Delaware Property & Casualty Insurance License, Practice Exams

Under the NFIP Dwelling Form, building coverage and contents coverage:

1. Are both automatically included at the same limit
2. Share a single combined limit
3. Have separate limits and must be purchased separately ✓
4. Cannot both be purchased on one property

Why: NFIP building and contents coverages carry separate limits, and contents coverage must be purchased separately from building coverage.

Which of the following is paid IN ADDITION to the policy limits under the CGL Supplementary Payments provision?

1. Damage to the insured's own product, which is drawn from the products-completed operations aggregate limit
2. Punitive damages assessed against the insured, paid on top of the each-occurrence limit of insurance
3. Lost wages of an injured employee for the entire time missed from work, over and above the general aggregate
4. The cost of bonds to release attachments and reasonable expenses incurred at the insurer's request ✓

Why: Supplementary Payments — including defense costs, bond premiums, and expenses at the insurer's request — are paid in addition to the limits of insurance.

For how long may a temporary licence run under 18 Del. C. s 1711(a), and what must the Commissioner deem?

1. Not more than 180 days, and the Commissioner must deem the temporary licence necessary for the servicing of an insurance business; the temporary licensee must pass the written examination within that period or the temporary licence lapses at the end of it without possibility of renewal.
2. Not more than 180 days, and the Commissioner must deem the temporary licence necessary for the servicing of an insurance business; no examination is required. ✓
3. Not more than 90 days, renewable once for a further 90 days on cause shown, and the Commissioner must deem the temporary licence necessary for the servicing of an insurance business in one of the cases the subsection lists.
4. Not more than one year, and the Commissioner must deem the temporary licence to be in the public interest; an examination is required unless the applicant would be exempt from it under s 1709 of the title had a full licence been applied for.

Why: 18 Del. C. s 1711(a) lets the Commissioner ISSUE A TEMPORARY LICENSE FOR A PERIOD NOT TO EXCEED 180 DAYS WITHOUT REQUIRING AN EXAMINATION IF THE INSURANCE COMMISSIONER DEEMS THAT THE TEMPORARY LICENSE IS NECESSARY FOR THE SERVICING OF AN INSURANCE BUSINESS in the listed cases. No examination, and 180 days is the ceiling.

A captive insurer is best distinguished from a captive agent in that the captive insurer:

1. Is a state residual market facility that accepts risks the voluntary market declines
2. Sells policies for a single insurer under an exclusive appointment
3. Is a consumer reporting agency that assembles underwriting reports for member companies
4. Is an insurance company owned by its parent to insure the parent's own risks ✓

Why: A captive insurer is owned by its parent and primarily insures the parent's risks; this is distinct from a captive agent, who merely represents only one insurer.

A manufacturer wants to avoid any coinsurance penalty at the time of loss and is willing to agree on the property's value in advance. The best option is:

1. Spoilage endorsement
2. Reporting form
3. Peak Season endorsement
4. Agreed Value option ✓

Why: The Agreed Value option suspends the coinsurance condition based on a value agreed upon by insurer and insured, avoiding any coinsurance penalty.

Under the exclusive remedy doctrine, what does an employee generally give up in exchange for statutory workers' compensation benefits?

1. The right to be reinstated to the same job and shift once the treating physician issues a release
2. The right to employer-paid medical care
3. The right to two-thirds wage benefits
4. The right to sue the employer in tort for the work-related injury ✓

Why: The exclusive remedy doctrine means workers' compensation is the employee's sole remedy against the employer; the employee gives up the right to sue the employer in tort in exchange for guaranteed no-fault benefits.

What are the outer limits on filing with the Association, and on its aggregate obligation, under 18 Del. C. s 4208(a)(1)?

1. A covered claim does not include one filed after the earlier of twenty-four months from the order of liquidation or the court's final filing date; and, except for workers' compensation, the obligation ceases once $10,000,000 has been paid in the aggregate, here and elsewhere, for any one insured and its affiliates on one insurer. ✓
2. A covered claim does not include one filed more than twenty-four months after the order of liquidation, whatever date the court may have set for filing with the liquidator; and the Association's obligation ceases once $500,000 has been paid in the aggregate to or for any one insured, workers' compensation included.
3. There is no outer limit on filing, the Association standing in the insolvent insurer's shoes for as long as the policy would have answered; the $10,000,000 figure is the net worth above which an insured's first-party claim is not covered at all, and there is no aggregate cap on the Association's obligation to any one insured.
4. A covered claim does not include one filed after the later of twenty-four months from the order of liquidation or the court's final filing date; and the Association's obligation ceases once $10,000,000 has been paid in the aggregate by the Delaware Association alone, payments by associations in other states being disregarded for the purpose.

Why: 18 Del. C. s 4208(a)(1) provides that A COVERED CLAIM DOES NOT INCLUDE ANY CLAIM FILED WITH THE ASSOCIATION AFTER THE EARLIER OF: (i) 24 MONTHS AFTER THE DATE OF THE ORDER OF LIQUIDATION OR (ii) FINAL DATE SET BY THE COURT FOR THE FILING OF CLAIMS AGAINST THE LIQUIDATOR OR RECEIVER. It adds that EXCEPT IN THE CASE OF A CLAIM FOR BENEFITS UNDER WORKERS' COMPENSATION COVERAGE, ANY OBLIGATION OF THE ASSOCIATION TO ANY AND ALL PERSONS SHALL CEASE WHEN $10,000,000 SHALL HAVE BEEN PAID IN THE AGGREGATE BY THE ASSOCIATION AND ANY 1 OR MORE ASSOCIATIONS SIMILAR TO THE ASSOCIATION OF ANY OTHER STATE OR STATES OR ANY PROPERTY/CASUALTY SECURITY FUND ... TO OR ON BEHALF OF ANY INSURED AND ITS AFFILIATES ... UNDER THE POLICY OR POLICIES OF ANY 1 INSOLVENT INSURER. EARLIER, not later; and out-of-state payments DO count.

Under the FCRA, when an insurer denies an application or charges a higher premium based on a consumer report, it must provide the consumer with:

1. A refund of every premium paid to date, with interest, within 30 days of the underwriting decision
2. A replacement policy issued at the originally quoted premium until the report is corrected
3. An adverse action notice including how to obtain a copy of the report ✓
4. A federal flood zone determination form

Why: The FCRA requires an adverse action notice that informs the consumer of the action, identifies the reporting agency, and explains the right to obtain a free copy of the report and dispute it.

Which of the following is true about how WC indemnity benefits interact with maximum and minimum limits?

1. No statutory ceiling or floor applies; the weekly check is simply two-thirds of the worker's own average wage
2. Weekly benefits are subject to statutory maximums and minimums tied to the state average wage ✓
3. A statutory maximum caps the weekly benefit, but no minimum exists, so a low-wage worker receives whatever the percentage yields
4. The weekly benefit always equals one hundred percent of the worker's pre-injury wage until maximum medical improvement

Why: Indemnity benefits are generally a percentage of average weekly wage but capped by a statutory maximum and floored by a minimum, often tied to the statewide average weekly wage.

An operator was charged under 21 Del. C. s 2118(p) but the vehicle was in fact insured. What does paragraph (p)(2) provide?

1. The operator shall not be convicted if the vehicle was in fact insured, whether or not any proof is produced to the court, the existence of the insurance being a complete defence which the prosecution must disprove; failure to produce the card at the time of the stop goes only to the costs the court may award against the operator on an acquittal.
2. The operator must still be convicted, since the offence created by the subsection is the failure to carry and produce the card rather than the absence of insurance; the court may however suspend the minimum fine in whole or in part where proof of insurance in force at the time is produced to it before the date of sentencing.
3. The operator shall not be convicted if, before conviction, the operator produces to the court the insurance identification card or other sufficient proof - including an automobile, garage keeper's or other commercial or personal insurance policy - showing insurance in full force and effect at all pertinent times covering that vehicle. ✓
4. The operator shall not be convicted if, before conviction, the operator produces to the court the insurance identification card itself; some other proof of insurance will not do, because subsection (s)(2) makes the failure to produce a card presumptive evidence that the person is operating the vehicle without the insurance this title requires.

Why: 21 Del. C. s 2118(p)(2) provides that AN OPERATOR SHALL NOT BE CONVICTED UNDER THIS SUBSECTION IF, PRIOR TO CONVICTION, THE OPERATOR SHALL PRODUCE TO THE COURT IN WHICH THE OFFENSE IS TO BE TRIED THE INSURANCE IDENTIFICATION CARD OR IN LIEU THEREOF OTHER SUFFICIENT PROOF, INCLUDING BUT NOT LIMITED TO AN AUTOMOBILE, GARAGE KEEPER'S OR OTHER COMMERCIAL OR PERSONAL INSURANCE POLICY, SHOWING THAT THERE WAS INSURANCE IN FULL FORCE AND EFFECT AT ALL PERTINENT TIMES COVERING OR WHICH WOULD COVER THE SAID MOTOR VEHICLE OR THE OPERATION OF THE SAID MOTOR VEHICLE BY THE OPERATOR CHARGED. Paragraph (p)(3) lets the Justice of the Peace Court take that proof by mail, facsimile or other court-approved method instead of an appearance.

To what does Delaware Regulation 1901 apply, and what is the penalty for a producer who ignores it?

