Maine Property & Casualty Insurance License, Practice Exams

The superintendent defers examining a domestic insurer beyond the ordinary interval. What outer limit does 24-A M.R.S. s 221 place on that deferral?

1. The deferral may not exceed 2 additional years beyond the ordinary interval, and may be granted only once in respect of any one insurer, a second deferral requiring the written concurrence of the Attorney General.
2. In no event may an authorized insurer be examined less frequently than once every 5 years, whatever the reason may have been that the superintendent had for deferring the examination beyond the usual interval. ✓
3. There is no outer limit, the section leaving the timing of examinations entirely to the superintendent's judgment once the criteria in subsection 1 have been considered and the reasons for deferral recorded.
4. The deferral may run for so long as the insurer's annual statement and the opinion of its independent certified public accountant disclose no material adverse change in its financial condition.

Why: 24-A M.R.S. s 221(1): the superintendent may defer, BUT IN NO EVENT MAY AN AUTHORIZED INSURER BE EXAMINED LESS FREQUENTLY THAN ONCE EVERY 5 YEARS. Three years is the ordinary domestic interval; five years is the floor that deferral cannot breach.

Supplementary payments in a liability policy typically include:

1. The insured's lost earnings for every day spent assisting with the defense, with no dollar cap
2. Defense costs, bail bond premiums, and reasonable expenses incurred at the insurer's request ✓
3. Punitive damages awarded against the insured, paid in addition to the applicable limit of liability
4. The replacement cost of property the insured damaged

Why: Supplementary (additional) payments cover items like defense costs, certain bonds, and the insured's expenses incurred assisting the defense, often beyond the limit.

A bond guaranteeing that the contractor will pay subcontractors, laborers, and material suppliers is a:

1. Maintenance bond
2. Performance bond
3. Payment bond ✓
4. Bid bond

Why: A payment bond guarantees that subcontractors and suppliers will be paid, protecting against liens.

Coverage C under the Dwelling Policy insures:

1. The dwelling structure
2. Personal property of the insured ✓
3. Personal liability
4. Detached other structures

Why: Coverage C — Personal Property covers the household contents and personal belongings of the insured. The Dwelling Policy contains no liability coverage by default.

A party to a hearing and a non-party whose interests are substantially and directly affected both wish to appeal an order of the superintendent. What periods apply under 24-A M.R.S. s 236?

1. Both have 30 days, the party's period running from receipt of notice and the non-party's from the date the decision was rendered, so that the two appeals may in practice expire on different days although the period is the same.
2. The party to the hearing has 30 days running from receipt of notice of that order; the aggrieved non-party has 40 days running from the date on which the decision below was actually rendered. ✓
3. The party has 40 days after receipt of notice; the aggrieved non-party has 30 days from the date the decision was rendered, the shorter period reflecting that the non-party did not take part in the hearing below.
4. Both have 40 days from the date the decision was rendered, a non-party being entitled to the same period as a party once the superintendent is satisfied that the non-party's interests are substantially and directly affected.

Why: 24-A M.R.S. s 236(3): ANY PERSON WHO WAS A PARTY to the hearing may appeal WITHIN 30 DAYS AFTER RECEIPT OF NOTICE. ANY PERSON NOT A PARTY whose interests are SUBSTANTIALLY AND DIRECTLY AFFECTED and who is aggrieved may appeal WITHIN 40 DAYS FROM THE DATE THE DECISION WAS RENDERED. Two periods and two different starting points - this is the most testable distinction in chapter 3.

What must a UNITED STATES insurer show to have its request for eligibility approved under 24-A M.R.S. s 2007(3)?

1. That it is authorized to write such insurance in its domiciliary jurisdiction, and that it maintains capital and surplus at least equal to the greater of the minimum that would be required if it were licensed in this State and $15,000,000. ✓
2. That it is authorized to write such insurance in its domiciliary jurisdiction, and that it maintains capital and surplus of at least $15,000,000, that figure being an absolute minimum which the requirements applicable to a licensed Maine insurer can never exceed.
3. That it is authorized to write such insurance in its domiciliary jurisdiction, that it maintains capital and surplus of at least $4,500,000, and that it has filed with the superintendent a trust deposit equal to its outstanding Maine liabilities.
4. That it appears on the National Association of Insurance Commissioners' quarterly listing and maintains capital and surplus at least equal to the minimum that would be required of it if it were licensed as a domestic insurer in this State.

Why: 24-A M.R.S. s 2007(3): the superintendent SHALL APPROVE a United States insurer's request for eligibility if the insurer (A) IS AUTHORIZED TO WRITE SUCH INSURANCE IN ITS DOMICILIARY JURISDICTION and (C) MAINTAINS CAPITAL AND SURPLUS, or its equivalent under its domiciliary law, at least equal to THE GREATER OF (1) the minimum capital and surplus that would be required IF THE INSURER WERE LICENSED IN THIS STATE and (2) $15,000,000. The NAIC quarterly listing is s 2007(5) and belongs to NON-United States insurers.

A Maine domestic insurer wants to solicit applications in New Hampshire. What does 24-A M.R.S. s 404 require of it?

1. It must notify the superintendent of the lines it intends to write outside this State and file a copy of the New Hampshire certificate of authority with the Bureau within 30 days of its issue, but needs nothing further.
2. It must hold a subsisting Maine certificate of authority for the same kind or kinds of insurance, the same rule applying to a foreign insurer operating from offices, personnel or facilities located in this State. ✓
3. Nothing under this section, which governs only the transaction of insurance within this State, an outward-bound solicitation being a matter for the regulator of the state in which the application is solicited.
4. It must obtain the superintendent's written approval for the specific programme of solicitation, approval being granted only where the superintendent finds that Maine policyholders will not be prejudiced by it.

Why: 24-A M.R.S. s 404(2): NO INSURER FORMED UNDER THE LAWS OF THIS STATE, AND NO FOREIGN INSURER FROM OFFICES OR BY PERSONNEL OR FACILITIES LOCATED IN THIS STATE, shall solicit applications or otherwise transact insurance IN ANOTHER STATE OR COUNTRY unless it holds A SUBSISTING CERTIFICATE OF AUTHORITY granted by the superintendent for THE SAME KIND OR KINDS.

The principle of indemnity states that an insured should:

1. Profit from a covered loss, since the premium was paid for that possibility
2. Receive replacement cost on every policy, whatever valuation basis it names
3. Be restored to approximately the same financial condition that existed before the loss ✓
4. Always receive the full face amount of the policy regardless of the size of the loss

Why: Indemnity restores the insured to the financial position held before the loss, without allowing profit from the loss.

Under the Homeowners policy, the policy period and territory generally cover losses occurring:

1. Anywhere in the world for property losses, with liability confined to the United States mainland
2. Only while the property is inside the described dwelling, since off-premises losses need an endorsement
3. Only during hours the insured is present at the residence, as the policy suspends while it is unoccupied
4. During the policy period within the coverage territory (U.S., its territories, and Canada) ✓

Why: Coverage applies to losses during the policy period within the policy territory, commonly the United States, its territories and possessions, and Canada.

