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FIN 431 Final Test 3 recap
Terms in this set (50)
Lisa has three fire insurance policies on her office building. The policy from company A is for $300,000, and the policies from companies B and C are for $100,000 each. If Lisa has a $200,000 loss, how much of the loss will be covered by each policy if the loss is settled on a pro rata basis by the insurers?
Policy A: 160,000; Policies B&C 20,000 each
Mary has insured her car under a PAP (personal auto policy) and has purchased the following coverages and limits (in parentheses). Liability ($100,000/$300,000/$75,000) and Uninsured Motorists ($50,000/$100,000/$75,000). One day Mary is a passenger in a friend's car and is involved in an accident with an uninsured motorist. The accident was the uninsured motorist's fault. Mary is severely injured. Which of the following statements is most correct?
Mary's policy will cover her injuries up to 50k
Exclusions are used in insurance policies for which of the following reasons
to eliminate coverage not needed by typical insureds.
Michelle had major abdominal surgery. Months after the surgery, she still did not feel well. When she was operated on again, the surgeon discovered two sponges that were not removed at the conclusion of the first operation. Michelle should be able to collect damages without having to prove negligence under the doctrine of
res ispa loquitor
James and Megan Webb own a home valued at $300,000 and have insured it under an unendorsed HO-3 policy for $250,000 (so the coverage A limit is $250,000). The standard limits apply to the other sections of the policy. James is an architect. The roof of a new addition to a client's home collapses and the client sues James. The court awards damages of $40,000 against James. How much does the HO-3 policy pay in total for these damages?
Owen's car is insured under a Personal Auto Policy (PAP). A hail storm occurred one evening, and his car was severely damaged. Which PAP coverage, if Owen purchased it, would cover this damage to his auto?
Alex is driving his car and accidentally injures a group of 3 pedestrians. It is established that Alex was negligent and that the damages for each pedestrian are $30,000. Alex has liability insurance limits of $50,000/$100,000/$80,000. How much should Alex's auto insurer pay in total for these damages?
The term used to describe plans in which automobile insurers participate to make insurance available to drivers unable to obtain coverage in the standard market is the
Residual (shared) Market
John is in an auto accident. He is determined to be 30% at fault and the other driver is determined to be 70% at fault. The damage to his car is $10,000. In terms of a pure comparative negligence rule the other driver should pay him
Which of the following policy provisions is used to reduce moral hazard and attitudinal hazard?
Fundamental purposes of the principle of indemnity include which of the following?I. To reduce moral hazardII. To prevent the insured from being indemnified
James was injured in an auto accident caused by another motorist's negligence. To reimburse him for his hospital bills and lost earnings, items which can be specifically itemized, James will receive
Kevin has three liability policies which provide for contribution by equal shares if other insurance applies to a loss. How much will each policy pay for a $3,000,000 liability judgment if policy A provides $500,000 of coverage, policy B provides $1,000,000 of coverage, and policy C provides $3,000,000 of coverage?
Policy A will pay $500,000, policy B will pay $1,000,000, and policy C will pay $1,500,000.
Which of the following statements about the uninsured motorists coverage of the PAP is true?
The coverage applies only if the uninsured motorists is legally liable
Peter has a house that is insured with a standard HO-3 policy for $1 million (i.e. his Coverage A limit is $1 million). The house, other structures, and his personal property are destroyed in a fire. Peter has to live in a rental home while his house is repaired. What is the maximum that his policy will pay in total for these losses?
A homeowner was repairing the deck on the back of his home. He left power tools on the deck when he quit working for the day. A neighbor's child saw the power tools. He came on to the deck, and started to play with a power saw. He cut off two of his fingers. A property owner may be held liable for creating a condition that entices children to enter the property where they are injured under the doctrine of
Kelly was hit by a car while she was walking to the park. She incurred $750 in medical costs at a hospital emergency room. Kelly has coverage for this charge under which of her Personal Auto Policy (PAP) coverages?
A contract which is enforceable only against one party is a
When must an insurable interest legally exist in property insurance?
Only at the time of the loss
Which of the following coverage forms is most applicable to someone who rents an apartment?
Ho-4 (Contents broad form)
Nancy was injured when she drove her car through a stop sign and was struck by Philip's car. Philip saw Nancy and could have stopped. However, he failed to do so since he had the right-of-way. Nancy can recover damages from Philip under which of the following legal doctrines?
the last clear chance rule
All of the following statements about Part D (coverage for damage to your auto) of the PAP are true EXCEPT
Losses are paid only if another driver is at fault
Mary has insured her car under a PAP (Personal Auto Policy) and has purchased the following coverages and limits (in parentheses): Liability ($25,000/$50,000/$25,000) and Uninsured Motorists ($50,000/$100,000/$50,000). One day Mary is driving her own car and accidentally collides with a tree. Mary's arm is broken in the accident and her friend (a passenger in Mary's car) suffers a broken nose. Mary's friend does not have any insurance and sues Mary as she believes that the accident was Mary's fault. Ignoring any deductibles, which of the following statements is most correct?