1. It applies to every line of insurance written in this State, including surplus lines, since an excess rate is most often needed on a risk the admitted market has refused; agents and brokers who fail to comply are subject to the penalties in 18 Del. C. s 2530, being the penalty section of the rating chapter under which the filing is made.
2. It applies to the lines subject to 18 Del. C. s 2502(a) and to surplus lines alike, but not to workers' compensation, which is excluded from the rating chapter by s 2502(b); agents and brokers who fail to comply are subject to 18 Del. C. s 1732 and the penalties provided there for a breach of the producer licensing chapter.
3. It applies only to private passenger automobile and homeowners' insurance, the two lines in which an individual consumer is most likely to be offered an excess rate; a producer who fails to comply commits an unfair trade practice under 18 Del. C. ch. 23 and is liable to the penalties in s 2308 of that chapter.
4. It applies to the lines subject to regulatory jurisdiction under 18 Del. C. s 2502(a), and does not apply to surplus lines insurance; agents and brokers who fail to comply are subject to 18 Del. C. s 1732 and the penalties provided there. ✓

Why: Delaware Regulation 1901 s 5.1: THIS REGULATION APPLIES TO THOSE LINES OF INSURANCE SUBJECT TO REGULATORY JURISDICTION UNDER 18 Del.C. s 2502(a). THIS REGULATION DOES NOT APPLY TO SURPLUS LINES INSURANCE. THE TERMS OF INSURANCE DEPARTMENT BULLETIN 79-1 DO NOT APPLY TO THIS REGULATION. Section 8.1: AGENTS AND/OR BROKERS WHO FAIL TO COMPLY WITH THE TERMS OF THIS REGULATION SHALL BE SUBJECT TO THE PROVISIONS OF 18 Del.C. s 1732 AND THE PENALTIES THEREFOR.

A policyholder telephones the insurer to ask whether a cracked window would be covered, and does not claim. May the insurer count that when it decides whether to renew?

1. No. 18 Del. C. s 4131 provides that an insurer shall not consider an inquiry regarding a homeowners policy or a loss under it to be a claim for the purposes of making underwriting decisions, including decisions to nonrenew; an inquiry is any contact initiated by an insured that is not the filing of a claim. ✓
2. Yes. Section 4131 provides only that an inquiry is not itself a claim for the purposes of the claim counts in s 4130; the insurer remains free to take the inquiry into account as part of the general picture of the risk in deciding whether to renew, to re-rate or to impose a higher deductible on the renewal.
3. No, unless the inquiry concerned a loss which the insurer afterwards inspected, in which case the inspection report may be taken into account; an inquiry which leads to no inspection is disregarded, since the insurer has no independent knowledge of the condition of the property from which to judge the risk.
4. Yes, provided the insurer has disclosed in the form required by Regulation 702 that inquiries are among the occurrences likely to cause a nonrenewal; the disclosure requirement exists precisely so that a policyholder knows before making contact what the consequences of doing so may turn out to be.

Why: 18 Del. C. s 4131 provides that AN INSURER SHALL NOT CONSIDER AN INQUIRY REGARDING A HOMEOWNERS POLICY OR A LOSS UNDER THAT POLICY TO BE A CLAIM FOR PURPOSES OF MAKING UNDERWRITING DECISIONS, INCLUDING BUT NOT LIMITED TO DECISIONS TO NONRENEW A POLICY. AN INQUIRY IS ANY CONTACT INITIATED BY AN INSURED THAT IS NOT THE FILING OF A CLAIM. The bar is on all underwriting decisions, not only on the nonrenewal counts in s 4130.

What does 18 Del. C. s 320(c) require of the person being examined?

1. That the person make freely available the accounts, records and documents relating to the subject of the examination that are in the person's own possession, an officer, attorney or agent holding records on the person's behalf being reachable instead only by a subpoena issued under s 326 of the title.
2. That the person, and the person's officers, attorneys, employees, agents and representatives, make freely available the accounts, records, documents, files, information, assets and matters in their possession or control relating to the subject of the examination, and facilitate the examination. ✓
3. That the person produce the accounts, records and documents specified in the examination warrant within thirty days of service of the warrant, and permit the examiner to take copies of them at the expense of the Department rather than at the expense of the person being examined.
4. That the person make freely available everything relating to the subject of the examination, except records subject to a common law or statutory privilege, which the person may withhold on filing a written claim of privilege with the Commissioner before the examination begins.

Why: 18 Del. C. s 320(c) provides that EVERY PERSON BEING EXAMINED, THE PERSON'S OFFICERS, ATTORNEYS, EMPLOYEES, AGENTS AND REPRESENTATIVES, SHALL MAKE FREELY AVAILABLE TO THE COMMISSIONER, OR THE COMMISSIONER'S EXAMINERS, THE ACCOUNTS, RECORDS, DOCUMENTS, FILES, INFORMATION, ASSETS AND MATTERS OF SUCH PERSON, IN THE PERSON'S POSSESSION OR CONTROL, RELATING TO THE SUBJECT OF THE EXAMINATION AND SHALL FACILITATE THE EXAMINATION. The duty reaches the person's professional advisers as well as the person, and it is a duty to FACILITATE, not merely to avoid obstructing.

The Peak Season endorsement is most useful for an insured whose:

1. Personal property (inventory) increases significantly during certain periods ✓
2. Automobile fleet expands each summer to handle additional delivery routes and drivers
3. Liability exposure drops in the winter months when the seasonal operation is closed
4. Building value stays constant year after year and needs no adjustment at renewal

Why: Peak Season provides additional limits on business personal property during seasonal periods of higher inventory, such as a retailer before the holidays.

Which homeowners' insurance disputes must an insurer arbitrate under 18 Del. C. s 331, and which are outside it?

1. Disputes about the amounts owed under a claim for losses or damages must be arbitrated; disputes about whether coverage exists and on what terms are not, and the mandate does not apply where the policy has an arbitration or appraisal provision in a form the Department has approved. ✓
2. Disputes about the amounts owed under a claim and disputes about whether coverage exists must both be arbitrated, the section making arbitration the exclusive first remedy for any homeowners' claim dispute, except where the policy contains an arbitration or appraisal provision approved by the Department.
3. Disputes about whether coverage exists and on what terms must be arbitrated; disputes about the amounts owed are left to the appraisal provisions of the policy, and the mandate does not apply where the policy itself contains an appraisal provision in a form approved by the Insurance Department.
4. Disputes about the amounts owed under a claim must be arbitrated whatever the policy says, an arbitration or appraisal provision in the policy being of no effect against the statutory process; disputes about whether coverage exists are not subject to the process established by the section.

Why: 18 Del. C. s 331(a) requires every insurer providing homeowners' cover TO SUBMIT TO ARBITRATION ... ANY DISPUTE RELATING TO THE AMOUNTS OWED UNDER ANY CLAIM FOR LOSSES OR DAMAGES BY AN INSURED, and provides that DISPUTES RELATING TO WHETHER COVERAGE EXISTS AND UNDER WHAT TERMS AND CONDITIONS THE COVERAGE EXISTS SHALL NOT BE SUBJECT TO THE ARBITRATION PROCESS ESTABLISHED IN THIS SECTION. It adds that WHERE THE INSURANCE POLICY PROVIDES AN ARBITRATION OR APPRAISAL PROVISION IN A FORM APPROVED BY THE INSURANCE DEPARTMENT, THE ARBITRATION MANDATED BY THIS SUBSECTION SHALL NOT APPLY. Amount yes, coverage no, and an approved policy provision displaces the statutory process.

Under the CGL, 'property damage' is defined to include:

1. Physical injury to tangible property only, with any resulting loss of use expressly excluded
2. Purely economic loss such as lost profits and diminished market value, even where nothing tangible has been harmed, so long as the loss arises out of the insured's operations
3. Bodily injury, sickness, or disease sustained by a person
4. Physical injury to tangible property (including loss of use) and loss of use of tangible property that is not physically injured ✓

Why: Property damage means physical injury to tangible property including resulting loss of use, plus loss of use of undamaged tangible property.

How is an arbitration under 21 Del. C. s 2118(j) started, who hears it, and what does an arbitrator cost?

1. By a written request filed with the Superior Court of the county in which the accident occurred; that Court appoints three arbitrators from a panel maintained by the Insurance Commissioner, at least one of whom must be a licensed insurance adjuster; the arbitrator's fee may not exceed $250 per arbitrator for any one arbitration.
2. By a written request mailed to the Insurance Commissioner; the Commissioner or the Commissioner's nominee selects a single arbitrator from a panel of attorneys authorized to practise law in this State, insurance adjusters being eligible only to sit on a panel hearing a property claim; the fee may not exceed $25 for any one arbitration.
3. By a written request mailed to the insurance commissioner; the Commissioner or a nominee picks three from a panel of Delaware attorneys and licensed insurance adjusters, at least one of them an attorney; the arbitrator's fee may not exceed $25 per arbitrator in any one single arbitration. ✓
4. By an oral or written demand made to the insurer, which must then apply to the Insurance Commissioner to constitute a panel; the Commissioner selects three arbitrators, all of whom must be attorneys authorized to practise law in this State; the schedule of costs is fixed by the panel itself at the conclusion of the arbitration.