The intentional relinquishment of a known right by the insurer is called a:

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

Why: A waiver is the voluntary giving up of a known right; estoppel may then prevent the insurer from asserting that right later.

Vandals break windows and damage interior walls. The insured has the Basic form. Is vandalism covered?

1. Only if the vandals also committed a theft or an attempted theft
2. No, vandalism and malicious mischief appear first in the Broad form
3. Yes, vandalism is a named peril in the Basic form ✓
4. Only under the Special form, because Basic lists no vandalism peril

Why: Vandalism (V&MM) is one of the named perils included in the Basic Causes of Loss form.

When converting from an occurrence form to a claims-made form, 'prior acts' coverage refers to:

1. Only the tail bought when a claims-made policy is cancelled or nonrenewed
2. Coverage for occurrences that took place before the policy's inception but on or after the retroactive date ✓
3. Coverage for claims already made against the insured before the new policy incepted, provided the insured reports them to the new carrier within 60 days
4. Doubling the aggregate limit for the first year after conversion

Why: Prior acts (nose) coverage, established by setting the retroactive date earlier, covers occurrences before inception but on/after that date.

Under the PAP, the duty to allow the insurer to inspect and appraise the damaged vehicle before its repair or disposal falls under:

1. Part E — Duties After an Accident or Loss ✓
2. Part C, which governs uninsured motorists claims handling
3. Part A general conditions applying to liability claims
4. Part B medical payments

Why: Part E requires the insured to permit the insurer to inspect and appraise the damaged property before repairs or disposal, as part of the post-loss duties.

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.

Loss under a standard fire policy is made payable to a designated mortgagee. What does the MORTGAGEE INTERESTS condition provide?

1. That interest may be cancelled by giving the mortgagee a ten days' written notice; and if the insured fails to render proof of loss, the mortgagee, upon notice, shall render proof within sixty (60) days thereafter and is subject to the provisions on appraisal, time of payment and suit. ✓
2. That interest may not be cancelled separately at all, the mortgagee's protection continuing for so long as the policy itself remains in force, and the mortgagee being under no obligation to render a proof of loss in any circumstances whatever.
3. That interest may be cancelled on the same notice as the insured's, and if the insured fails to render proof of loss the mortgagee must do so within thirty days, failing which the mortgagee's claim under the loss payable clause is extinguished.
4. That interest may be cancelled by giving the mortgagee a ten days' written notice, and the company that pays the mortgagee where no liability existed as to the mortgagor has no recourse against the mortgagor and no right to an assignment of the mortgage.

Why: 24-A M.R.S. s 3002(1), MORTGAGEE INTERESTS AND OBLIGATIONS: where loss is made payable in whole or part to a DESIGNATED MORTGAGEE not named as the insured, THAT INTEREST MAY BE CANCELLED BY GIVING THE MORTGAGEE A TEN DAYS' WRITTEN NOTICE. IF THE INSURED FAILS TO RENDER PROOF OF LOSS, THE MORTGAGEE, UPON NOTICE, SHALL RENDER PROOF WITHIN SIXTY (60) DAYS THEREAFTER and is SUBJECT TO THE PROVISIONS relating to APPRAISAL, TIME OF PAYMENT and BRINGING SUIT. Where the company claims NO LIABILITY EXISTED as to the mortgagor, it is, to the extent of its payment, SUBROGATED TO THE MORTGAGEE'S RIGHTS - WITHOUT IMPAIRING THE MORTGAGEE'S RIGHT TO SUE - OR IT MAY PAY OFF THE MORTGAGE DEBT AND REQUIRE AN ASSIGNMENT of it.

Mobile agricultural machinery and equipment under a farm policy refers to:

1. Livestock such as dairy cattle, hogs, and horses kept for breeding or sale
2. Harvested grain and seed held in silos and storage bins on the premises
3. The farm dwelling and its attached structures
4. Tractors, combines, and similar equipment used in farming operations ✓

Why: Mobile agricultural machinery (tractors, combines, harvesters) is a category of covered farm personal property, often insured for direct physical loss.

Under the PAP "other insurance" provision for liability, when the insured uses a non-owned auto, the PAP generally provides:

1. No coverage at all, because a non-owned auto is not a covered auto under Part A
2. Coverage for half of the loss, prorated with the owner's policy by limits
3. Excess coverage over any other applicable insurance ✓
4. Primary coverage ahead of the owner's policy

Why: For a non-owned auto, the named insured's PAP liability coverage is excess over the vehicle owner's primary coverage.

The Fair Credit Reporting Act (FCRA) primarily regulates:

1. The collection, use, and disclosure of consumer report information ✓
2. How FEMA sets and subsidizes flood premiums inside mapped Special Flood Hazard Areas
3. Federal premium subsidies paid to crop insurers under the Federal Crop Insurance Act
4. The federal reinsurance backstop for certified acts of terrorism

Why: The FCRA governs how consumer reporting agencies collect, share, and use consumer credit and report information, and the rights of consumers regarding that information.

How may a consultant's bond come to an end, and with what consequence, under 24-A M.R.S. s 1464?

1. It remains in force until released by the superintendent or cancelled by the surety on 30 days advance written notice to the licensee and superintendent and if no replacement is procured the licence terminates in terms. ✓
2. It remains in force until released by the superintendent or cancelled by the surety on 30 days advance written notice; and on cancellation the consultant's licence is suspended until a replacement bond is filed with the superintendent.
3. It remains in force for the term of the licence and may not be cancelled by the surety during that term, the surety's only remedy being to decline to renew the bond when the licence next falls due for continuation.
4. It remains in force until released by the superintendent or cancelled by the surety on 90 days advance written notice to the licensee, the superintendent being notified by the licensee rather than by the surety itself.

Why: 24-A M.R.S. s 1464(3): the bond REMAINS IN FORCE UNTIL RELEASED BY THE SUPERINTENDENT OR UNTIL CANCELED BY THE SURETY. WITHOUT PREJUDICE TO ANY LIABILITY PREVIOUSLY INCURRED, the surety may cancel UPON 30 DAYS ADVANCE WRITTEN NOTICE TO THE LICENSEE AND THE SUPERINTENDENT. UPON CANCELLATION BY THE SURETY AND FAILURE TO PROCURE A SATISFACTORY REPLACEMENT BOND PRIOR TO CANCELLATION, THE CONSULTANT'S LICENSE TERMINATES. Termination, not suspension, and it is automatic.

A medical professional wants protection against patient claims of negligent treatment. The correct policy is:

1. Medical Professional Liability (malpractice) / E&O ✓
2. Employee Benefits Liability, which covers errors in administering benefit plans
3. Commercial General Liability, since the patient suffered bodily injury
4. A performance bond for medical work

Why: Patient injury from professional treatment is excluded by the CGL and covered by medical professional liability (malpractice) insurance.

