North Carolina Property & Casualty Insurance License, Practice Exams

Under the standard fire policy, no suit or action to recover a claim may be sustained in court unless it is commenced within what period after inception of the loss?

1. Three years ✓
2. Five years
3. One year
4. Two years

Why: The Suit provision requires that any action on the policy be commenced within three years after inception of the loss.

A machine made by a third party injures an employee. The employee collects WC, then sues the machine maker, who in turn sues the employer claiming the employer's negligence contributed. What is this type of claim that Part Two can cover?

1. A dual-capacity suit
2. A care and loss of services suit
3. A consequential bodily injury suit
4. A third-party-over (action over) suit ✓

Why: A third-party-over (or action-over) suit occurs when a third party sued by the employee brings the employer in for contribution; Part Two Employers Liability can respond to this.

A delivery driver uses his personal car to deliver pizzas for a restaurant. Under his unendorsed PAP, a liability claim during a delivery is likely:

1. Subject to the public/livery conveyance exclusion and may be denied ✓
2. Covered under Part D only, because delivery use changes the physical damage rate but never the liability insuring agreement
3. Covered under Part B only, since medical payments carries no business-use restriction on the driver
4. Fully covered, because the restaurant's commercial policy is required by law to sit excess of the driver's pap

Why: Using a vehicle to carry property/persons for a fee (delivery for hire) can trigger the livery/business-use exclusion, so the claim may not be covered without commercial coverage.

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.

Symbol 2 in the Business Auto Coverage Form designates:

1. Hired autos only
2. Any auto
3. Specifically described autos
4. Owned autos only ✓

Why: Symbol 2 covers all owned autos, both those owned now and those acquired later, depending on category symbols used.

To be eligible for most owner-occupied Homeowners forms, the dwelling generally must be:

1. Owner-occupied and used principally as a private residence ✓
2. Occupied solely for business, with no living quarters
3. A commercial building of masonry construction
4. Vacant for at least 60 consecutive days

Why: Owner-occupied homeowners forms require that the dwelling be used primarily as the insured's private residence; commercial or vacant structures are not eligible.

An insurance policy is a unilateral contract because:

1. Only the insured makes a legally enforceable promise
2. Only the insurer makes a legally enforceable promise ✓
3. Both parties make legally enforceable promises
4. Neither party makes any promise

Why: In a unilateral contract, only one party, the insurer, makes a legally enforceable promise; the insured is not legally obligated to pay future premiums.

Two applicants for accident and health insurance are in the same class and of essentially the same hazard, yet the insurer charges them different premiums for no legitimate reason. This is which defined practice?

1. A permitted rebate
2. Unfair discrimination ✓
3. Defamation
4. An unfair claim settlement practice

Why: G.S. 58-63-15(7)b prohibits unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, fees, or rates for accident or health insurance.

Identity theft / identity fraud expense coverage on a Homeowners policy generally provides:

1. Liability protection for the insured against the debts the thief ran up in their name
2. Reimbursement only for physical property such as a wallet, cards and documents taken in the theft
3. Expenses to restore the insured's identity and credit after fraud ✓
4. Earthquake protection for the dwelling

Why: The identity theft endorsement reimburses expenses (such as legal fees, lost wages, and notary costs) incurred to restore the insured's identity and credit standing.

Under the SDIP, an at-fault accident causing only property damage of $2,300 or less is classified as a:

1. Non-chargeable accident in all cases
2. Minor accident ✓
3. Major accident
4. Intermediate accident

Why: N.C. Gen. Stat. §58-36-75(a) defines a "minor accident" as an at-fault accident resulting in only property damage of $2,300 or less. Property damage over $2,300 but under $3,850 is an intermediate accident.

The coinsurance formula for the amount payable is:

1. Loss × Coinsurance percentage, minus deductible
2. (Amount required ÷ Amount carried) × Loss, plus deductible
3. Loss ÷ Coinsurance percentage, then minus deductible
4. (Amount carried ÷ Amount required) × Loss, then minus deductible ✓

Why: Payment = (insurance carried ÷ insurance required) × loss, minus any deductible, never exceeding the policy limit.