Why: 21 Del. C. s 2118(j) requires every policy to submit to arbitration on the request of the party claiming a loss within the paragraph (a)(2) coverages or for damage to a motor vehicle. SUCH REQUEST SHALL BE IN WRITING AND MAILED TO THE INSURANCE COMMISSIONER. Paragraph (j)(2) establishes A PANEL OF ARBITRATORS CONSISTING OF ATTORNEYS AUTHORIZED TO PRACTICE LAW IN THE STATE AND INSURANCE ADJUSTERS LICENSED TO ACT AS SUCH; (j)(3) requires the Commissioner to SELECT 3 INDIVIDUALS FROM THE PANEL ..., AT LEAST 1 OF WHOM SHALL BE AN ATTORNEY; and (j)(6) provides that THE ARBITRATOR'S FEE SHALL NOT EXCEED $25 PER ARBITRATOR FOR ANY 1 ARBITRATION.

If an insured carries 100/300 UM limits and is hit by a driver with 25/50 liability limits, underinsured motorists coverage may provide additional recovery of up to:

1. Nothing at all, because the at-fault driver carried liability limits that met the state minimum
2. The difference between the UM/UIM limit and the at-fault driver's coverage, per policy terms ✓
3. The full $300,000 per accident, paid on top of whatever the at-fault driver's insurer already paid
4. Only $25,000, because UIM recovery is capped at the at-fault driver's per-person liability limit

Why: UIM allows the insured to recover the gap between their UIM limit and the underinsured driver's limits, subject to how the state/policy coordinates the limits.

What does 18 Del. C. s 4213 provide about detecting and preventing insolvencies, and what does s 4214 require of the Board?

1. The Board must recommend to the Commissioner on detection and prevention at least annually, and its reports are public documents open to inspection by any member insurer; a report on the history and causes of an insolvency is optional, and the Association files a financial report not later than December 31 of each year.
2. The Board may recommend to the Commissioner on detection and prevention and on any matter germane to a member's solvency - such reports not being public documents; it shall report on the history and causes of any insolvency in which the Association paid. The Association files a financial report by June 30. ✓
3. The Commissioner alone is charged with detecting and preventing insolvencies, the Board's role being to pay claims once insolvency has occurred; the Board files a financial report not later than June 30 each year, and the Association is exempt from examination, being a creature of statute rather than an insurer.
4. The Board may recommend to the Commissioner on detection and prevention, and its reports are not public documents; the Commissioner has no reciprocal duty to report to the Board, the flow of information under the chapter running only one way, and the Association's financial report is due not later than June 30 each year.

Why: 18 Del. C. s 4213: (1) THE BOARD OF DIRECTORS MAY, UPON MAJORITY VOTE, MAKE RECOMMENDATIONS TO THE COMMISSIONER FOR THE DETECTION AND PREVENTION OF INSURER INSOLVENCIES ...; (3) IT SHALL BE THE DUTY OF THE COMMISSIONER TO REPORT TO THE BOARD OF DIRECTORS WHEN THE COMMISSIONER HAS REASONABLE CAUSE TO BELIEVE THAT ANY MEMBER INSURER ... MAY BE INSOLVENT OR IN A FINANCIAL CONDITION HAZARDOUS TO THE POLICYHOLDERS OR THE PUBLIC; (4) THE BOARD ... MAY ... MAKE REPORTS AND RECOMMENDATIONS TO THE COMMISSIONER UPON ANY MATTER GERMANE TO THE SOLVENCY, LIQUIDATION, REHABILITATION OR CONSERVATION OF ANY MEMBER INSURER. SUCH REPORTS AND RECOMMENDATIONS SHALL NOT BE CONSIDERED PUBLIC DOCUMENTS; (6) THE BOARD ... SHALL, AT THE CONCLUSION OF ANY INSURER INSOLVENCY IN WHICH THE ASSOCIATION WAS OBLIGATED TO PAY COVERED CLAIMS, PREPARE A REPORT ON THE HISTORY AND CAUSES ... Section 4214: THE ASSOCIATION SHALL BE SUBJECT TO EXAMINATION AND REGULATION BY THE COMMISSIONER. THE BOARD ... SHALL SUBMIT, NOT LATER THAN JUNE 30 OF EACH YEAR, A FINANCIAL REPORT FOR THE PRECEDING CALENDAR YEAR.

A farmowners-ranchowners policy is best described as a package that combines:

1. Multiple peril crop insurance on the farmer's planted acreage, bought separately from any dwelling coverage
2. Property and liability coverage for the farm dwelling, farm structures, and farming operations ✓
3. Automobile coverage on farm trucks and tractors only
4. Farm liability alone, leaving the dwelling and outbuildings to be insured under a separate property form

Why: The farmowners-ranchowners policy is a package combining homeowners-type property and liability coverage with coverage for farm structures, equipment, and operations.

Federal Multiple Peril Crop Insurance (MPCI) is overseen by which federal entity?

1. The Federal Reserve Board of Governors
2. The Department of Commerce
3. The Risk Management Agency (RMA) of the USDA ✓
4. FEMA, through the NFIP

Why: MPCI is administered through the USDA's Risk Management Agency, which works with the Federal Crop Insurance Corporation and private insurers.

Which perils does the Broad Causes of Loss form ADD beyond the Basic form?

1. Earthquake and flood, which the Basic form omits from its list of covered causes
2. War and nuclear hazard, added back once the Broad form endorsement is attached
3. Wear and tear from ordinary use
4. Falling objects; weight of snow, ice, or sleet; and water damage ✓

Why: The Broad form adds falling objects; weight of snow, ice, or sleet; water damage; and includes a limited collapse provision.

Under PAP Part A, punitive or exemplary damages are:

1. Paid on the same basis as compensatory damages, up to the full Part A liability limit shown on the Declarations page
2. Often excluded or not covered, as the policy responds to compensatory damages the insured is legally liable for ✓
3. Paid outside the limit of liability as a supplementary payment, the same way defense costs and post-judgment interest are
4. Covered under Part B medical payments instead of Part A

Why: Liability coverage responds to compensatory damages; punitive damages are commonly excluded or unenforceable under the policy and many states' public policy.

A home has a replacement cost of $300,000 but a market value of $230,000. For insurance-to-value purposes, the amount of insurance should be based on:

1. The original purchase price
2. The land value
3. Replacement cost of $300,000 ✓
4. Market value of $230,000

Why: Insurance to value is based on the cost to rebuild (replacement cost), not market value, which includes land and location factors.

The voluntary and intentional giving up of a known right is called:

1. Estoppel
2. Waiver ✓
3. Concealment
4. Subrogation

Why: A waiver is the intentional and voluntary relinquishment of a known legal right.

What immunity and what tax treatment does 18 Del. C. ch. 42 give the Association?

1. No liability and no cause of action arises against any member insurer, the Association or its agents, the Board or the Commissioner for any act or failure to act under the chapter; nor is the Association subject to a claim for bad faith. It is exempt from all fees and taxes except on property. ✓
2. No liability arises against the Commissioner or the Board, but the Association itself may be sued in the ordinary way, including for bad faith in the handling of a covered claim, since s 4208 deems it the insurer to the extent of its obligation and it must take the burdens of that position with its benefits.
3. No liability arises against any of the persons named, and the Association is not subject to a claim for damages for bad faith; the Association is exempt from all taxes of every kind including taxes on the real and personal property it owns, and from all fees levied by the State or any of its subdivisions.
4. No liability arises against the Association or the Commissioner for an act done in good faith, the immunity being lost where bad faith is shown; the Association is exempt from state taxes except premium tax, which it pays on the assessments it collects in the same way as a member insurer pays on premiums.

Why: 18 Del. C. s 4217: THERE SHALL BE NO LIABILITY ON THE PART OF AND NO CAUSE OF ACTION OF ANY NATURE SHALL ARISE AGAINST ANY MEMBER INSURER, THE ASSOCIATION OR ITS AGENTS OR EMPLOYEES, THE BOARD OF DIRECTORS OR THE COMMISSIONER OR THE COMMISSIONER'S REPRESENTATIVES FOR ANY ACTION OR ANY FAILURE TO ACT TAKEN BY THEM IN THE PERFORMANCE OF THEIR POWERS AND DUTIES UNDER THIS CHAPTER. NEITHER SHALL THE ASSOCIATION, ITS OFFICERS, AGENTS AND EMPLOYEES BE SUBJECT TO ANY CLAIM FOR DAMAGES FOR BAD FAITH. Section 4215: THE ASSOCIATION SHALL BE EXEMPT FROM PAYMENT OF ALL FEES AND ALL TAXES LEVIED BY THIS STATE OR ANY OF ITS SUBDIVISIONS, EXCEPT TAXES LEVIED ON REAL OR PERSONAL PROPERTY. The immunity is not qualified by good faith; it is flat.

18 Del. C. s 1704(b)(1) excepts certain officers, directors and employees from the producer licensing requirement. What is the condition that applies to all of them?