Under the PAP, coverage for racing or speed contests is:

1. Covered under Part A liability, though damage to the insured's own car is left out
2. Excluded for liability and physical damage while in or preparing for a prearranged race ✓
3. Covered under Part D only, so the insured collects for the wrecked car but not for injuries
4. Paid as a supplementary payment outside the limit

Why: The PAP excludes coverage while the auto is used in or preparing for any prearranged or organized racing or speed contest.

An employer with worse-than-average claims experience for its class would most likely have an experience modification factor that is:

1. Equal to 1.00, with no change
2. Set to zero
3. Below 1.00, producing a credit
4. Above 1.00, producing a debit ✓

Why: A debit mod above 1.00 reflects worse-than-average loss experience and increases the employer's premium relative to the class average.

A Maine producer moves house. What does 24-A M.R.S. s 1420-F require?

1. The licensee must inform the superintendent of the change of address within 14 days of it in writing, and a failure to do so is a ground for suspension or revocation of the licence under section 1420-K.
2. The licensee must inform the superintendent of the change of address within 30 days of it, by any means acceptable to the superintendent, and failure to do so timely results in a penalty under section 601. ✓
3. The licensee must inform the superintendent of the change of address before the next licence continuation date, the address on the licence being a matter of record rather than a condition of the licence itself.
4. The licensee must surrender the licence and obtain a replacement showing the new address within 30 days, the licence being required by subsection 5 to contain the licensee's current address at all times.

Why: 24-A M.R.S. s 1420-F(6): a licensee shall inform the superintendent BY ANY MEANS ACCEPTABLE TO THE SUPERINTENDENT of a CHANGE OF ADDRESS WITHIN 30 DAYS of the change, and FAILURE TO TIMELY INFORM the superintendent of a change in legal name or address RESULTS IN A PENALTY PURSUANT TO SECTION 601. Thirty days and a fee penalty - not fourteen days, and not suspension.

Is an INSURER required to hold an insurance producer licence under 24-A M.R.S. s 1420-C?

1. No - the subchapter may not be construed to require an insurer to obtain a producer licence, and for that purpose 'insurer' does not include the insurer's officers, directors, employees, subsidiaries or affiliates. ✓
2. No - the subchapter may not be construed to require an insurer to obtain a producer licence, and for that purpose 'insurer' includes the insurer's officers, directors, employees, subsidiaries and affiliates as well.
3. Yes - an insurer that sells, solicits or negotiates directly with the public must hold a producer licence for each line of authority it writes in that way, in addition to its certificate of authority.
4. Yes - but only where the insurer transacts business in this State without appointing any licensed producer, a direct writer being treated as its own producer for the purposes of the subchapter.

Why: 24-A M.R.S. s 1420-C(1): the subchapter MAY NOT BE CONSTRUED TO REQUIRE AN INSURER TO OBTAIN AN INSURANCE PRODUCER LICENSE, and IN THIS SECTION, 'INSURER' DOES NOT INCLUDE AN INSURER'S OFFICERS, DIRECTORS, EMPLOYEES, SUBSIDIARIES OR AFFILIATES. The carve-out is narrow: the company itself, not the people in it, who are dealt with by the exceptions in s 1420-C(2).

A contractor's business owns no vehicles but employees drive their personal cars to job sites for the company. The business should carry:

1. An MCS-90 endorsement, which federal rules make the required proof of coverage for any employer
2. A personal auto policy issued to the firm
3. Hired and non-owned auto liability (Symbols 8 and 9) ✓
4. Garagekeepers coverage on employee autos

Why: Hired and non-owned auto liability protects the business against vicarious liability from employees' personal autos used on company business and any hired vehicles.

How may an insurer DISPUTE a claim under 24-A M.R.S. s 2436(2)?

1. By notifying the insured orally or in writing that the claim is not accepted, the subsection requiring no statement of grounds because the grounds will emerge in any proceeding the insured afterwards brings on the claim against the insurer.
2. By filing with the superintendent a statement of the grounds of the dispute within 30 days of receiving the proof of loss, the superintendent then notifying the insured and fixing a time within which the insured may answer the insurer's statement.
3. By tendering the undisputed part of the claim and stating that the balance is contested, no further explanation being required of the insurer where a payment on account has been made to the insured within the period allowed for payment.
4. By furnishing the insured, beneficiary or a representative a written statement that the claim is disputed with the grounds, based upon a reasonable investigation and in sufficient detail to permit the insured to understand and respond to the insurer's position. ✓

Why: 24-A M.R.S. s 2436(2): an insurer may dispute a claim BY FURNISHING to the insured or beneficiary, OR A REPRESENTATIVE, A WRITTEN STATEMENT THAT THE CLAIM IS DISPUTED WITH A STATEMENT OF THE GROUNDS upon which it is disputed. The statement MUST BE BASED UPON A REASONABLE INVESTIGATION of the claim and MUST INCLUDE SUFFICIENT DETAIL TO PERMIT THE INSURED OR BENEFICIARY TO UNDERSTAND AND RESPOND to the insurer's position.

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.

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 insurer knowingly accepts a late premium payment without objection on several occasions, then later tries to deny a claim because a payment was late. The insurer is most likely prevented from doing so by:

1. Waiver and estoppel ✓
2. Insurable interest
3. Indemnity
4. Subrogation

Why: By repeatedly accepting late payments (waiver), the insurer may be estopped from later denying coverage based on the very right it gave up.

What excuses a late first payment under 39-A M.R.S. s 205(2)(A)?

1. An act of God or unavoidable circumstances alone, a mistake of fact being no excuse because the employer and its insurer are taken to know the facts of an injury of which proper notice has been given to them by the employee.
2. An act of God, a mistake of fact or unavoidable circumstances - but an employer's failure to timely report an injury for which proper notice was given is not an excuse for the insurer. ✓
3. Any circumstance the board considers reasonable, including the employer's failure to report the injury to its insurer promptly, which the paragraph treats as a matter between employer and insurer rather than one affecting the employee.
4. Nothing at all, the obligation to make the first payment within 14 days being absolute and the penalty attaching automatically whatever the reason for the delay in making the payment to the injured employee.

Why: 39-A M.R.S. s 205(2)(A): THERE IS NO PENALTY for a failure to make a timely payment IF THE FIRST PAYMENT CANNOT BE PAID WITHIN 14 DAYS DUE TO AN ACT OF GOD, TO A MISTAKE OF FACT OR TO UNAVOIDABLE CIRCUMSTANCES. AN EMPLOYER'S FAILURE TO TIMELY REPORT AN INJURY FOR WHICH PROPER NOTICE WAS GIVEN IS NOT AN EXCUSE FOR THE INSURER.

How is a Lloyd's insurer treated under 24-A M.R.S. s 406?

