CALA Insurance Policy and Regulations 4

Question 1

What is the significance of an 'omnibus clause' in an automobile liability policy?

Accepted Answer

It extends liability coverage to anyone using the vehicle with the named insured's permission

Answer

The omnibus clause broadens liability coverage beyond the named insured to include permissive users, aligning with financial responsibility laws.

Question 2

Under the McCarran-Ferguson Act, who primarily regulates the business of insurance in the United States?

Accepted Answer

Individual states

Answer

McCarran-Ferguson (1945) reserves insurance regulation to the individual states, keeping federal antitrust laws from applying except in narrow circumstances.

Question 3

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?

Accepted Answer

The 'pro rata' or 'contribution by equal shares' method outlined in each policy's other insurance clause

Answer

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.

Question 4

What is the legal effect of a 'reservation of rights' letter sent by an insurer to an insured?

Accepted Answer

It allows the insurer to investigate and defend the claim while preserving the right to deny coverage later

Answer

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.

Question 5

Under the standard PAP, which of the following losses would be covered under the collision coverage section?

Accepted Answer

The vehicle rolling into a ditch due to a failed parking brake

Answer

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.

(CALA) Certified Automotive Loss Adjuster Practice Test

(CALA) Certified Automotive Loss Adjuster Practice Test

CALA Insurance Policy and Regulations 4