1. That the officer, director or employee is employed by an insurer rather than by an insurance producer, an employee of a producer being required to hold a licence whatever the nature of the work performed and whatever the basis of the remuneration.
2. That the officer, director or employee holds no other licence issued under the chapter, a person already licensed in one capacity being required to be licensed for every capacity in which that person acts on behalf of the insurer or the producer.
3. That the officer, director or employee is paid a salary rather than a commission, and that the Commissioner has approved the arrangement in writing in advance of the person beginning the activities on which the exception is claimed.
4. That the officer, director or employee receives no commission on policies written or sold to insure risks residing, located or to be performed in this State. ✓

Why: 18 Del. C. s 1704(b)(1) excepts AN OFFICER, DIRECTOR OR EMPLOYEE OF AN INSURER OR OF AN INSURANCE PRODUCER, PROVIDED THAT THE OFFICER, DIRECTOR OR EMPLOYEE DOES NOT RECEIVE ANY COMMISSION ON POLICIES WRITTEN OR SOLD TO INSURE RISKS RESIDING, LOCATED OR TO BE PERFORMED IN THIS STATE, and then only where the work falls into one of three cases: activities that are EXECUTIVE, ADMINISTRATIVE, MANAGERIAL, OR CLERICAL ... AND ARE ONLY INDIRECTLY RELATED TO THE SALE, SOLICITATION OR NEGOTIATION OF INSURANCE; a function relating to UNDERWRITING; or acting as A SPECIAL AGENT OR AGENCY SUPERVISOR ASSISTING INSURANCE PRODUCERS where the activities are limited to technical advice and assistance and do not include sale, solicitation or negotiation. The exception covers an employee of a PRODUCER as well as of an insurer, so it is not confined to insurer employees.

A legal doctrine that reduces a plaintiff's recovery in proportion to their own degree of fault is:

1. Contributory negligence
2. Res ipsa loquitur
3. Comparative negligence ✓
4. Strict liability

Why: Comparative negligence apportions damages according to each party's percentage of fault rather than barring recovery entirely.

What is the purpose of Delaware Regulation 902, and under what authority is it made?

1. To set forth unfair claim settlement practices which are prohibited whenever they occur, the regulation dispensing with the frequency requirement that 18 Del. C. s 2304(16) imposes so that a single instance of any listed practice is a violation; adopted under 18 Del. C. ss 311 and 2312.
2. To set forth the standards by which the Commissioner will determine whether a claim has been settled fairly, and the remedies available to an insured who is dissatisfied with a settlement offered; adopted under 18 Del. C. ss 311 and 2312 and the Administrative Procedures Act.
3. To set forth unfair claim settlement practices which, when committed or performed with such frequency as to indicate a general business practice, are prohibited; adopted under 18 Del. C. ss 311 and 2312 and promulgated in accordance with the Administrative Procedures Act, 29 Del. C. ch. 101. ✓
4. To set forth unfair claim settlement practices which, when committed with such frequency as to indicate a general business practice, are prohibited; adopted under 18 Del. C. s 1718 and the Administrative Procedures Act, and applicable only to licensees of the Department rather than to insurers.

Why: Delaware Regulation 902 s 1.0 states that THE PURPOSE OF THIS REGULATION IS TO SET FORTH UNFAIR CLAIM SETTLEMENT PRACTICES WHICH, WHEN COMMITTED OR PERFORMED WITH SUCH FREQUENCY AS TO INDICATE A GENERAL BUSINESS PRACTICE, ARE PROHIBITED. s 2.0 records that it IS ADOPTED BY THE COMMISSIONER PURSUANT TO THE AUTHORITY GRANTED BY 18 Del.C. ss 311 AND 2312, AND PROMULGATED IN ACCORDANCE WITH THE DELAWARE ADMINISTRATIVE PROCEDURES ACT, 29 Del.C. Ch. 101. The regulation carries the same frequency requirement as the statute, so a single instance is no more a violation of the regulation than it is of s 2304(16).

Under the PAP, a family member who owns their own vehicle insured under a separate policy is, for liability while driving that owned vehicle:

1. Covered for physical damage only, because Part D of the named insured's policy automatically follows any auto a resident relative owns
2. Covered under Part C only, so uninsured motorist benefits respond but bodily injury liability does not
3. Generally not covered for that separately owned vehicle under the named insured's pap (owned-but-not-insured exclusion) ✓
4. Fully covered under the named insured's pap, since every resident family member is an insured for liability in any vehicle they drive

Why: The PAP excludes liability for vehicles owned by a family member that are not insured under this policy (other than the named insured's covered autos).

The 'Separation of Insureds' condition in the CGL means that:

1. Each named insured and each additional insured is given its own separate each occurrence and aggregate limits
2. Suits brought by one insured against another insured are always covered, because the exclusions stop applying between them
3. The policy applies separately to each insured as though each were the only insured, except as to the limits ✓
4. The General Aggregate is doubled whenever more than one insured is listed on the declarations page of the policy

Why: Separation of insureds applies the coverage separately to each insured (except for the shared limits), as if each were separately insured.

A document attached to a policy that adds, deletes, or modifies coverage is called an:

1. Affidavit
2. Application
3. Binder
4. Endorsement ✓

Why: An endorsement (or rider) is a written amendment that changes the terms of the base policy.

Under 'contribution by equal shares,' insurers covering the same loss pay:

1. Only the insurer whose policy was written first, with the others reimbursing it afterward
2. Nothing until the insured has paid a share equal to the deductible
3. Equal amounts until the lowest limit is exhausted, then the rest continue ✓
4. Amounts proportional to each policy's limit of insurance

Why: Each insurer contributes equal amounts until the smallest applicable limit is used up; remaining insurers continue contributing equally.

Who may qualify as a SELF-INSURER under 21 Del. C. s 2904(a), and who issues the certificate?

1. Any person in whose name more than fifteen motor vehicles are registered in this State, on condition of providing the same benefits available under a required policy; the certificate of self-insurance is issued by the Insurance Commissioner, who also arbitrates any dispute between an insurer and a self-insurer under 21 Del. C. s 2118(j) of the title.
2. Any person in whose name more than fifteen motor vehicles are registered in this State, on condition of providing the same benefits available under a required vehicle insurance policy; the certificate of self-insurance is issued by the secretary of transportation. ✓
3. Any person in whose name twenty-five or more motor vehicles are registered in this State, on condition of depositing $40,000 in cash or securities with the State Treasurer; the certificate is issued by the Secretary of Transportation on production of the Treasurer's certificate that the deposit has been made and is being held.
4. Any person in whose name five or more motor vehicles are registered in this State, that being the number which Regulation 606 treats as a fleet; the certificate of self-insurance is issued by the Secretary of Transportation, and the holder is exempt from the arbitration provisions of 21 Del. C. s 2118 of the title.

Why: 21 Del. C. s 2904(a) provides that UPON CONDITION OF PROVIDING THE SAME BENEFITS AVAILABLE UNDER A REQUIRED VEHICLE INSURANCE POLICY, ANY PERSON IN WHOSE NAME MORE THAN 15 MOTOR VEHICLES ARE REGISTERED IN THIS STATE MAY QUALIFY AS A SELF-INSURER BY OBTAINING A CERTIFICATE OF SELF-INSURANCE ISSUED BY THE SECRETARY OF TRANSPORTATION. Note that s 2118(g)(6) and (j)(9) both apply the section's machinery to self-insurers, so self-insurance is an alternative to buying the policy, not an escape from the obligations.

The PAP towing and labor costs coverage pays for labor:

1. For accident-related medical transport
2. Only when performed at the place of disablement ✓
3. Anywhere repairs are needed regardless of location
4. For routine maintenance at the shop

Why: Towing and labor costs coverage pays towing plus labor, but only labor performed at the place where the vehicle was disabled.

A large corporation sets aside its own funds in a formal program to pay for its own anticipated losses rather than buying insurance. This is:

1. Coinsurance
2. Reinsurance
3. Reciprocal insurance
4. Self-insurance ✓

Why: Self-insurance is a formal retention program in which an entity sets aside funds to pay its own losses instead of transferring the risk.

What does a SUSPENSION mean under 18 Del. C. s 1702(23), and what happens when it ends?

1. A temporary bar on the privileges of the licence for a maximum of 12 months, which also suspends the licensee's appointments; on expiry of the period, and on satisfactory completion of any terms the Commissioner imposed, all licences and appointments are reinstated. ✓
2. A temporary bar on the privileges of the licence for a minimum of 12 months, the appointments remaining in force so that the licensee's insurers may continue to service the business; on expiry the licensee must reapply under s 1706 and pass the examination again.
3. A temporary bar of not more than 6 months during which the licensee may service existing policies but may not sell, solicit or negotiate new business; on expiry the licence is reinstated automatically without any conditions and without notice to the appointing insurers.
4. A bar of indefinite duration that lasts until the Commissioner lifts it by order; appointments are revoked outright and must be re-filed by each insurer, with a new appointment fee, once the licence has been restored by the Commissioner.

Why: 18 Del. C. s 1702(23): SUSPENSION means TO BAR TEMPORARILY THE PRIVILEGES OF AN INSURANCE LICENSE OR LICENSES granted under chapter 17, FOR A MAXIMUM OF 12 MONTHS. A SUSPENSION SHALL ALSO INCLUDE A SUSPENSION OF THE APPOINTMENT OF SUCH LICENSEE. UPON THE EXPIRATION OF THE SUSPENSION PERIOD AND UPON SATISFACTORY COMPLETION OF SUCH TERMS AND CONDITIONS AS THE COMMISSIONER HAS IMPOSED, ALL LICENSES AND APPOINTMENTS SHALL BE REINSTATED. s 1712(e) also lets the Commissioner reinstate a suspended licence at any time on conditions.

A person is dissatisfied with a decision of the inspection bureau. What do 18 Del. C. ss 4112 and 4113 provide?