1. As a reciprocal insurer for the purposes of this Title, its underwriting members being treated as subscribers who exchange contracts of indemnity with one another through an attorney-in-fact.
2. As a stock insurer for the purposes of this Title, with net assets over all liabilities not less than the capital funds required of a foreign stock insurer transacting the same kinds of insurance. ✓
3. As a mutual insurer for the purposes of this Title, since its underwriting members bear the risk directly and there is no permanent capital stock divided into shares held by outside stockholders.
4. As an unauthorized insurer for the purposes of this Title, so that a Lloyd's contract may be placed in this State only by a licensed surplus lines producer under the provisions of chapter 19.

Why: 24-A M.R.S. s 406(5): A LLOYD'S INSURER SHALL BE TREATED AS A STOCK INSURER FOR THE PURPOSES OF THIS TITLE, WITH NET ASSETS OVER ALL LIABILITIES TO BE NOT LESS THAN THE CAPITAL FUNDS REQUIRED OF A FOREIGN STOCK INSURER TRANSACTING THE SAME KINDS OF INSURANCE. It is an authorized form under s 406, not an unauthorized one.

How does the association handle claims under 24-A M.R.S. s 4438(1)(F), and what may it do with surplus funds under s 4438(2)(F)?

1. Through its own employees alone, the subchapter forbidding the association to delegate the handling of claims to any member insurer or other person; and surplus funds must be carried forward against future insolvencies rather than refunded to members.
2. Through its employees or through licensed insurers or persons using licensed adjusters, designated as servicing facilities with the superintendent's approval, a member being free to decline; and it may refund surplus to members in proportion. ✓
3. Through servicing facilities designated by the superintendent, which a member insurer may not decline; and surplus funds are paid over to the General Fund at the end of any calendar year in which the assets of an account exceed its estimated liabilities.
4. Through independent adjusters retained for each insolvency and approved by the liquidation court; and surplus funds are applied to reduce the next assessment rather than refunded, the association having no power to make a refund to members.

Why: 24-A M.R.S. s 4438(1)(F): the association shall HANDLE CLAIMS THROUGH ITS EMPLOYEES OR THROUGH ONE OR MORE INSURERS LICENSED IN THE STATE OR OTHER PERSONS USING EMPLOYEES LICENSED AS ADJUSTERS IN THE STATE, DESIGNATED AS SERVICING FACILITIES. DESIGNATION OF A SERVICING FACILITY IS SUBJECT TO THE APPROVAL OF THE SUPERINTENDENT, BUT DESIGNATION OF A MEMBER INSURER AS A SERVICING FACILITY MAY BE DECLINED BY SUCH INSURER. s 4438(2)(F): the association MAY REFUND TO THE MEMBER INSURERS IN PROPORTION TO THE CONTRIBUTION OF EACH the amount by which the assets of an account EXCEED ITS LIABILITIES as estimated by the board for the coming year.

The characteristic of an insurance contract under which the dollar amounts exchanged by the parties may be unequal is called:

1. Conditional
2. Aleatory ✓
3. Personal
4. Unilateral

Why: An aleatory contract involves an exchange of unequal amounts; the insured pays a small premium and may collect a large benefit, or nothing at all.

Before workers' compensation laws, employers defending common-law negligence suits could use several defenses. Which of the following was one of those defenses that WC laws effectively removed?

1. The collateral source rule
2. The fellow-servant rule ✓
3. The statutory employer rule
4. The exclusive remedy rule

Why: The common-law defenses WC removed were contributory negligence, assumption of risk, and the fellow-servant rule (injury caused by a coworker). WC made these defenses irrelevant to benefit eligibility.

To add liability protection to a Dwelling Policy, which is typically attached?

1. Ordinance or Law endorsement
2. Inflation guard endorsement
3. Personal Liability Supplement ✓
4. Scheduled Personal Property endorsement

Why: Because the Dwelling Policy has no built-in liability, a Personal Liability Supplement is added to provide Coverage L (liability) and Coverage M (medical payments).

Errors and omissions (E&O) insurance protects a producer against:

1. Flood damage to the agency building and to the client files stored in its basement records room
2. Physical damage to the producer's own car while driving between client appointments, including collision and theft losses
3. Health expenses of the producer and the agency staff
4. Liability arising from negligent acts, errors, or omissions in providing professional insurance services ✓

Why: E&O coverage responds to claims that the producer was professionally negligent, such as failing to obtain requested coverage, and is a key protection against the producer's professional liability exposure.

Self-insurance is best defined as:

1. Buying a policy from an offshore carrier that is not licensed in the insured's home state, so no premium tax applies
2. Purchasing an umbrella policy to sit above the primary limits
3. An entity setting aside its own funds to pay for its own anticipated losses rather than transferring the risk ✓
4. Joining a state FAIR Plan so that the residual market, rather than the entity itself, absorbs the cost of each loss

Why: Self-insurance is a risk-retention technique in which an organization budgets and funds its own losses internally instead of transferring the risk to an insurer.

An insurer transfers a policy to an affiliate. How does 24-A M.R.S. s 2908(1)(E) treat that?

1. The transfer is considered a nonrenewal by the transferring insurer and a new policy by the affiliate, so that the insured is entitled to 30 days' written notice of nonrenewal before the transfer can take effect against that insured.
2. The transfer of a policy from an insurer to an affiliate is considered a policy renewal for the purposes of the section - so it is not a nonrenewal requiring notice on that ground. ✓
3. The transfer is considered a cancellation, the paragraph requiring 10 days' notice under subsection 5 and entitling the insured to request a hearing before the superintendent within 45 days of receiving the notice of transfer.
4. The transfer has no effect under the section, which reaches only the relationship between an insurer and its own policyholders and leaves arrangements within an insurance holding company system to chapter 47 of this Title.

Why: 24-A M.R.S. s 2908(1)(E): RENEWAL or TO RENEW means the issuance of, or the offer to issue by an insurer, a policy SUCCEEDING a policy previously issued and delivered BY THE SAME INSURER OR AN AFFILIATE, or the issuance of a certificate or notice extending the terms of an existing policy beyond its expiration date. FOR THE PURPOSES OF THIS SECTION, THE TRANSFER OF A POLICY FROM AN INSURER TO AN AFFILIATE IS CONSIDERED A POLICY RENEWAL.

A clothing store's stock is destroyed by fire. The BPP with the Special Causes of Loss form is in force. Coverage applies because:

1. The Basic form lists fire as a named peril and the Special form adopts that same list
2. A flood set off the fire, and the ensuing loss provision restores the water damage
3. Fire is not excluded under the open-perils form ✓
4. Theft is the cause of loss, and stock is insured against theft on all three forms

Why: Under the open-perils Special form, fire is a covered cause of loss because it is a risk of direct physical loss that is not excluded.

What disclaimer does 24-A M.R.S. s 2412-A(4) require in a policy issued to a large commercial policyholder?