Mary's policy will not cover her own injuries but will cover legal liability for her friend's injuries up to $25,000
Heather sued Robert for injuries suffered in an automobile accident. Based on the facts presented, the jury concluded that Heather was 40 percent at fault in the accident and Robert was 60 percent at fault. Under the ststutory law of comparative negligence, the jury should award Heather
60% of her actual damages
David owns a car and has purchased the minimum coverage and limits that is required by law in the state of Mississippi. He is involved in a hit-and-run accident (the other car did not stop) and his car sustains damage of $40,000. How much does David's insurance pay for the damage to his car?
The HO-3 homeowners insurance policy covers the dwelling and other structures on a risk-of-direct-physical loss basis. (T/F)
Under a dram shop law, a business may be held liable for damages resulting from
The sale of alcohol
Several states have adopted modified no-fault auto insurance. (T/F)
Section 2 of an unendorsed HO-3 policy provides coverage for bodily injury liability. (T/F)
John occasionally borrows the car of his friend, Sophie. Sophie has a PAP with liability limits of $100,000/$300,000/$50,000. John also has a PAP, and his liability limits are $250,000/$500,000/$50,000. John had an accident while using Sophie's car and was found to be legally liable for $300,000 in bodily injury liability for injuries suffered by one person. How much will be paid by each policy?
Sophie's policy will pay $100,000, John's policy will pay $200,000.
An item, with actual cash value of $2,500 and depreciation of $800, is destroyed. What is the replacement cost of the loss?
3,300 (ACV=Replacement -Depr)
James and Megan Webb own a home valued at $300,000 and have insured it under an unendorsed HO-3 policy for $250,000 (so the coverage A limit is $250,000). The standard limits apply to the other sections of the policy. Megan entertains members of a local garden club in her home and makes a speech that damages, or defames, the character of two guests who sue her for person injury. This kind of wrong is termed slander. The court awards each guest damages of $60,000. How much does the HO-3 policy pay in total for these damages?
Which of the following statements about monetary damages awarded by a court is (are) true?I. The purpose of general damages is to provide benefits for medical expenses or loss of earnings.II. The purpose of punitive damages is to punish the tortfeasor so that others are deterred from committing the same wrongful act.
Sue's office building was damaged by a fire caused by a careless tenant. After paying Sue for the loss, the insurance company sued the tenant to recover its loss. This suit is based on the principle of
Why does the insured get the benefit of the doubt if an insurance policy contains any ambiguities or uncertainties?
because insurance contracts are contracts of adhesion
A false material statement made by an applicant for insurance is an example of
Which of the following statements about torts is (are) true?I. The person who is injured or harmed by a tort is called a plaintiff or claimant. II. The punishment for committing a tort is damages in the form of money.
Both I and II
John is driving David's car. They both have Personal Auto Policies and have the minimum auto insurance coverage required in the state of Mississippi. John negligently runs over a pedestrian and is legally liable to pay $50,000 to the injured pedestrian. Which of the following is most correct?
John and David's auto insurers will pay out the same amount
All of the following are examples of tort reform proposals EXCEPT
Eliminating caps on noneconomic damages
John negligently injures a pedestrian while he is driving his car. The damages awarded against him are $100,000. His insurer spends $50,000 on the legal defense. The relevant liability insurance limit in his auto policy is $100,000. True or False: John's insurer will subtract what they paid in legal defense costs from any possible claims payment. (T/F)
______ is the failure to exercise the standard of care required by law to protect others from an unreasonable risk of harm.
John has a standard HO-3 policy. A friend visits him one day while he is cutting the grass and he accidentally runs over his friend's foot with a lawnmower. His friend's medical expenses are $1,000. True or False: John's HO-3 policy will cover the full amount of his friend's injuries. (T/F)
Coverage C of the unendorsed HO-3 policy places special limits on various classes of property, including jewelery. If an insured wants jewelery coverage for items whose total value exceeds the special limit, they should buy a ______ endorsement.
Scheduled Personal property
One of the reasons that deductibles are used in insurance policies is to
Eliminate coverage for small claims
Under one doctrine, a person who understands the danger inherent in an activity cannot recover damages in the event of injury from the activity. This doctrine is called the
Assumption of risk doctrine
Sharon lives in a state that has a no-fault automobile insurance law. Under the law, an injured person has the right to sue the negligent driver only if the bodily injury claim exceeds a dollar or verbal threshold. The no-fault law in Sharon's state is a(n)
Modified no-fault plan
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred:-The driver of the other car suffered $30,000 in bodily injuries.-Ken's car sustained $5,000 in damages.-Ken incurred $5,000 in medical expenses.-The car that Ken hit was a total loss.Which of Ken's Personal Auto Policy (PAP) coverages will cover the other driver's medical expenses?
Bodily injury liability
The purpose of gap insurance is to
pay the difference between the amount the insurer pays if a car is a total loss and the remaining amount owed on a lease or car loan.
Jerry has a standard HO-3 insurance policy with a Coverage A limit of $600,000. His other coverages have the standard limits that we learned about in class. His policy has no endorsements. His house is damaged in an earthquake and sustains $200,000 damage. How much will his insurance company pay for the damage?
Eric's property was damaged in an accident. He phoned his agent to see if the loss was covered under his property insurance policy. The agent said, "As long as the cause of loss is not specifically excluded in the policy, the loss is covered." Based on the agent's answer, what type of insuring agreement appears in the policy?
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