1. An appeal lies to the Superior Court within thirty days of the action or decision, the Commissioner having no appellate jurisdiction over the inspection bureau; and the bureau and its employees are liable in the ordinary way for a negligently prepared inspection report, the subchapter conferring immunity only on the Commissioner.
2. An appeal lies to the Commissioner within thirty days; after a hearing on not less than ten days' written notice the Commissioner may approve, disapprove or direct reassignment under the plan. No liability arises against insurers, the bureau, the facility, the association or the Commissioner for inspections or reports. ✓
3. An appeal lies to the Commissioner within ten days of the action or decision, and is heard on not less than thirty days' written notice; the Commissioner may approve or disapprove the decision but may not direct that an application be reassigned, that being a matter for the industry placement facility under its own plan of operation.
4. An appeal lies to the Commissioner within thirty days, and is decided on the papers without a hearing; no liability arises against the bureau or the facility for statements in their reports, but the immunity does not extend to the Commissioner or to insurers, who remain answerable for what they say about an applicant's property.

Why: 18 Del. C. s 4112 provides that ANY PERSON AGGRIEVED BY ANY ACTION OR DECISION OF THE INSPECTION BUREAU OR INDUSTRY PLACEMENT FACILITY MAY APPEAL TO THE COMMISSIONER WITHIN 30 DAYS FROM THE ACTION OR THE DECISION. THE COMMISSIONER SHALL AFTER HEARING HELD UPON NOT LESS THAN 10 DAYS WRITTEN NOTICE ... ISSUE AN ORDER APPROVING THE ACTION OR DECISION, DISAPPROVING [IT] OR DIRECTING THE INSPECTION BUREAU OR THE INDUSTRY PLACEMENT FACILITY TO REASSIGN AND PLACE THE APPLICATION PURSUANT TO SAID PLAN. Section 4113: THERE SHALL BE NO LIABILITY ON THE PART OF, AND NO CAUSE OF ACTION OF ANY NATURE SHALL ARISE AGAINST, INSURERS, THE INSPECTION BUREAU, THE INDUSTRY PLACEMENT FACILITY, THE JOINT UNDERWRITING ASSOCIATION OR THEIR AGENTS OR EMPLOYEES, OR THE COMMISSIONER ..., FOR ANY INSPECTIONS UNDERTAKEN OR STATEMENTS MADE BY THEM IN ANY REPORTS AND COMMUNICATIONS CONCERNING THE PROPERTY TO BE INSURED.

What does 18 Del. C. s 2304(6) forbid, and what penalty does it carry?

1. An insurer making any political contribution to any candidate for state office in Delaware; the penalty is a civil fine of up to $10,000 per contribution under s 2308 and forfeiture of the insurer's certificate of authority for a second offence.
2. A producer contributing more than $1,000 in any election cycle to a candidate for Insurance Commissioner; the penalty is suspension of the producer's licence for 1 year and a requirement to disclose the contribution to every client.
3. Paying or using money or property for or in aid of any candidate for Insurance Commissioner, or reimbursing anyone who does; a participating officer, director, stockholder, agent or knowing recipient faces up to 1 year's imprisonment and a $1,000 fine. ✓
4. An insurer employing a former Insurance Commissioner within 1 year of the Commissioner leaving office; the penalty is a fine of up to $1,000 a day for each day of the employment and disgorgement of the salary paid.

Why: 18 Del. C. s 2304(6)a: no insurer, or bank acting as an insurer under s 761(a)(14) of Title 5, shall directly or indirectly pay or use, or offer, consent or agree to pay or use, any money or property for or in aid of any candidate for the office of Insurance Commissioner, or for nomination for it, or to reimburse or indemnify any person for money so used. Subdivision b: any participating officer, director, stockholder or agent, or any person who solicits or knowingly receives such money, is punished by imprisonment for not more than 1 year and a fine of not more than $1,000, and an abetting officer or director is liable to the insurer for the amount contributed.

An alien insurer is examined under 18 Del. C. s 318. How far does that examination reach?

1. It is limited to the insurer's insurance transactions, assets, trust deposits and affairs in this State, the Commissioner having no authority to reach business the insurer writes in any other state of the United States.
2. It is limited to the insurer's insurance transactions, assets, trust deposits and affairs in the United States, except as otherwise required by the Commissioner. ✓
3. It reaches the insurer's worldwide transactions, assets and affairs, an alien insurer being subject to the same scope of examination as a domestic insurer once it holds a certificate of authority in this State.
4. It is limited to the insurer's United States trust deposits alone, its transactions and affairs being examined instead by the insurance supervisory official of the jurisdiction under whose laws the insurer was organised.

Why: 18 Del. C. s 318(a) provides that EXAMINATION OF AN ALIEN INSURER SHALL BE LIMITED TO ITS INSURANCE TRANSACTIONS, ASSETS, TRUST DEPOSITS AND AFFAIRS IN THE UNITED STATES EXCEPT AS OTHERWISE REQUIRED BY THE COMMISSIONER. The boundary is the United States, not this State, and the Commissioner may require more.

When an employer is held responsible for the negligent acts of an employee committed within the scope of employment, this is:

1. Contributory negligence
2. Vicarious liability ✓
3. Absolute liability
4. Strict liability

Why: Vicarious liability holds one party (e.g., an employer) responsible for the actions of another (e.g., an employee acting within the scope of employment).

A business with predictable, frequent small losses decides to fund those losses internally rather than buy first-dollar insurance. This strategy is:

1. Risk transfer to an insurer
2. Joining an assigned-risk plan
3. Risk avoidance
4. Self-insurance (risk retention) ✓

Why: Funding one's own predictable losses internally is self-insurance, a form of planned risk retention.

What is an interline endorsement in a CPP?

1. A separate stand-alone policy
2. An endorsement that applies to a single coverage part only
3. A type of declarations page
4. An endorsement affecting more than one coverage part ✓

Why: Interline endorsements modify provisions that apply to more than one coverage part, such as common policy changes affecting both property and liability.

What are the court penalties for violating 21 Del. C. s 2118, under subsection (s)(1)?

1. For a first offence, a fine of not less than $1,500 nor more than $2,000 and a six-month suspension; for each subsequent offence within three years, not less than $3,000 nor more than $4,000 and a twelve-month suspension. The minimum fine may never be suspended, the General Assembly having made it mandatory in order to give the section real deterrent effect against repeat offenders.
2. For a first offence, a penalty of $100 assessed by the Division of Motor Vehicles together with a registration reinstatement fee of $50; a court fine of not less than $1,500 nor more than $2,000 is reserved for a second or subsequent offence within three years, and a six-month suspension of licence or driving privileges follows a third such offence.
3. For a first offence, a fine of not less than $1,500 nor more than $2,000, with no suspension of licence or driving privileges; the suspension for six months is imposed only on a subsequent offence occurring within three years of a former one, for which the fine is also raised to not less than $3,000 nor more than $4,000 by the subsection.
4. For a first offence, a fine of not less than $1,500 nor more than $2,000 and a six-month suspension of licence or privileges; for each subsequent offence within three years, not less than $3,000 nor more than $4,000 and a six-month suspension. The minimum fine for a violation of (a), (b) or (p) may be suspended if insurance was secured between charge and sentencing. ✓

Why: 21 Del. C. s 2118(s)(1) provides that WHOEVER VIOLATES ANY SUBSECTION OF THIS SECTION SHALL BE FINED FOR THE FIRST OFFENSE NOT LESS THAN $1,500 NOR MORE THAN $2,000 AND SHALL HAVE THAT PERSON'S DRIVING LICENSE AND/OR PRIVILEGES SUSPENDED FOR 6 MONTHS. FOR EACH SUBSEQUENT OFFENSE OCCURRING WITHIN 3 YEARS OF A FORMER OFFENSE, THAT PERSON SHALL BE FINED NOT LESS THAN $3,000 NOR MORE THAN $4,000 AND SHALL HAVE THAT PERSON'S DRIVER'S LICENSE AND/OR DRIVING PRIVILEGE SUSPENDED FOR 6 MONTHS. THE MINIMUM FINE LEVIED FOR A VIOLATION OF SUBSECTION (a), (b), OR (p) ... MAY BE SUSPENDED, IN WHOLE OR IN PART, BY THE COURT IF EVIDENCE IS PRESENTED THAT THE DEFENDANT HAS SECURED INSURANCE BETWEEN THE DATE OF CHARGE AND THE DATE OF SENTENCING. Six months either way; the fine is what changes.

In commercial auto, mobile equipment (e.g., a bulldozer) is generally:

1. Covered under garagekeepers, since the dozer sits in the insured's care and custody
2. Treated as a covered auto under the BACF whenever it is self-propelled
3. Not a covered auto under the BACF and typically insured under general liability ✓
4. Covered under Symbol 1 alone, never any other symbol

Why: Self-propelled mobile equipment is excluded from the auto definition and is normally addressed under a commercial general liability policy.

"Your covered auto" under the PAP includes:

1. Any car the insured happens to drive, owned or not, anywhere in the world, so long as the owner has given permission
2. Only vehicles the insured leases under a written agreement of six months or longer, with owned autos added by endorsement
3. Vehicles shown in the Declarations, newly acquired autos, trailers owned, and temporary substitutes (per terms) ✓
4. Only the first auto listed in the Declarations, with later additions needing a new policy

Why: "Your covered auto" encompasses vehicles in the Declarations, certain newly acquired autos, owned trailers, and qualifying temporary substitute autos.