1. Language similar to: the contract provisions, rates and rating plans provided for in this policy are exempt from the filing and approval requirements of the Bureau of Insurance, the policy itself carrying that statement for the policyholder to read. ✓
2. Language similar to: this policy is issued by an insurer not licensed by this State and is not subject to its supervision, and losses will not be paid by any state insurance guaranty association in the event of the insurer's insolvency.
3. Language similar to: the policyholder has certified that it meets the criteria for a large commercial policyholder and waives the protection of the Maine Insurance Code as to the contract provisions, rates and rating plans used in this policy.
4. Language the superintendent prescribes by rule, printed in 16-point type on a separate document affixed to the policy and signed and dated by the policyholder to acknowledge that it has been received and read before the contract was bound.

Why: 24-A M.R.S. s 2412-A(4): each policy issued to a large commercial policyholder MUST INCLUDE A DISCLAIMER WITH LANGUAGE SIMILAR TO: 'The contract provisions, rates and rating plans provided for in this policy are exempt from the filing and approval requirements of the Bureau of Insurance.' The notice that the insurer is not licensed by this State and that guaranty associations will not pay losses is the s 2009 surplus lines notice.

A spouse of an injured worker sues the employer for loss of the worker's companionship and services resulting from the work injury. This is an example of which type of claim Part Two may cover?

1. Dual-capacity injury caused by the employer's product
2. Occupational disease claimed by a family member
3. Third-party-over action brought by a manufacturer
4. Consequential (related) bodily injury and loss of consortium ✓

Why: Part Two can cover consequential bodily injury and care/loss of services (loss of consortium) suits brought by family members related to the employee's work injury.

A loss payable clause in a property policy primarily protects:

1. The state guaranty association, which is reimbursed first out of any loss payment
2. A secured creditor or lender with an interest in covered personal property ✓
3. A bailee holding the property for repair, giving it a direct claim on the proceeds
4. The named insured alone, to the exclusion of any lender

Why: A loss payable clause directs claim payments to a designated party (such as a lender) holding an interest in the covered property.

Many Homeowners policies suspend certain coverages, such as vandalism and freezing, after the dwelling has been vacant for more than:

1. 30 days
2. 90 days
3. 60 days ✓
4. 15 days

Why: A common provision suspends or restricts coverage for vandalism, glass breakage, and freezing once the dwelling has been vacant for more than 60 consecutive days.

A vehicle the named insured becomes the owner of during the policy period that replaces a vehicle shown in the Declarations is referred to as a:

1. Non-owned auto
2. Temporary substitute auto
3. Hired auto
4. Newly acquired auto ✓

Why: A newly acquired auto is one the insured becomes the owner of during the policy period, either as an additional or replacement vehicle.

Under a Homeowners policy, loss to a covered building caused by freezing of plumbing is generally covered only if the insured:

1. Used reasonable care to maintain heat or shut off and drained the water ✓
2. Reported the burst pipe to the insurer within 24 hours of discovering the water
3. Lives in a climate where freezing is uncommon
4. Has paid the extra premium for a freezing endorsement

Why: Freezing losses are covered only if the insured maintained heat in the building or shut off the water supply and drained the systems; otherwise the loss is excluded.

An insured who intentionally sets fire to insured property to collect on the policy demonstrates:

1. A moral hazard ✓
2. A physical hazard
3. A morale hazard
4. An aleatory hazard

Why: A moral hazard exists when a person's dishonesty or tendency to cause a loss, such as arson for profit, increases the chance of loss.

Under 24-A M.R.S. s 211, what is the scope of the superintendent's authority?

1. The powers expressly vested in the superintendent by the Insurance Code, and no others, any authority not stated in terms in the Code being reserved to the Legislature and exercisable only by amendment of the Code itself.
2. The powers expressly vested by the Insurance Code, together with any power exercised by an insurance regulator of another state whose department is accredited by the National Association of Insurance Commissioners.
3. The powers and the authority that are expressly vested in the superintendent by the Insurance Code, together with those powers and that authority which may be reasonably implied from that Code itself. ✓
4. The powers expressly vested by the Insurance Code, together with any power the superintendent considers necessary in the public interest, whether or not it can be derived from a provision of the Code.

Why: 24-A M.R.S. s 211(2): the superintendent has the powers and authority EXPRESSLY VESTED IN THE SUPERINTENDENT BY OR REASONABLY IMPLIED FROM THIS TITLE. Implied powers are included, but they must be implied FROM THE TITLE - a free-standing public-interest power is not the test, and another state's powers are not Maine's.

May an insurer pay a commission to an unlicensed person under 24-A M.R.S. s 1420-L, and may such a person accept one?

1. No as to paying the commission but yes as to acceptance, the prohibition being directed at the insurer and the licensed producer, who are the persons the superintendent regulates, rather than at the unlicensed recipient of the money.
2. Yes to both, provided the unlicensed person took no part in the sale, solicitation or negotiation and the payment is a referral fee of a fixed amount not contingent on the placement of any particular contract.
3. Yes to both, provided the unlicensed person becomes licensed within 90 days of the payment, the section being concerned with unlicensed activity rather than with the flow of money between the parties to it.
4. No to both: an insurer or producer may not pay, and a person may not accept, a commission or other valuable consideration for selling, soliciting or negotiating insurance in this State where a licence is required. ✓

Why: 24-A M.R.S. s 1420-L(1) and (2): an insurance company or producer MAY NOT PAY, and a person MAY NOT ACCEPT, a commission, service fee, brokerage or other valuable consideration for SELLING, SOLICITING OR NEGOTIATING insurance in this State IF THAT PERSON IS REQUIRED TO BE LICENSED under the subchapter AND IS NOT SO LICENSED. Both sides of the transaction are caught.

Which best describes the difference between replacement cost and actual cash value?

1. ACV is always higher than replacement cost
2. They are identical
3. Replacement cost includes depreciation; ACV does not
4. ACV is replacement cost minus depreciation ✓

Why: Actual cash value equals replacement cost minus depreciation, so it pays less than replacement cost on older property.

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.

What is the effect of the superintendent's list of eligible surplus lines insurers under 24-A M.R.S. s 2007(2)?

1. While the list is in effect the producer must restrict surplus lines business to the listed insurers, and the superintendent warrants the solvency of each insurer on it, the State being answerable to Maine insureds for losses unpaid by an insurer the superintendent has listed.
2. The list is advisory only, a producer being free to place business with an unlisted insurer on satisfying itself that the insurer is sound, and the superintendent publishing the list as a convenience rather than as a restriction on the producer's choice.
3. The list binds the producer only as to new business, existing placements with an insurer afterwards removed from the list continuing until the policy expires, and the producer being under no duty to notify the insured of the removal at any time.
4. While the list is in effect the producer must restrict to the listed insurers all surplus lines business placed; but the subsection casts no duty on the superintendent to determine any nonadmitted insurer's actual financial condition or claims practices. ✓

Why: 24-A M.R.S. s 2007(2): the superintendent publishes a list of currently eligible surplus lines insurers and mails it to each producer at the office last of record. WHILE ANY SUCH LIST IS IN EFFECT, THE PRODUCER SHALL RESTRICT TO THE INSURERS SO LISTED all surplus lines business placed. The subsection MAY NOT BE CONSTRUED TO CAST ON THE SUPERINTENDENT THE DUTY OF DETERMINING the actual financial condition or claims practices of any nonadmitted insurer; eligibility MAY INDICATE ONLY that the insurer APPEARS sound with satisfactory claims practices and that the superintendent HAS NO CREDIBLE EVIDENCE TO THE CONTRARY.