Tenant's improvements and betterments installed by a lessee are usually insured under:

1. Coverage B — Business Personal Property of the tenant ✓
2. Coverage C — Personal Property of Others, since the landlord holds title to the improvements
3. They are never insurable by the tenant
4. Coverage A — Building, purchased by the tenant

Why: Improvements and betterments made by a tenant (that cannot be legally removed) are covered as the tenant's business personal property under Coverage B.

May a sole proprietor, partner, or LLC member elect to be included as an employee under their business's workers' compensation coverage?

1. Yes, if actively engaged in the operation of the business and the insurer is notified of the election ✓
2. Only if the business regularly employs fewer than three workers and elects to carry the coverage voluntarily
3. Only with the prior written approval of the North Carolina Industrial Commission for each such election
4. No; owners are always excluded, and any premium charged for them must be refunded to the business at audit

Why: G.S. 97-2(2) allows a sole proprietor, partner, or LLC member to elect inclusion as an employee if actively engaged in the business and the insurer is notified of the election.

The Permitted Incidental Occupancies endorsement allows the insured to:

1. Rent the dwelling to as many as four separate families while keeping owner-occupant eligibility
2. Add an automobile used in the business to the policy
3. Operate a manufacturing shop on the premises
4. Conduct a limited business or professional office within the residence ✓

Why: This endorsement modifies the policy to permit a small, incidental business or office (such as a professional studio) on the residence premises.

Under the BPP, which of the following is covered as Business Personal Property?

1. Autos licensed for road use and parked in the insured's lot
2. Amounts owed by customers that cannot be collected after records are destroyed
3. Furniture, fixtures, and stock owned by the insured ✓
4. Land, water, and the cost of excavating and regrading it

Why: Coverage B (Business Personal Property) includes furniture, fixtures, machinery, equipment, and stock owned by the insured and used in the business.

The defined practice of "False Information and Advertising Generally" applies to statements made through which channels?

1. A newspaper, magazine, notice, circular, letter, poster, radio station, or any other way ✓
2. Only statements made during a face-to-face sales presentation to a prospective policyholder
3. Only advertisements printed in a newspaper or magazine of general circulation in the State
4. Only direct mail solicitations sent to the insurer's existing policyholders at their last known address

Why: G.S. 58-63-15(2) reaches statements made in a newspaper, magazine or other publication, in the form of a notice, circular, pamphlet, letter or poster, over any radio station, or in any other way.

A bond that guarantees the contractor will complete the project according to the contract terms is a:

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

Why: A performance bond guarantees completion of the work per the contract specifications.

Under §58-46-5, which insurers are authorized (and effectively required) to participate in the FAIR Plan underwriting association?

1. Only those insurers that write windstorm coverage in the eighteen coastal counties served by the pool
2. All insurers licensed to write and writing property insurance in the state on a direct basis ✓
3. Only mutual insurers organized under the laws of this State
4. Only surplus lines insurers not admitted to write property insurance here

Why: Section 58-46-5 applies to all insurers licensed to write and writing property insurance in the state on a direct basis, who share expenses, income, and losses on a fair and equitable basis.

What is the maximum number of weeks of payments an employee may receive under the partial-incapacity section?

1. No limit
2. 500 weeks ✓
3. 400 weeks
4. 300 weeks

Why: G.S. 97-30 provides that in no case shall the employee receive more than 500 weeks of payments under that section, with weeks paid under G.S. 97-29 deducted.

A person licensed under Article 33 must notify the Commissioner of the commencement of any bankruptcy, insolvency, or receivership proceeding within:

1. 15 days after commencement
2. Three business days after commencement ✓
3. 30 days after commencement
4. 10 business days after commencement

Why: G.S. 58-33-46(c) requires notice within three business days after the commencement of the proceeding or the making of an assignment for the benefit of creditors.