Electronic Data Processing (EDP) / electronic equipment floaters are notable because they often cover:

1. Liability claims brought against the insured by customers whose personal information was exposed in a system breach
2. Perils such as electrical injury, mechanical breakdown, and data loss not covered by standard property forms ✓
3. Only fire damage to the insured's computer hardware and media
4. Flood damage to computer hardware and nothing else

Why: EDP floaters provide broad coverage for computer hardware, software, and data, including perils like electrical/mechanical breakdown that standard property forms typically exclude.

Garage coverage (now largely the Auto Dealers Coverage Form) is designed for:

1. Homeowners who keep a detached garage or workshop, insuring the structure and the tools stored inside it
2. Long-haul trucking fleets, replacing the Motor Carrier Coverage Form for carriers hauling freight for hire
3. Businesses in the auto sales/service trade, covering their operations and inventory exposures ✓
4. Individual motorcycle owners insuring a bike for pleasure use

Why: Garage/Auto Dealers coverage addresses the unique liability and physical damage exposures of dealers, repair shops, and service stations, including dealers' inventory.

Actual cash value (ACV) is most commonly calculated as:

1. The original purchase price
2. Market value plus depreciation
3. Replacement cost minus depreciation ✓
4. Replacement cost plus appreciation

Why: ACV is typically replacement cost at the time of loss minus depreciation for age, wear, and obsolescence.

For property and casualty insurance, insurable interest must exist:

1. At the inception of the policy and at the time of the loss ✓
2. Only at the time the policy is purchased, not afterwards
3. Only at the time of the loss, not when the policy is bought
4. At the time of application and at no later point

Why: For P&C insurance, insurable interest must be present both when the policy is issued and at the time of loss.

Which of the following is typically a FIRST-PARTY coverage under a cyber policy?

1. Bodily injury liability arising from a hacked industrial control system
2. Advertising injury liability for content posted on the insured's website
3. Breach notification, credit monitoring, and data restoration costs for the insured ✓
4. Defense of a third-party suit alleging the insured leaked customer data

Why: First-party cyber coverages reimburse the insured's own costs, such as breach notification, forensics, and data restoration.

Glass breakage to a covered building under broad and special homeowners forms is generally:

1. Covered only under DP-1, which adds breakage of glass as an extended coverage peril on all dwelling forms
2. Part of Section ii liability, since broken glass creates a hazard to visitors on the premises
3. Excluded entirely unless a separate glass floater is purchased for the storm doors and windows
4. Covered, though restricted if the dwelling has been vacant beyond the allowed period ✓

Why: Breakage of glass is a covered additional coverage/peril under broad and special forms, but coverage may be suspended when the dwelling has been vacant beyond the stated period.

How does the accident prevention course discount work under Delaware Regulation 607?

1. A ten per cent discount on the total premium for every coverage in the policy if all operators complete an approved course within the last twenty-four months; an insured who completes a refresher course at any time before the three-year expiry gets a fifteen per cent discount from the date of completion rather than from the next renewal date.
2. A fifteen per cent discount on bodily injury liability, property damage liability and personal injury protection premiums if all operators complete an approved course within the last thirty-six months, reduced to ten per cent for a refresher course; the discount runs for three years from completion and may not be renewed by a further course.
3. A ten per cent discount on bodily injury liability, property damage liability and personal injury protection premiums if the driver who customarily operates the vehicle completes an approved course; the discount is the same whether one operator or all of them complete it, and an instructor certified by the Division is not entitled to it.
4. A ten per cent discount on bodily injury liability, property damage liability and personal injury protection premiums if all operators named on the policy complete an approved course within the last thirty-six months, or a fraction of ten per cent if fewer do; an insured who completes a refresher course within the one hundred and eighty days before the three-year expiry gets fifteen per cent from the next renewal. ✓

Why: Delaware Regulation 607 s 3.0 applies the discount TO THE TOTAL PREMIUMS FOR BODILY INJURY LIABILITY COVERAGE, PROPERTY DAMAGE LIABILITY COVERAGE, AND PERSONAL INJURY PROTECTION COVERAGE, provided the vehicle is individually or jointly owned and rated as private passenger, and the driver who customarily operates it holds a certificate of completion WITHIN THE LAST 36 MONTHS FROM THE DATE OF APPLICATION. Section 4.1: A 10% DISCOUNT ... IF ALL OPERATORS NAMED ON THE POLICY AS INSUREDS COMPLETE THE COURSE. IF FEWER THAN ALL ..., THEN THE DISCOUNT SHALL BE A FRACTION OF 10%. Section 4.2: AN INSURED WHO COMPLETES A REFRESHER COURSE WITHIN THE ONE HUNDRED AND EIGHTY DAYS PRIOR TO THE THREE YEAR EXPIRATION DATE SHALL RECEIVE A 15% DISCOUNT EFFECTIVE THE NEXT RENEWAL DATE. Section 4.3 gives certified instructors the same discount as a refresher completer.

The right of an insurer, after paying a claim, to recover from the party who caused the loss is:

1. Abandonment
2. Subrogation ✓
3. Salvage
4. Liberalization

Why: Subrogation transfers the insured's right of recovery against a responsible third party to the insurer after it pays the claim.

What happens to the claimant's rights once the Association pays, under 18 Del. C. s 4211?

1. The person recovering is deemed to have assigned the policy rights to the Association to the extent of the recovery and must cooperate with it as with the insurer; the Association may recover back what it paid for an insured whose net worth exceeded $25,000,000, or for an affiliate of the insolvent insurer. ✓
2. The person recovering keeps the rights under the policy and may pursue the liquidator for the balance in that person's own name; the Association has no assignment and no recovery back, its payment being a statutory benefit rather than a subrogated indemnity, and net worth is relevant only to whether a first-party claim was covered at all.
3. The person recovering is deemed to have assigned the rights under the policy and must cooperate; the Association may recover back from any insured whose net worth exceeded $10,000,000, and from any person who received the payment, whether or not that person is an affiliate of the insolvent insurer.
4. The person recovering is deemed to have assigned the rights under the policy; the Association may recover back from an insured whose net worth exceeded $25,000,000, and the receiver or liquidator of the insolvent insurer is not bound by settlements the Association has made, being free to reopen them in the liquidation.

Why: 18 Del. C. s 4211(a)(1): ANY PERSON RECOVERING UNDER THIS CHAPTER SHALL BE DEEMED TO HAVE ASSIGNED THE RIGHTS UNDER THE POLICY TO THE ASSOCIATION TO THE EXTENT OF THE PERSON'S RECOVERY ... EVERY INSURED OR CLAIMANT ... SHALL COOPERATE WITH THE ASSOCIATION TO THE SAME EXTENT AS SUCH PERSON WOULD HAVE BEEN REQUIRED TO COOPERATE WITH THE INSOLVENT INSURER. Paragraph (a)(2): THE ASSOCIATION SHALL HAVE THE RIGHT TO RECOVER FROM ... a. ANY INSURED WHOSE NET WORTH ON DECEMBER 31 OF THE YEAR IMMEDIATELY PRECEDING ... EXCEEDS $25,000,000 AND WHOSE LIABILITY OBLIGATIONS TO OTHER PERSONS ARE SATISFIED IN WHOLE OR IN PART BY PAYMENTS MADE UNDER THIS CHAPTER; AND b. ANY PERSON WHO IS AN AFFILIATE OF THE INSOLVENT INSURER ... Subsection (b): THE RECEIVER, LIQUIDATOR OR STATUTORY SUCCESSOR ... SHALL BE BOUND BY SETTLEMENTS OF COVERED CLAIMS BY THE ASSOCIATION.

The 'Damage to Premises Rented to You' coverage in the CGL applies to:

1. Loss of business income the tenant suffers while the damage to rented premises is repaired
2. Property damage to premises rented to the named insured, including fire and certain other perils for short-term rentals ✓
3. Bodily injury to tenants and their guests occurring in the common areas of the rented building, paid without regard to fault
4. Damage to any property the named insured owns, occupies, or holds on loan, wherever that property sits at the time of loss

Why: This coverage (formerly fire legal liability) pays for damage to premises rented to the insured, with fire and other listed perils for premises rented for 7 or fewer consecutive days.

Which valuation method pays the cost to repair or replace property with new property of like kind and quality, without deduction for depreciation?

1. Agreed value
2. Functional replacement cost
3. Actual cash value
4. Replacement cost ✓

Why: Replacement cost pays to repair or replace with new property of like kind and quality with no deduction for depreciation.

Custom furnishings or equipment installed in a pickup or van (e.g., custom murals, special carpeting) under the unendorsed PAP are:

1. Covered automatically up to the actual cash value of the furnishings, with no endorsement needed
2. Covered in full with no dollar limit, because they are permanently attached to the vehicle
3. Generally excluded from Part D unless coverage is added by endorsement ✓
4. Covered only under Part A liability, and only if the equipment injures a passenger

Why: The PAP excludes custom furnishings or equipment in pickups and vans unless coverage is specifically added, often by endorsement.

A rental dwelling is insured under the Dwelling Policy program. Which loss would be covered under a DP-2 but not under a DP-1, even with every optional DP-1 peril added?

1. Roof damage from a tree limb falling on a calm day ✓
2. Siding torn off the house during a severe windstorm
3. Soot damage from a sudden puff-back of the oil furnace
4. Graffiti sprayed on exterior walls by local vandals

Why: Falling objects is one of the broad form perils that the DP-2 adds. Windstorm and smoke come with the DP-1's extended coverage option, and vandalism and malicious mischief can also be added to a DP-1 for extra premium.