What does 24-A M.R.S. s 221 say about the scope of an examination of an ALIEN insurer?

1. It is limited to the insurer's insurance transactions and affairs in this State, its assets and trust deposits elsewhere in the United States being a matter for the regulator of its port-of-entry state alone.
2. It extends to the insurer's worldwide transactions, assets and affairs, an alien insurer being subject to fuller examination than a domestic one precisely because its head office lies outside the United States.
3. It is limited to that insurer's insurance transactions, its assets, its trust deposits and its affairs within the United States, except as the superintendent may otherwise require of it. ✓
4. It is limited to the insurer's trust deposits in the United States, the remainder of the examination being carried out by the insurance supervisory official of the country in which the insurer is domiciled.

Why: 24-A M.R.S. s 221(1): EXAMINATION OF AN ALIEN INSURER IS LIMITED TO ITS INSURANCE TRANSACTIONS, ASSETS, TRUST DEPOSITS AND AFFAIRS IN THE UNITED STATES, EXCEPT AS OTHERWISE REQUIRED BY THE SUPERINTENDENT. Four things, measured at the United States level rather than at Maine's border, and the superintendent may still require more.

Policy A ($50,000) and Policy B ($100,000) cover the same loss, and both use contribution by equal shares. A covered loss of $120,000 occurs. Policy B pays:

1. $60,000
2. $70,000 ✓
3. $80,000
4. $100,000

Why: Each pays equally until the smaller limit runs out: $50,000 each, totalling $100,000. Policy B then pays the remaining $20,000 alone, for $70,000. The $80,000 figure is what pro rata by limits would give.

What must an antifraud plan under 24-A M.R.S. s 2186 outline?

1. Specific procedures, appropriate to the lines written in the State, to prevent, detect and investigate insurance fraud; to educate appropriate employees on fraud detection; and to report fraud to law enforcement and regulatory authorities. ✓
2. Specific procedures to detect and investigate insurance fraud and to report it to the superintendent, the education of employees and the hiring of investigators being matters for the insurer's own judgment rather than requirements of the plan.
3. A statement of the insurer's antifraud policy, the identity of the officer responsible for it, and the sums budgeted for fraud investigation in the current financial year, filed annually with the superintendent for review.
4. Specific procedures to prevent and detect insurance fraud in the lines the insurer writes nationally, the plan being a group-wide document rather than one appropriate to the lines written in this particular State.

Why: 24-A M.R.S. s 2186(5): the plan must outline specific procedures, APPROPRIATE TO THE LINES OF INSURANCE THE INSURER WRITES IN THE STATE, to (A) PREVENT, DETECT AND INVESTIGATE ALL FORMS OF INSURANCE FRAUD; (B) EDUCATE APPROPRIATE EMPLOYEES on the antifraud plan and fraud detection; (C) PROVIDE FOR THE HIRING OF OR CONTRACTING FOR FRAUD INVESTIGATORS; and (D) REPORT INSURANCE FRAUD TO APPROPRIATE LAW ENFORCEMENT AND REGULATORY AUTHORITIES.

Loss of use (transportation expenses) coverage in the PAP for a theft loss typically begins:

1. After a waiting period (e.g., 48 hours) following the theft ✓
2. At the moment the auto is stolen, with no waiting period, provided the theft is reported to police
3. Never for theft losses, since transportation expense follows only collision repairs to the covered auto
4. Only once the stolen auto is recovered and the insured learns how long the repairs will take

Why: For a theft of the covered auto, transportation expense coverage typically begins a set number of hours (e.g., 48) after the theft is reported.

What fraud warning does 24-A M.R.S. s 2186 require, and on what documents?

1. A statement printed on all applications for insurance warning that a false statement may void the contract, claim forms being outside the requirement because the contract is already in force when a claim is made under it.
2. A statement, or one substantially similar, permanently affixed to all applications and claim forms used by insurers in this State whatever the form of transmission: that it is a crime to knowingly provide false, incomplete or misleading information to an insurance company for the purpose of defrauding it, and that penalties may include imprisonment, fines or a denial of insurance benefits. ✓
3. A statement read aloud to the applicant by the producer at the time the application is taken, and recorded in the producer's file, the warning being a spoken one so that the applicant cannot say it was overlooked.
4. A statement in a form prescribed by rule of the superintendent, which each insurer must file for approval before use and may vary to suit the line of insurance and the manner in which the form is transmitted.

Why: 24-A M.R.S. s 2186(3)(A): ALL APPLICATIONS AND CLAIM FORMS used by insurers in this State, REGARDLESS OF THE FORM OF TRANSMISSION, must contain the statement or a SUBSTANTIALLY SIMILAR one, PERMANENTLY AFFIXED. s 2186(3)(B): THE LACK OR OMISSION OF THE STATEMENT DOES NOT CONSTITUTE A DEFENSE in any criminal prosecution or civil action for a fraudulent insurance act. s 2186(3)(C): the subsection APPLIES TO ALL INSURERS EXCEPT REINSURERS.

A restaurant's walk-in freezer fails due to compressor breakdown, spoiling $8,000 of food. Which coverage best responds?

1. Business income coverage for the sales lost while the freezer was down
2. Spoilage endorsement (and/or equipment breakdown) ✓
3. Ordinance or Law coverage to rebuild the freezer to current code
4. Products liability of the compressor's maker

Why: Spoilage coverage (or equipment breakdown) addresses loss to perishable stock caused by refrigeration/equipment breakdown.

A rating method that uses an individual risk's actual past loss experience to adjust its premium is:

1. Experience (merit) rating ✓
2. Manual rating, which applies the published class rate from the rate manual
3. Judgment rating, where the underwriter sets the premium from experience and intuition
4. Class rating, which groups similar exposures and charges each of them the same rate

Why: Experience or merit rating modifies premium based on the insured's own loss history, rewarding favorable experience.

The meaning of 'negotiate' in the Maine Producer Licensing Act is in issue. Which definitions section governs, and why does it matter?

1. Section 1402, which defines terms for the whole of chapter 16 including subchapter I-A, section 1420-A being confined to the meaning of the terms used in the appointment and termination provisions of the subchapter.
2. Either, the two sections being identical in substance so that it makes no practical difference which of them is cited in support of a proposition about the meaning of a term used anywhere in chapter 16.
3. Section 1420-A, which defines the terms used in subchapter I-A; section 1402 is the definitions section for chapter 16 at large, and the two sit in the same chapter, which is why they are often confused. ✓
4. Section 3, the general definitions section of the Insurance Code, chapter 16 containing no definition of 'negotiate' and borrowing the meaning of that term from the Title's own opening provisions instead.