A 'license' under Article 33 is a document issued by the Commissioner authorizing a person to act as an insurance producer for the lines specified. The statute also states that the license itself:

1. Remains valid for the licensee's lifetime unless voluntarily surrendered
2. Does not create any authority to represent or commit an insurance carrier ✓
3. Authorizes the holder to adjust losses without an appointment
4. Automatically confers an appointment with each insurer listed

Why: G.S. 58-33-10(8) states the license itself does not create any authority, actual, apparent, or inherent, to represent or commit an insurance carrier.

If the Department finds that an insurer's termination did not comply with the law AND the insurer willfully violated the statute, the Department may order renewal or reinstatement plus payment by the insurer of the Department's review costs not to exceed:

1. $5,000
2. $1,000 ✓
3. $500
4. $250

Why: N.C. Gen. Stat. §58-36-85(e)(3) authorizes the Department to order renewal or reinstatement and payment by the insurer of the review costs, not to exceed $1,000, where the termination did not comply and the insurer willfully violated the section.

An insurer first submits an application produced by a newly hired licensed individual on June 1. Under G.S. 58-33-40, the insurer must file the notice of appointment by no later than:

1. June 16 (within 15 days after the first application is submitted) ✓
2. June 8, because notice is due within 7 days after the producer's license is issued
3. July 1, because the insurer has 30 days after the first application is submitted
4. April 1 of the following year, when all appointments are renewed in a single annual filing

Why: G.S. 58-33-40(b) requires the appointment notice within 15 days after the date the first insurance application is submitted; 15 days after June 1 is June 16.

Under §58-41-15, a permitted midterm cancellation is not effective unless written notice of cancellation is delivered or mailed to the insured not less than:

1. 30 days before the effective date
2. 15 days before the effective date ✓
3. 45 days before the effective date
4. 10 days before the effective date

Why: Section 58-41-15(b) requires written notice of cancellation to be delivered or mailed not less than 15 days before the proposed effective date of cancellation.

Choosing a high deductible and paying small losses out of pocket is an example of which method of handling risk?

1. Retention ✓
2. Avoidance
3. Transfer
4. Sharing

Why: Retention means accepting responsibility for some or all of a loss, such as through deductibles or self-insurance.

Under the Act, burial expenses in a death case are payable up to what maximum amount?

1. $15,000
2. $10,000 ✓
3. $7,500
4. $5,000

Why: G.S. 97-38 authorizes burial expenses not exceeding $10,000.

A heating contractor ships and installs a new furnace; the equipment is stolen from the job site before acceptance. Best coverage:

1. Installation floater ✓
2. Accounts receivable
3. Ocean marine cargo
4. Jewelers block

Why: An Installation floater covers materials and equipment during transit, storage, and installation until the work is accepted by the owner.

An insurer delays a claim by demanding a preliminary claim report and then a formal proof-of-loss form requesting substantially the same information. This is which listed practice?

1. Refusing to pay the claim without conducting a reasonable investigation of the available information
2. Failing to affirm or deny coverage within a reasonable time
3. Delaying investigation or payment by requiring duplicative submissions ✓
4. Failing to acknowledge claim communications promptly

Why: G.S. 58-63-15(11)l lists delaying investigation or payment of claims by requiring a preliminary claim report and then formal proof-of-loss forms, both containing substantially the same information.

The weekly total-disability benefit under the Act is subject to what limit?

1. A flat statutory ceiling of $800 per week that has not changed since 1994
2. A ceiling equal to the employee's full average weekly wage before injury
3. No maximum at all, only a statutory minimum
4. A maximum weekly benefit amount set annually, effective January 1 ✓

Why: G.S. 97-29(a) caps the weekly benefit at the maximum amount established annually to be effective January 1, and G.S. 97-29(i) describes the annual computation.

A retail employee sues the company for sexual harassment and wrongful termination. Which policy is designed to respond?