What does 21 Del. C. s 2118(h) stop an injured person from doing in an action against a tortfeasor?

1. Pleading or introducing into evidence those damages for which compensation has actually been paid under paragraph (a)(2) or (3); damages within the coverage which the insurer has refused to pay, or which fall within an elected deductible, may be pleaded and proved in the ordinary way against the tortfeasor.
2. Pleading or introducing into evidence those damages for which compensation is available under paragraph (a)(2) or (3) of this section, without any regard to the elective reductions in that coverage and whether or not the benefits are in fact actually recoverable in this particular instance. ✓
3. Bringing the action at all until the personal injury protection claim has been determined by arbitration under subsection (j) of the section, the arbitration award being a condition precedent to any claim against the tortfeasor for damages arising out of the same motor vehicle accident.
4. Pleading or introducing into evidence any damages for bodily injury whatever, the injured person's remedy for personal injury being confined to the no-fault benefits; only a claim for damage to a motor vehicle, which paragraph (a)(3) expressly excludes, may be brought against the tortfeasor.

Why: 21 Del. C. s 2118(h) precludes any person eligible for benefits under paragraph (a)(2) or (3), other than an insurer suing under subsection (g), FROM PLEADING OR INTRODUCING INTO EVIDENCE IN AN ACTION FOR DAMAGES AGAINST A TORTFEASOR THOSE DAMAGES FOR WHICH COMPENSATION IS AVAILABLE UNDER PARAGRAPH (a)(2) OR (3) ... WITHOUT REGARD TO ANY ELECTIVE REDUCTIONS IN SUCH COVERAGE AND WHETHER OR NOT SUCH BENEFITS ARE ACTUALLY RECOVERABLE. AVAILABLE, not paid - a deductible the insured elected does not reopen the door.

Under TRIA, the federal government's share of insured terrorism losses applies only after the insurer pays:

1. The full amount of every certified loss, with federal reimbursement available only to reinsurers
2. Nothing, since federal sharing begins at the first dollar
3. A flat $1,000 retention for each certified event
4. An insurer deductible based on a percentage of its prior-year premiums ✓

Why: Under TRIA, each insurer retains a deductible (a percentage of its prior-year direct earned premium) before the federal government shares in the remaining certified losses.

Speculative risk is generally uninsurable because it:

1. Cannot be measured
2. Involves the chance of either loss or gain ✓
3. Involves only the chance of loss with no chance of gain
4. Is always catastrophic

Why: Speculative risk involves the possibility of gain as well as loss, like gambling, and is not insurable; only pure risk is insurable.

The implied warranty of legality in ocean marine requires that:

1. The voyage occur in daylight
2. The vessel be domestically owned
3. All cargo be perishable
4. The venture be a lawful one ✓

Why: The warranty of legality requires that the insured venture be legal; insuring an illegal voyage (e.g., smuggling) is unenforceable.

A workers' compensation policy is cancelled. What does 19 Del. C. s 2374 require, and what penalties follow a default?

1. The carrier must notify the Department of Labor within thirty days, and the employer must produce proof of insurance within thirty days; a defaulting employer faces a civil penalty equal to the unpurchased premium, and on a continuing default a further $10 per day for each employee with no minimum daily figure at all.
2. The carrier must notify the Insurance Commissioner within 14 days rather than the Department of Labor, the policy being a contract of insurance; the employer must produce proof within 14 days, and a defaulting employer faces a civil penalty of the unpurchased premium times three, which the Commissioner assesses and collects.
3. The carrier must notify the Department of Labor within 14 days, copying the employer, who must then produce proof of insurance within 14 days or prove one of five excuses. A defaulting employer faces a civil penalty of three times the unpurchased premium and, on continuing default, $10 per day per employee, but not less than $250 a day. ✓
4. The carrier must notify the Department of Labor within 14 days, including where the termination is a replacement of coverage through a different carrier; the employer must then produce proof within 14 days, and a defaulting employer faces a penalty of $250 for each day of the default and no multiplier on the premium.

Why: 19 Del. C. s 2374(b) requires every carrier to NOTIFY THE DEPARTMENT OF LABOR ... WITHIN 14 DAYS THAT AN EMPLOYER'S POLICY ... HAS BEEN CANCELED, LAPSED, OR IS OTHERWISE TERMINATED, OTHER THAN FOR REPLACEMENT OF COVERAGE THROUGH A DIFFERENT INSURANCE CARRIER, WITH A COPY TO THE EMPLOYER. Subsection (c) gives the employer 14 DAYS to provide proof or establish one of five excuses. Subsection (d): the civil penalty is the premium for the insurance NOT PURCHASED TIMES 3, or for an employer with no history the most expensive policy premium TIMES 3. Subsection (e)(2) adds AN ASSESSMENT OF $10 PER DAY FOR EACH EMPLOYEE ..., BUT NOT LESS THAN $250 FOR EACH DAY OF SUCH REFUSAL OR NEGLECT. Subsection (e)(3) makes the employer liable to injured employees and removes the defences of contributory negligence, assumption of risk and fellow servant; subsection (f) lets the Court of Chancery ENJOIN the business after a 30-DAY default.

Suitability in insurance sales means a producer should:

1. Always place the client with whichever carrier pays the highest commission on that line
2. Recommend products appropriate to the client's needs and circumstances ✓
3. Offer only the one product line the producer knows best, whatever the client actually owns
4. Avoid asking about the client's finances, since gathering that detail creates a fiduciary duty

Why: Suitability requires that recommendations fit the client's actual needs, financial situation, and objectives rather than the producer's compensation.

Which statement about no-fault auto insurance CONCEPTS is generally correct?

1. No-fault systems let injured parties recover certain economic losses from their own insurer regardless of fault ✓
2. No-fault means no one pays for accident losses until a court or arbitration panel first assigns fault to one of the drivers
3. No-fault eliminates the need for liability coverage entirely, so states adopting it repeal their financial responsibility laws
4. No-fault applies only to property damage claims, with every bodily injury claim still settled through the tort system

Why: Under no-fault concepts, an injured person's own insurer pays specified personal injury/economic losses regardless of who caused the accident, with limits on lawsuits.

Smoke damage under a Homeowners policy is typically:

1. Covered only under DP-1 and DP-2, since homeowners forms treat smoke as a pollution loss instead
2. A covered named peril, though smoke from agricultural smudging or industrial operations may be excluded ✓
3. Excluded entirely, because smoke residue is considered gradual damage rather than a sudden loss
4. Covered under Coverage E liability, which reimburses the insured for smoke damage to their contents

Why: Smoke is a covered peril, but smoke arising from agricultural smudging or industrial operations is commonly excluded.

The appraisal condition in a property policy is used to resolve disputes over:

1. Policy cancellation
2. Liability to third parties
3. The amount or value of the loss ✓
4. Whether the loss is covered

Why: Appraisal is a method to resolve disagreements over the amount/value of a loss, not whether coverage applies; each party selects an appraiser and they choose an umpire.

How often may the Board review an agreement or award under 19 Del. C. s 2347, and on what grounds?

1. On the application of any party on the ground that the employee's incapacity has terminated, increased, diminished or recurred, or that the status of a dependent has changed; the Board may review at any time but not oftener than once in 26 weeks - a restriction on when the Board may convene, not on filing. ✓
2. On the application of any party on the ground that the incapacity has changed; the Board may review not oftener than once in 26 weeks, and the restriction is on when a party may file a petition to review, so that a petition filed inside the period is rejected by the Department without being placed on the Board's docket at all.
3. On the application of the employer alone, the employee's remedy for an increase in incapacity being a fresh claim rather than a review; the Board may review at any time and as often as the employer applies, and a change in the status of a dependent is a ground only where death compensation under s 2330 is in payment.
4. On the application of any party in interest on any ground, including a commutation of payments under s 2358; the Board may review not oftener than once in 52 weeks, and compensation continues until the Board enters an award ending it, the parties having no power to terminate it by consent.

Why: 19 Del. C. s 2347(a) provides that ON THE APPLICATION OF ANY PARTY IN INTEREST ON THE GROUND THAT THE INCAPACITY OF THE INJURED EMPLOYEE HAS SUBSEQUENTLY TERMINATED, INCREASED, DIMINISHED, OR RECURRED, OR THAT THE STATUS OF THE DEPENDENT HAS CHANGED, THE BOARD MAY AT ANY TIME, BUT NOT OFTENER THAN ONCE IN 26 WEEKS, REVIEW ANY AGREEMENT OR AWARD ... THIS SUBSECTION DOES NOT RESTRICT WHEN A PARTY IN INTEREST CAN FILE A PETITION TO REVIEW BUT RATHER WHEN THE BOARD CAN CONVENE TO HEAR THE PETITION. Subsection (c): the section DOES NOT APPLY TO A COMMUTATION OF PAYMENTS UNDER s 2358.

Functional replacement cost valuation pays to replace damaged property with:

1. Less costly but functionally equivalent materials ✓
2. Identical materials only, matched to the original in every respect
3. The market value of the property immediately before the loss occurred
4. Property of greater value than that which was damaged or destroyed

Why: Functional replacement cost permits using modern, less expensive materials that serve the same function as obsolete originals.

What standards must rates meet under 18 Del. C. s 2503(a), and what does it say about FIRE insurance experience?