Why: TWO DEFINITIONS SECTIONS, ONE CHAPTER. 24-A M.R.S. s 1402 defines terms for chapter 16 at large; s 1420-A defines them for SUBCHAPTER I-A, the Maine Producer Licensing Act, and it is 1420-A that defines NEGOTIATE, SELL, SOLICIT, HOME STATE, TERMINATE and UNIFORM APPLICATION. The meaning of any of those terms in the Act is taken from 1420-A.

A homeowner stores a guest's furniture temporarily. Property of others while on the residence premises is:

1. Covered only under Section ii liability, since the guest is not an insured
2. Subject to the $200 special limit for money
3. Never covered while owned by a non-insured
4. Coverable at the insured's option under Coverage C ✓

Why: Coverage C may, at the insured's option, apply to property of others while on the part of the residence premises occupied by an insured.

An employee is injured travelling to work in an employer-sponsored van pool. What does 39-A M.R.S. s 201(2) provide?

1. The employee is deemed to have received a personal injury arising out of and in the course of employment, the employer's sponsorship of the rideshare programme bringing the journey within the course of employment for the purposes of the Act.
2. The employee may not be deemed to have received a compensable injury in any circumstances, including a driver or mechanic paid by the employer to operate or maintain the vehicle used in the rideshare programme concerned.
3. The employee may not be deemed to have received a personal injury arising out of or in the course of employment - but nothing denies benefits to drivers, mechanics and others who receive remuneration for it. ✓
4. The question is left to the board on the facts of each case, the subsection listing the matters the board must weigh - the employer's degree of sponsorship, the route taken and whether the employee was paid for the travelling time.

Why: 39-A M.R.S. s 201(2): an employee injured while participating in a PRIVATE, GROUP OR EMPLOYER-SPONSORED CAR POOL, VAN POOL, COMMUTER BUS SERVICE OR OTHER RIDESHARE PROGRAM, HAVING AS ITS SOLE PURPOSE THE MASS TRANSPORTATION OF EMPLOYEES TO AND FROM WORK, MAY NOT BE DEEMED TO HAVE RECEIVED PERSONAL INJURY ARISING OUT OF OR IN THE COURSE OF EMPLOYMENT. NOTHING in the subsection DENIES BENEFITS TO EMPLOYEES SUCH AS DRIVERS, MECHANICS AND OTHERS WHO RECEIVE REMUNERATION for their participation.

What general limitation does 24-A M.R.S. s 2215(1) place on every disclosure of personal information, before any of its exceptions is reached?

1. The disclosure must be recorded in a register kept at the carrier's principal office in this State and open to inspection by the consumer at any reasonable time, the register showing the recipient, the date and the personal information disclosed on each occasion.
2. The disclosure must be preceded by written notice to the consumer at least ten days before it is made, so that the consumer has an opportunity to object to the superintendent and to obtain a stay of the disclosure pending a hearing on the objection.
3. The disclosure must be approved in advance by the superintendent where the recipient is a person other than a regulated insurance entity or an insurance support organization, and the approval is effective for that disclosure only and not for any later one.
4. The disclosure must be made with due consideration for the safety and reputation of all persons who may be affected by it, and must be limited to the minimum amount of personal information necessary to accomplish a lawful purpose. ✓

Why: 24-A M.R.S. s 2215(1): a regulated insurance entity or insurance support organization may not disclose personal information collected or received in connection with an insurance transaction UNLESS the disclosure is made WITH DUE CONSIDERATION FOR THE SAFETY AND REPUTATION of all persons who may be affected, is LIMITED TO THE MINIMUM AMOUNT OF PERSONAL INFORMATION NECESSARY to accomplish a lawful purpose, and falls within one of paragraphs A to R. The two conditions are cumulative with the exception, not alternatives to it.

An insurer seeks Maine authority to write a kind of insurance it is not authorized to write in its state of domicile. What does 24-A M.R.S. s 406 say?

1. It may be authorized, provided it satisfies the capital and surplus requirements of section 410 for that kind and files with the superintendent the reason why its domiciliary regulator has not granted the same authority.
2. It may be authorized for that kind only if it is a domestic insurer of this State, the requirement of authority in the state of domicile applying to foreign and alien insurers but not to insurers formed under the laws of this State.
3. It may be authorized, the domiciliary position being relevant only to the reserve requirement in subsection 1 and not to the kinds of insurance for which a certificate of authority may be granted here.
4. It may not be authorized to transact that kind in this State, because no insurer may be authorized for a kind of insurance unless duly authorized or qualified to transact it in the state or country of its domicile. ✓

Why: 24-A M.R.S. s 406(2): NO INSURER SHALL BE AUTHORIZED TO TRANSACT A KIND OF INSURANCE IN THIS STATE UNLESS DULY AUTHORIZED OR QUALIFIED TO TRANSACT SUCH INSURANCE IN THE STATE OR COUNTRY OF ITS DOMICILE. Maine will not grant authority its home regulator has withheld. Section 406(3) adds that the kind must be within the definitions in chapter 9.

Which document in a CPP contains information common to all coverage parts, such as the named insured, policy period, and premium?

1. Interline endorsement
2. Common Policy Declarations ✓
3. Coverage Part Declarations
4. Causes of Loss form

Why: The Common Policy Declarations identify the named insured, mailing address, policy period, business description, and the coverage parts that apply.

What minimum amounts must a policy carry to be accepted as proof of financial responsibility under 29-A M.R.S. s 1605(1)(C)?

1. $25,000 for damage to property; $50,000 for injury to or death of any one person; and $100,000 for one accident resulting in injury to or death of more than one person, the paragraph setting three limits and leaving medical payments and towing to the policy.
2. $10,000 for damage to property; $25,000 for injury to or death of any one person; and $50,000 for one accident resulting in injury to or death of more than one person, together with $2,000 for medical payments and $500 for towing and storage charges.
3. $25,000 for damage to property; $50,000 for injury to or death of any one person; $100,000 for one accident resulting in injury to or death of more than one person; $2,000 for medical payments under s 1605-A; and $500 for towing and storage under s 1605-B. ✓
4. $100,000 for damage to property; $250,000 for injury to or death of any one person; and $500,000 for one accident resulting in injury to or death of more than one person, those being the limits the Maine Automobile Insurance Plan must be prepared to write.

Why: 29-A M.R.S. s 1605(1)(C): the policy must be in the amount or limit of AT LEAST (1) FOR DAMAGE TO PROPERTY, $25,000; (2) FOR INJURY TO OR DEATH OF ANY ONE PERSON, $50,000; (3) FOR ONE ACCIDENT RESULTING IN INJURY TO OR DEATH OF MORE THAN ONE PERSON, $100,000; (4) FOR MEDICAL PAYMENTS PURSUANT TO SECTION 1605-A, $2,000; and (5) FOR TOWING AND STORAGE CHARGES PURSUANT TO SECTION 1605-B, $500. The $250,000/$500,000/$100,000 figures are the Maine Automobile Insurance Plan MAXIMUMS in 24-A s 2325(6), not the proof minimums.