1. Workers Compensation and Employers Liability
2. CGL Coverage A, Bodily Injury Liability
3. Commercial Property, Special Form
4. Employment Practices Liability (EPLI) ✓

Why: Harassment and wrongful termination are employment practices claims handled by EPLI, not the CGL.

Unlike Part One, Part Two (Employers Liability) of the policy does include limits of liability. The three Part Two limits typically apply to:

1. Medical benefits, wage-replacement indemnity benefits, and death benefits payable to the worker's surviving dependents
2. Temporary disability benefits, permanent disability benefits, and survivor benefits, each shown as a separate dollar amount
3. A per-claim limit, a per-occurrence limit, and an annual aggregate limit applied to the worker's medical payments
4. Bodily injury by accident, bodily injury by disease per employee, and bodily injury by disease policy limit ✓

Why: Part Two shows three limits: bodily injury by accident (each accident), bodily injury by disease (policy limit), and bodily injury by disease (each employee).

No licensed producer or limited representative may sell, solicit, or negotiate within North Carolina, or receive or transmit a premium, for a company not licensed to do business in this State, except as provided in:

1. G.S. 58-33-66, which governs temporary licenses
2. G.S. 58-33-125 and the fee provisions of Article 33
3. G.S. 58-28-5 and Article 21 of the Chapter ✓
4. Article 34, on managing general agents

Why: G.S. 58-33-26(h) prohibits such activity for an unlicensed company except as provided in G.S. 58-28-5 and Article 21 of the Chapter.

Process and orders of the Commissioner under Article 63 may be served by which method, among others?

1. Sending the order by electronic mail to any address the person has on file with the Department of Insurance
2. Posting a copy of the order at the courthouse door in the county where the person resides for ten full days
3. Registering and mailing a copy to the person at the residence or principal office or place of business ✓
4. Publishing the order once a week for four consecutive weeks in a newspaper of general circulation in the county

Why: G.S. 58-63-25(e) permits service either in the manner provided for civil actions or by registering and mailing a copy to the person at the residence or principal office or place of business, with the return postcard receipt as proof of service.

A fidelity bond protects an employer against:

1. Loss caused by the dishonest or fraudulent acts of its employees (e.g., embezzlement) ✓
2. Government-ordered cleanup of pollutants that escape from the employer's premises during operations
3. A contractor's failure to finish a job on schedule, which a performance bond guarantees
4. Bodily injury to customers who slip and fall on the premises

Why: Fidelity bonds (employee dishonesty coverage) protect an employer from loss due to employee theft or fraud.

Which Part of the Workers Compensation and Employers Liability Policy sets out the insured's responsibilities, such as notifying the insurer promptly of an injury and cooperating in the investigation?

1. Part Four ✓
2. Part One
3. Part Three
4. Part Two

Why: Part Four — Your Duties If Injury Occurs lists the insured's obligations, including prompt notice, providing information, and cooperating with the insurer.

In ocean marine insurance, Hull coverage insures:

1. Lost freight charges
2. The vessel itself and its machinery ✓
3. Liability to third parties
4. The cargo being carried

Why: Hull insurance covers physical damage to the vessel, including its structure, machinery, and equipment.

May a person still be denied treatment as an "eligible risk" of the Reinsurance Facility?

1. Only if the person resides outside North Carolina; residency is the sole disqualifier, and the insurer must otherwise write and cede the risk even where the applicant has never tendered any premium at all
2. Only if the person has been convicted of a felony involving a motor vehicle during the preceding three years, in which case the Facility's Board of Governors must approve the rejection in writing beforehand
3. No; the Facility must accept every applicant without exception
4. Yes; a person is not an eligible risk if timely premium is not tendered, an unsatisfied judgment for auto premiums exists, or the person fails to furnish information needed to effect insurance ✓

Why: N.C. Gen. Stat. §58-37-1(4a) excludes from eligible-risk status a person who fails to tender timely premium, has a valid unsatisfied judgment for auto insurance premiums, or does not furnish the information necessary to effect insurance.