1. Rates shall not be excessive, inadequate or unfairly discriminatory, and due consideration goes to loss experience within this State alone, experience elsewhere being of no assistance in rating a Delaware risk; for fire rates, to experience over not less than the most recent ten-year period for which such experience is available.
2. Rates shall not be excessive, inadequate or unfairly discriminatory, and due consideration goes to past and prospective loss experience within and outside the State, conflagration and catastrophe hazards, a reasonable margin for underwriting profit and contingencies, dividends and returned premium, past and prospective expenses, and all other relevant factors; for fire rates, to experience over not less than the most recent five-year period available. ✓
3. Rates must be adequate to support the insurer's obligations and may not be unfairly discriminatory, but there is no bar on an excessive rate, competition being relied on to keep rates down; due consideration goes to the listed factors, and for fire rates to the most recent five-year period available.
4. Rates shall not be excessive, inadequate or unfairly discriminatory; no margin for underwriting profit or contingencies may be included, since a rate which includes one is by definition excessive; and for fire rates, consideration goes to the experience of the fire insurance business over the most recent five-year period available.

Why: 18 Del. C. s 2503(a)(2): RATES SHALL NOT BE EXCESSIVE, INADEQUATE OR UNFAIRLY DISCRIMINATORY. Paragraph (a)(3) requires DUE CONSIDERATION ... a. TO PAST AND PROSPECTIVE LOSS EXPERIENCE WITHIN AND OUTSIDE THIS STATE; b. TO THE CONFLAGRATION AND CATASTROPHE HAZARDS; c. TO A REASONABLE MARGIN FOR UNDERWRITING PROFIT AND CONTINGENCIES; d. TO DIVIDENDS, SAVINGS OR UNABSORBED PREMIUM DEPOSITS ...; e. TO PAST AND PROSPECTIVE EXPENSES BOTH COUNTRYWIDE AND THOSE SPECIALLY APPLICABLE TO THIS STATE; f. TO ALL OTHER RELEVANT FACTORS WITHIN AND OUTSIDE THIS STATE; AND g. IN THE CASE OF FIRE INSURANCE RATES, CONSIDERATION SHALL BE GIVEN TO THE EXPERIENCE OF THE FIRE INSURANCE BUSINESS DURING A PERIOD OF NOT LESS THAN THE MOST RECENT 5-YEAR PERIOD FOR WHICH SUCH EXPERIENCE IS AVAILABLE.

Two unrelated roommates jointly own a car and both want PAP coverage as named insureds. The appropriate endorsement is:

1. Named Non-Owner
2. Joint Ownership Coverage ✓
3. Miscellaneous Type Vehicle
4. Extended Non-Owned for a Named Individual

Why: The Joint Ownership Coverage endorsement adapts the PAP for two or more individuals who are not married but jointly own the covered auto.

Beyond the favoured-agent rule in s 2305(a)(1), what do 18 Del. C. s 2305(a)(2)-(4) forbid a lender or vendor to do, and when is a disapproval UNREASONABLE?

1. Require the borrower to insure for more than the loan balance; require the borrower to name the lender as loss payee; or require force-placed insurance without 30 days' notice; a disapproval is unreasonable if the insurer holds an A.M. Best rating of A- or better.
2. Charge the borrower for reviewing the policy; require the policy to be placed through the lender's affiliate; or require the borrower to pay the premium into escrow; a disapproval is unreasonable if the borrower's insurer is admitted in Delaware.
3. Disapprove any policy issued by an admitted insurer; require the borrower to change insurers more than once in 5 years; or share the borrower's insurance information with any affiliate; a disapproval is unreasonable unless approved in advance by the Commissioner.
4. Unreasonably disapprove the borrower's policy; require a separate charge to substitute insurers; or use or disclose such information to the borrower's detriment; disapproval is unreasonable unless based solely on reasonable standards uniformly applied. ✓

Why: 18 Del. C. s 2305(a)(2): no person shall unreasonably disapprove the insurance policy provided by a borrower for the protection of the property securing the credit or lien; (a)(3): require directly or indirectly that any borrower, mortgagor, purchaser, insurer, broker or agent pay a separate charge to substitute the policy of one insurer for that of another; (a)(4): use or disclose information resulting from an insurance requirement when to the advantage of the lender or the detriment of the borrower, insurer, agent or broker. Subsection (b)(1): (a)(3) does not include interest on premium loans or advancements under the security instrument; (b)(2): a disapproval is unreasonable if not based solely on reasonable standards uniformly applied, relative to the extent of coverage required and the financial soundness and services of the insurer.

A building with exterior walls, floors, and roof made of combustible wood materials is classified as:

1. Fire-resistive construction
2. Frame construction ✓
3. Joisted masonry
4. Modified fire-resistive

Why: Frame construction has combustible exterior walls (typically wood), giving it the highest fire-rate classification and risk.

After a final order finding a violation, what civil action does 18 Del. C. s 4126 allow, and within what time?

1. The aggrieved applicant or named insured may sue the insurer to recover any loss, not otherwise recovered through insurance, which would have been paid under the coverage which was declined or terminated in violation of the subchapter; and no action may be brought two years after the date of the Commissioner's order. ✓
2. The aggrieved applicant or named insured may sue the insurer for the loss together with punitive damages and a civil penalty of $500 for each violation; the action must be brought within two years of the declination or termination complained of rather than of the final order, since the cause of action accrues when the loss is suffered.
3. The Commissioner may sue the insurer on behalf of the aggrieved applicant or named insured to recover any loss which would have been paid under the coverage; the aggrieved person has no independent right of action, and the proceedings must be begun within two years of the date of the final order of the Commissioner.
4. The aggrieved applicant or named insured may sue the insurer to recover any loss which would have been paid under the coverage, whether or not it has been recovered through other insurance, the object being to deter the practice rather than merely to indemnify; the action must be brought within three years of the final order.

Why: 18 Del. C. s 4126(a) provides that IF THE COMMISSIONER DETERMINED IN A FINAL ORDER THAT AN INSURER HAS VIOLATED s 4123 OR s 4124 ..., THE APPLICANT OR NAMED INSURED AGGRIEVED BY THE VIOLATION MAY BRING AN ACTION IN A COURT OF COMPETENT JURISDICTION IN THIS STATE TO RECOVER FROM SUCH INSURER ANY LOSS, NOT OTHERWISE RECOVERED THROUGH INSURANCE, WHICH WOULD HAVE BEEN PAID UNDER THE INSURANCE COVERAGE THAT WAS DECLINED OR TERMINATED IN VIOLATION OF THIS SUBCHAPTER. Subsection (b): ANY AMOUNTS RECOVERED ... SHALL NOT BE DUPLICATIVE OF ANY RECOVERY OBTAINED THROUGH ... ANY OTHER STATUTORY OR COMMON-LAW CAUSE OF ACTION ARISING OUT OF THE SAME OCCURRENCE. NO ACTION UNDER THIS SECTION SHALL BE BROUGHT 2 YEARS AFTER THE DATE OF A FINAL ORDER OF THE COMMISSIONER FINDING A VIOLATION.

18 Del. C. s 2304(7)b forbids collecting a premium in excess of the applicable charge. What may nevertheless be charged in addition?

1. A surplus lines broker licensed under Chapter 19 may charge applicable state and federal taxes and a nominal service charge to cover communication expenses; and a life insurer may charge amounts actually to be expended for a medical examination on application or reinstatement. ✓
2. A surplus lines broker licensed under Chapter 19 may charge applicable state and federal taxes and a service charge in such amount as the broker reasonably determines; and a life insurer may charge amounts actually to be expended for a medical examination on application or on reinstatement of a policy.
3. Any licensed producer may charge a nominal service charge to cover communication expenses in addition to the premium required by the insurer, the exception in the subdivision not being confined to surplus lines business placed under Chapter 19 of the title.
4. Nothing. The prohibition is absolute, and a surplus lines broker who needs to recover state and federal taxes must build them into the premium filed with and approved by the Commissioner rather than charge them to the insured as a separate item.

Why: 18 Del. C. s 2304(7)b forbids wilfully collecting AS PREMIUM OR CHARGE FOR INSURANCE ANY SUM IN EXCESS OF THE PREMIUM OR CHARGE APPLICABLE TO SUCH INSURANCE, AND AS SPECIFIED IN THE POLICY, in accordance with the classifications and rates filed with and approved by the Commissioner. It then provides that this SHALL NOT BE DEEMED TO PROHIBIT THE CHARGING AND COLLECTION BY SURPLUS LINES BROKERS LICENSED UNDER CHAPTER 19 OF THIS TITLE OF THE AMOUNT OF APPLICABLE STATE AND FEDERAL TAXES AND NOMINAL SERVICE CHARGE TO COVER COMMUNICATION EXPENSES, IN ADDITION TO THE PREMIUM REQUIRED BY THE INSURER, NOR ... THE CHARGING AND COLLECTION BY A LIFE INSURER OF AMOUNTS ACTUALLY TO BE EXPENDED FOR MEDICAL EXAMINATION OF AN APPLICANT FOR LIFE INSURANCE OR FOR REINSTATEMENT. The service charge must be NOMINAL and for COMMUNICATION EXPENSES, and the exception is confined to surplus lines brokers.

A mobile-home policy is most similar to which standard form, with endorsements addressing the unique nature of the dwelling?

1. A commercial package policy
2. A surety bond
3. A homeowners policy ✓
4. A workers compensation policy

Why: Mobile-home coverage is generally written as a modified homeowners policy with endorsements addressing transportation, tie-downs, and the structure's mobility.