CPSA CPIA 5 — Questions and Answers
Question 1: Which endorsement added to a homeowners policy would cover jewelry, furs, and fine arts on an open-perils, agreed-value basis?
- Scheduled personal property endorsement (Correct answer)
- Inflation guard endorsement
- Extended replacement cost endorsement
- Home business endorsement
Correct answer: Scheduled personal property endorsement
A scheduled personal property endorsement (personal articles floater) insures listed high-value items on an open-perils basis for a specified agreed value.
Question 2: A manufacturer's product injures a consumer after the product leaves the manufacturer's control. Which CGL coverage part responds?
- Coverage A – premises and operations
- Coverage A – products-completed operations (Correct answer)
- Coverage B – personal and advertising injury
- Coverage C – medical payments
Correct answer: Coverage A – products-completed operations
The products-completed operations hazard within Coverage A responds to bodily injury or property damage arising from the insured's products after they have been distributed or sold.
Question 3: Which term describes the practice of an agent placing insurance with an insurer that is not licensed to do business in the insured's state without following proper surplus lines procedures?
- Twisting
- Churning
- Unauthorized placement (Correct answer)
- Rebating
Correct answer: Unauthorized placement
Placing coverage with an unlicensed (non-admitted) insurer without following surplus lines regulations constitutes an unauthorized placement, which is illegal in most states.
Question 4: What is the primary difference between an 'admitted' and a 'non-admitted' insurer operating in a state?
- Non-admitted insurers offer lower premiums guaranteed by the state
- Admitted insurers are licensed and subject to state rate/form regulation; non-admitted insurers are not (Correct answer)
- Non-admitted insurers are covered by state guaranty funds; admitted are not
- Admitted insurers can only write personal lines; non-admitted write commercial lines
Correct answer: Admitted insurers are licensed and subject to state rate/form regulation; non-admitted insurers are not
Admitted insurers are licensed by the state and must file rates and forms for approval, while non-admitted (surplus lines) insurers operate outside these regulatory requirements.
Question 5: An agent who convinces a client to replace an existing life insurance policy with a new one primarily to earn a new commission is guilty of:
- Twisting (Correct answer)
- Rebating
- Misrepresentation
- Churning
Correct answer: Twisting
Twisting is the act of inducing a policyholder to drop an existing policy and purchase a new one through misrepresentation or incomplete comparison, often to benefit the agent.
Question 6: Under the ISO commercial property policy, which cause of loss form provides the broadest coverage by insuring against all risks of direct physical loss not specifically excluded?
- Basic form
- Broad form
- Special form (Correct answer)
- Difference-in-conditions form
Correct answer: Special form
The Special Cause of Loss form provides open-perils (all-risk) coverage, paying for any direct physical loss not explicitly excluded in the policy.
Question 7: Which of the following describes 'waiver of subrogation' and why an insured might request it?
- The insured gives up the right to file claims, reducing premium
- The insurer agrees not to pursue recovery from a specified third party after paying a claim, protecting an important business relationship (Correct answer)
- The insured transfers all liability to the insurer permanently
- The insurer waives the right to inspect the insured's premises
Correct answer: The insurer agrees not to pursue recovery from a specified third party after paying a claim, protecting an important business relationship
A waiver of subrogation endorsement prevents the insurer from suing a designated party (such as a landlord or contractor) after paying a claim, preserving the business relationship.
CPSA CPIA 5
Which endorsement added to a homeowners policy would cover jewelry, furs, and fine arts on an open-perils, agreed-value basis?