Saying that a property insurance contract is personal means that it:

1. Can only be sold to individuals in their own names, and never to a partnership, corporation or other business entity
2. Covers only personal property such as furniture and clothing, and never the dwelling or other real property
3. Must be signed in person by the named insured before the coverage can attach
4. Insures a person, not the property itself, and generally cannot be transferred without the insurer's consent ✓

Why: A personal contract insures the individual against loss, not the property; it cannot be assigned to another party without the insurer's consent.

As currently set by North Carolina statute, what are the minimum bodily-injury and property-damage liability limits an owner's motor vehicle liability policy must provide to serve as proof of financial responsibility?

1. $50,000 per person / $100,000 per accident / $50,000 property damage ✓
2. $25,000 per person / $50,000 per accident / $25,000 property damage
3. $100,000 per person / $300,000 per accident / $50,000 property damage
4. $30,000 per person / $60,000 per accident / $25,000 property damage

Why: N.C. Gen. Stat. §20-279.1(11) and §20-279.21(b)(2) set the minimum limits at $50,000 per person, $100,000 per accident for bodily injury, and $50,000 for property damage. North Carolina raised its minimums to these figures for policies issued or renewed on or after July 1, 2025 (the prior 30/60/25 limits no longer apply).

A bailee's customer floater is purchased to:

1. Insure the building the bailee occupies, its permanent fixtures, and the racks and bins that hold customer goods
2. Cover customers' property in the bailee's care regardless of the bailee's legal liability ✓
3. Provide auto liability and cargo coverage on the vehicles the bailee uses to pick up and deliver customer goods
4. Cover the bailee's own machinery, tools, and equipment used in the operation

Why: A bailee's customer policy covers customers' goods in the bailee's possession on a direct-damage basis, often paying regardless of the bailee's legal liability, to preserve goodwill.

A lender requires a borrower to buy credit life insurance against a single risk in an amount that exceeds the amount of the loan. This is which defined practice?

1. A prohibited rebate given to induce the borrower to accept the loan
2. A permitted loan servicing practice that requires no separate disclosure
3. Overinsurance in credit or loan transactions ✓
4. Unfair discrimination between individuals of the same class and hazard

Why: G.S. 58-63-15(13) prohibits requiring life or health insurance against any one risk that exceeds the amount of the loan in connection with a loan or extension of credit.

An employer who merely NEGLECTS (non-willfully) to secure the payment of compensation is guilty of:

1. No offense
2. A Class H felony
3. A Class 1 misdemeanor ✓
4. A Class A felony

Why: G.S. 97-94(c) provides that an employer who neglects to secure the payment of compensation is guilty of a Class 1 misdemeanor.

A worker permanently loses one finger but can return to the same job. This injury is best classified as:

1. Permanent partial disability ✓
2. Temporary partial disability
3. Temporary total disability
4. Permanent total disability

Why: Permanent partial disability (PPD) applies when there is a permanent impairment but the worker is not totally disabled and can still work.

Workers' compensation benefits are described as 'no-fault.' What does this mean?

1. Benefits are paid only if the employee was not at fault
2. Benefits are paid regardless of who was at fault for the injury ✓
3. Benefits are paid only if the employer was negligent
4. Benefits are reduced if the employee was partly at fault

Why: Workers' compensation is a no-fault system: an injured worker receives statutory benefits regardless of whether the employer, the employee, or neither was at fault.

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.

A reciprocal insurer is best described as:

1. An insurer owned and operated by the federal government to write perils private carriers avoid
2. A corporation owned by its stockholders, who elect the board of directors and receive dividends
3. An unincorporated group of subscribers who insure one another, managed by an attorney-in-fact ✓
4. A foreign insurer that writes only surplus lines business through resident surplus lines brokers

Why: A reciprocal or interinsurance exchange is an unincorporated association of subscribers who exchange insurance among themselves, administered by an attorney-in-fact.

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.