The provision describing the geographic area where coverage applies is the:

1. Policy period
2. Coinsurance clause
3. Insuring agreement
4. Policy territory ✓

Why: The policy territory defines the geographic boundaries within which covered losses or occurrences must take place.

A manufacturer wants higher liability limits but identical terms to its CGL across all of its primary policies. The most efficient solution is:

1. Dropping the aggregate
2. A fidelity bond
3. A follow-form excess policy ✓
4. A self-insured retention

Why: A follow-form excess policy adds limits while matching the underlying terms, ideal when only more capacity is needed.

What does 24-A M.R.S. s 2174 prohibit as to collecting premiums?

1. Collecting any premium before the policy has actually been issued and delivered to the insured, the section requiring the contract to be in existence before money may be taken for it from an applicant in this State.
2. Knowingly collecting a premium for insurance placed with an unauthorized insurer, the section being the enforcement provision behind the certificate of authority requirement in section 404 of the Insurance Code.
3. Collecting a premium in cash rather than by a means that leaves a record, the section being directed at the handling of trust funds by producers and supplementing section 1449 of the Insurance Code.
4. Knowingly collecting any sum as premium or charge for insurance which is not then provided, or not in due course to be provided subject to acceptance of the risk, by a policy issued by an authorized insurer. ✓

Why: 24-A M.R.S. s 2174(1): NO PERSON SHALL KNOWINGLY COLLECT ANY SUM AS PREMIUM OR CHARGE FOR INSURANCE, WHICH INSURANCE IS NOT THEN PROVIDED OR IS NOT IN DUE COURSE TO BE PROVIDED, SUBJECT TO ACCEPTANCE OF THE RISK BY THE INSURER, BY AN INSURANCE POLICY ISSUED BY AN INSURER AS AUTHORIZED BY THIS TITLE. Money taken for cover that is not and will not be there.

An insurer organized under the laws of another U.S. state is, in any other state, classified as:

1. Domestic
2. Admitted
3. Alien
4. Foreign ✓

Why: A foreign insurer is incorporated in another U.S. state relative to the state where it is transacting business.

A contract to insure stolen merchandise so it can be resold would be unenforceable due to lack of which element?

1. Competent parties
2. Legal purpose ✓
3. Offer and acceptance
4. Consideration

Why: A contract must have a legal purpose; insuring an illegal activity violates that requirement and is void.

Shareholders sue a corporation's board alleging mismanagement caused a stock drop. Which policy responds?

1. CGL Coverage B, treating the board's statements as advertising injury
2. Directors and Officers (D&O) Liability ✓
3. Liquor liability, if the board met over dinner
4. EPLI, because the suit names corporate officers

Why: Claims against directors and officers for wrongful management acts are handled by D&O liability insurance.

Which section of 24-A M.R.S. ch. 23 governs unfair discrimination and rebates in PROPERTY, CASUALTY and SURETY insurance?

1. Section 2162, sections 2160 and 2161 dealing with rebates and their exceptions in life, health and annuity contracts instead. ✓
2. Section 2160, which governs rebates in every line of insurance written in this State, section 2162 being confined to the surety business and to the special rules about bonds for publicly financed construction projects.
3. Section 2161, which states the exceptions to the discrimination and rebate provisions and applies them to property, casualty and surety insurance as well as to life, health and annuity contracts written here.
4. Section 2163, which prohibits the receipt of a rebate or illegal inducement and is the only section of the chapter that reaches property, casualty and surety insurance rather than life and health business.

Why: 24-A M.R.S. s 2162 is headed UNFAIR DISCRIMINATION, REBATES PROHIBITED -- PROPERTY, CASUALTY, SURETY INSURANCE. s 2160 is REBATES -- LIFE, HEALTH AND ANNUITY CONTRACTS and s 2161 states the EXCEPTIONS to ss 2159 and 2160 for those same lines. A P&C item uses 2162. s 2163 is the receipt side and is not line-specific.

Which of the following is NOT one of the four elements required to prove a negligent act?

1. Intent to cause harm ✓
2. A breach of that duty
3. Proximate cause
4. A legal duty owed

Why: Negligence requires duty, breach, proximate cause, and damages. Intent is not required—an intentional act is a different category (an intentional tort).

The HO-8 (Modified Form) is most appropriate for:

1. A condominium unit owner insuring interior walls, cabinets and floor coverings
2. A rented apartment where the tenant owns only the contents
3. An older home whose replacement cost greatly exceeds its market value ✓
4. A brand-new luxury home valued well above its rebuilding cost

Why: HO-8 is the Modified Coverage Form for older homes where replacement cost far exceeds market value; it settles losses on a functional/repair-cost basis rather than full replacement cost.

A bailee is a party who:

1. Insures only goods that the party itself owns and keeps at its own location
2. Has temporary possession of another's property for a specific purpose ✓
3. Is a federal regulator who licenses warehouses and other storage operations
4. Owns the property outright and holds clear legal title to it at all times

Why: A bailee has lawful temporary possession of another's property (e.g., a dry cleaner or repair shop) and may be liable for its safekeeping.

After a covered fire, a city orders demolition of the undamaged portion of an older building to meet current code. Which coverage pays for the demolition and increased rebuilding cost?

1. Peak season
2. Business income
3. Ordinance or Law ✓
4. Utility services

Why: Ordinance or Law coverage pays for loss to the undamaged portion, demolition costs, and increased cost of construction to comply with current codes.

What does 24-A M.R.S. s 2202 state as the purpose of chapter 24?

1. To set standards for collecting, using and disclosing information gathered in insurance transactions, balancing carriers' need for information against fair information practices, letting consumers learn what is held and verify it, and giving reasons for adverse underwriting decisions. ✓
2. To prohibit insurers from collecting any personal information about a consumer beyond what the application form itself requests, and to require that every other item of information be obtained afresh from the consumer each time a policy is written or renewed in this State.
3. To transfer supervision of consumer information held by insurers from the superintendent to the Attorney General, who enforces the chapter through the Unfair Trade Practices Act and whose determinations on privacy questions bind the Bureau of Insurance in any later proceeding.
4. To adopt the federal privacy standards at 45 Code of Federal Regulations, Parts 160 and 164 as the whole of Maine's insurance privacy law, so that a carrier complying with those standards is deemed to comply with every requirement of this Title as to consumer information.

Why: 24-A M.R.S. s 2202 states five purposes: to ESTABLISH STANDARDS for the collection, use and disclosure of information gathered in insurance transactions; to MAINTAIN A BALANCE between carriers' need for information and the public's need for fair information practices that respect privacy; to establish a regulatory mechanism enabling consumers to ASCERTAIN WHAT IS COLLECTED AND VERIFY ITS ACCURACY; to LIMIT THE DISTRIBUTION of information collected; and to enable consumers to OBTAIN THE REASONS FOR ADVERSE UNDERWRITING DECISIONS.