the significance of an 'omnibus clause' in an automobile liability policy?
Answer: It extends liability coverage to anyone using the vehicle with the named insured's permission
The omnibus clause broadens liability coverage beyond the named insured to include permissive users, aligning with financial responsibility laws.
Under the McCarran-Ferguson Act, who primarily regulates the business of insurance in the United States?
Answer: Individual states
McCarran-Ferguson (1945) reserves insurance regulation to the individual states, keeping federal antitrust laws from applying except in narrow circumstances.
A vehicle is covered under both a personal auto policy and a commercial auto policy at the time of loss. Which principle determines how each policy contributes to the claim?
Answer: The 'pro rata' or 'contribution by equal shares' method outlined in each policy's other insurance clause
When two policies cover the same loss, the other insurance clauses of each policy dictate how liability is shared, commonly on a pro-rata or equal-shares basis.
What is the legal effect of a 'reservation of rights' letter sent by an insurer to an insured?
Answer: It allows the insurer to investigate and defend the claim while preserving the right to deny coverage later
A reservation of rights letter permits the insurer to act on behalf of the insured without waiving policy defenses, notifying the insured that coverage may ultimately be denied.
Under the standard PAP, which of the following losses would be covered under the collision coverage section?
Answer: The vehicle rolling into a ditch due to a failed parking brake
Collision coverage applies to upset (rolling over) of the vehicle, which includes a vehicle rolling into a ditch; falling objects, theft, and hail are covered under OTC/comprehensive.
Which document serves as the primary evidence of the insurance contract between the insured and the insurer?
Answer: The declarations page combined with the policy form
The complete insurance contract consists of the declarations page (specific coverage details) together with the policy form (standard terms and conditions).
Which endorsement to a personal auto policy would typically extend coverage to a vehicle rented by the named insured while their own vehicle is being repaired?
Answer: Transportation expense coverage (rental reimbursement)
Transportation expense (rental reimbursement) coverage pays daily rental costs when the insured's vehicle is out of service due to a covered loss.