An adjuster handling portable consumer electronic device claims also begins exercising discretion to deny or pay a claim. Under G.S. 58-33-27, that individual:

1. May continue to rely on the exemption, because it turns only on the number of individuals supervised
2. Remains exempt so long as no more than 25 individuals are supervised under the license
3. Must instead obtain a motor vehicle damage appraiser license from the Commissioner
4. No longer qualifies for the no-license exemption, which requires no discretion in claim disposition ✓

Why: G.S. 58-33-27(b) conditions the exemption on the individual NOT exercising any discretion in the disposition of the claim; exercising discretion removes the exemption.

Under G.S. 58-63-32, after the time for filing a petition for review has expired with none filed, the Commissioner may reopen and modify or set aside an order when:

1. Only within 30 days after the order became final, and only on the Commissioner's own motion supported by evidence unavailable at the hearing
2. Only if the person charged consents in writing and the Attorney General joins the request
3. Conditions of fact or law have changed so as to require it, or the public interest requires, after notice and opportunity for hearing ✓
4. Never, because an order from which no petition for review was filed becomes permanent and may not be altered by the Commissioner in any way

Why: G.S. 58-63-32(c) allows the Commissioner, after notice and opportunity for hearing, to reopen and alter, modify, or set aside an order whenever conditions of fact or law have so changed as to require it or the public interest requires.

Under the Reinsurance Facility statute, the coverages an insurer may cede to the Facility include which of the following at the standard minimum reinsured amounts?

1. Only bodily injury and property damage liability, at the minimum limits required by §20-279.21
2. Only the physical damage coverages, meaning comprehensive and collision, at actual cash value
3. Only the portion of any coverage that exceeds $1,000,000, with the primary layer retained by the writing insurer
4. Bodily injury and property damage liability, medical payments, and uninsured/underinsured motorist coverages ✓

Why: N.C. Gen. Stat. §58-37-35(b)(1) lists the coverages reinsured through the Facility, including BI and PD liability, medical payments, and uninsured and underinsured motorist coverages, at specified minimum amounts.

Debris removal under a Homeowners policy is best described as:

1. A separate Section ii liability coverage that responds when debris from the insured's property injures a neighbor
2. An additional coverage that pays to remove debris of covered property after a covered loss ✓
3. Excluded entirely unless the debris blocks a public roadway
4. Available only by endorsement, since the base form treats removal costs as an owner's maintenance expense

Why: Debris removal is an additional coverage paying the cost to remove debris of covered property following a covered cause of loss.

The Business Pursuits endorsement on a Homeowners policy is used to:

1. Extend liability for certain business activities of an insured (e.g., a teacher or clerk) ✓
2. Cover an insured's full-scale business operation, replacing the need for a commercial general liability policy
3. Add scheduled coverage for jewelry, silverware and other valuables kept at the insured's place of work
4. Provide flood coverage for a home office

Why: The business pursuits endorsement extends Section II liability to certain employee business activities that would otherwise be excluded; it does not cover an owned business.

The Utility Services endorsement (Direct Damage / Time Element) covers:

1. Theft of utility meters and metering equipment owned by the power company but located on the insured's premises
2. The insured's legal liability to neighboring businesses for a utility outage that its own excavation work caused
3. Replacement of underground water and sewer pipes on the insured's property when they fail from age or corrosion
4. Loss resulting from interruption of utility service from off-premises power, water, or communication property ✓

Why: Utility Services coverage pays for direct damage and/or business income loss resulting from failure of off-premises utility service (power, water, communications) caused by a covered peril.

Under G.S. 58-63-50, the penalty applies to a person who willfully violates which of the following?

1. A cease and desist order of the Commissioner under G.S. 58-63-32, after it has become final and while in effect ✓
2. A policy form filing requirement imposed by the Commissioner
3. An undefined practice that a superior court has enjoined under G.S. 58-63-40
4. Any provision of Article 63, whether or not the Commissioner has first issued and served an order on the person charged

Why: G.S. 58-63-50 imposes the penalty on a person who willfully violates a cease and desist order of the Commissioner under G.S. 58-63-32 after it has become final and while the order is in effect.

Under the Act, an injury is compensable only if it is an 'injury by accident' that:

1. Occurs during regular business hours
2. Results in more than 30 days of lost time
3. Is witnessed by a supervisor
4. Arises out of and in the course of the employment ✓

Why: G.S. 97-2(6) defines 'injury' as only injury by accident arising out of and in the course of the employment.

Under the CGL, the duty to defend ends when:

1. The policy is renewed and a fresh set of aggregate limits takes effect for the new term
2. The applicable limit of insurance has been exhausted by payment of judgments or settlements ✓
3. The insured retains its own attorney and the insurer reimburses those fees
4. The first claim of the policy period is filed against the insured

Why: The insurer's duty to defend ceases once the applicable limit is used up by judgments or settlements.

The characteristic that requires certain acts, such as paying premium and providing proof of loss, before the insurer must pay a claim is that insurance is a contract of:

1. Aleatory nature
2. Conditional nature ✓
3. Indemnity
4. Adhesion

Why: Insurance is a conditional contract because both parties must meet certain conditions before the contract can be enforced.

Under TRIA, insurers writing certain commercial property and casualty lines must:

1. Deny any claim arising from a certified act of terrorism and refer the insured to Treasury for payment
2. Attach a mandatory terrorism exclusion to every commercial policy they issue in that state
3. Provide flood coverage at no extra charge on each commercial property policy written
4. Make available (offer) coverage for certified acts of terrorism to policyholders ✓

Why: TRIA requires participating insurers to make terrorism coverage available to commercial policyholders, though the insured may decline it.

An employee who suffers the loss of both hands, both arms, both feet, both legs, both eyes, or any two thereof qualifies for what?

1. Temporary total disability limited to 500 weeks
2. Permanent total disability, with entitlement to lifetime compensation ✓
3. A lump-sum award for serious bodily disfigurement
4. Permanent partial disability under the schedule of injuries only

Why: G.S. 97-29(d)(1) and G.S. 97-31(17) treat the loss of any two such members as permanent total disability, entitling the employee to lifetime compensation.

An unlicensed person who is required to secure a license must pay the Commissioner, upon application, a fee of how much, with the same amount for each additional line of authority requested?

1. $100.00
2. $50.00 ✓
3. $75.00
4. $25.00

Why: G.S. 58-33-125(c) requires a fee of fifty dollars ($50.00) upon application, and fifty dollars ($50.00) for each additional kind of insurance requested.

Under G.S. 58-63-25(a), the Commissioner initiates a proceeding for a defined practice when the Commissioner has reason to believe a person engaged in such a practice AND that a proceeding would be:

1. Supported by a sworn consumer complaint
2. Less costly than litigation
3. Approved by the insurer
4. In the interest of the public ✓

Why: G.S. 58-63-25(a) requires the Commissioner to have reason to believe the person engaged in the practice and that a proceeding on the matter would be in the interest of the public before issuing a statement of charges and notice of hearing.

The difference between cancellation and nonrenewal is that nonrenewal:

1. Requires the insurer to return the entire annual premium paid, not merely the unearned portion
2. Requires the insurance commissioner's prior written approval before the notice may be mailed
3. Ends coverage in the middle of the policy term once the statutory notice period expires
4. Lets the current policy run to expiration but does not continue it for a new term ✓

Why: Cancellation terminates a policy during its term, while nonrenewal allows the current term to expire and declines to issue a new term.

Under the standard fire policy's appraisal provision, if the two appraisers fail for 15 days to agree upon a competent and disinterested umpire, the umpire is selected by:

1. A judge of a court of record in the state where the property is located ✓
2. The insurer's home-office claims manager, acting for both parties
3. The North Carolina Rate Bureau from its published list
4. The Commissioner of Insurance, on the insured's request

Why: If the appraisers cannot agree on an umpire within 15 days, on request a judge of a court of record in the state where the property is located selects the umpire.

Which Causes of Loss form provides the narrowest coverage, listing named perils such as fire, lightning, windstorm, and vandalism?

1. Broad form
2. Open perils form
3. Basic form ✓
4. Special form

Why: The Basic Causes of Loss form covers a limited list of named perils and provides the narrowest protection of the three forms.

The MCS-90 endorsement is best described as a:

1. Physical damage coverage paying collision and comprehensive losses to trailers and semitrailers a carrier pulls under lease
2. State-filed certificate showing that no-fault benefits are in force
3. Motor truck cargo form paying for freight damaged in transit
4. Federally mandated public liability endorsement assuring payment for bodily injury and property damage to the public ✓

Why: The MCS-90 is a federally required endorsement guaranteeing the motor carrier will pay for public bodily injury and property damage, ensuring financial responsibility.

For workers' compensation purposes, how is 'average weekly wages' generally computed?

1. The employee's highest-earning quarter of the preceding year, divided by 13 weeks
2. Total earnings in the 52 weeks immediately preceding the injury, divided by 52 ✓
3. The statewide average weekly wage published by the Commission each year
4. The employee's hourly rate at the time of injury multiplied by a 40-hour week

Why: G.S. 97-2(5) generally computes average weekly wages as the injured employee's earnings during the 52 weeks immediately preceding the injury divided by 52.

A captive insurer is:

1. A consumer reporting agency that compiles claim histories for underwriting decisions
2. An insurer owned by, and primarily insuring the risks of, its parent organization ✓
3. An insurer restricted by its charter to writing flood coverage in participating communities
4. A state-run residual market that accepts applicants the voluntary market has declined

Why: A captive is an insurance company formed and owned by a parent company (or group) chiefly to insure the parent's own risks.

When an employee is entitled to benefits under both the general disability sections and a specific scheduled impairment, the employee:

1. Must accept whichever award the Industrial Commission finds to be the smaller of the two
2. Selects the statutory compensation providing the more favorable remedy, but not both concurrently ✓
3. Automatically receives the scheduled award, the general sections becoming unavailable
4. May collect under both sections at once, with the total capped at 500 weeks

Why: G.S. 97-29(f) prohibits collecting benefits concurrently under both provisions and lets the employee select the statutory compensation that provides the more favorable remedy.

Under the SDIP, an at-fault accident is classified as a "major accident" if it results in bodily injury or death, or in property damage of at least:

1. $2,300
2. $1,000
3. $3,850 ✓
4. $5,000

Why: N.C. Gen. Stat. §58-36-75(a) defines a "major accident" as an at-fault accident causing bodily injury or death, or property damage of $3,850 or more.

In a liability policy, an 'occurrence' is best described as:

1. Any intentional act by the insured that results in injury or damage
2. An accident, including continuous or repeated exposure to harmful conditions ✓
3. A scheduled loss of a kind specifically listed on the declarations page
4. A single instantaneous event, so that repeated exposure is excluded

Why: An occurrence is defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions, broadening coverage beyond a single sudden event.

The Protective Safeguards endorsement on a BOP or commercial property policy generally:

1. Adds coverage for flood and surface water damage at premises located within a designated special flood hazard area
2. Requires the insured to maintain specified protective systems (e.g., sprinklers) as a condition of coverage ✓
3. Reduces the property deductible to zero for any loss at a location protected by an automatic sprinkler system
4. Increases the building limit automatically each year to keep pace with construction costs

Why: Protective Safeguards conditions coverage on the insured maintaining specified systems such as automatic sprinklers or alarms; failure to maintain them can suspend coverage.

A new NFIP flood policy generally does not take effect until how many days after the application and premium are submitted?

1. 10 days
2. 60 days
3. 30 days ✓
4. 15 days

Why: The NFIP imposes a standard 30-day waiting period before a new flood policy becomes effective, to discourage buying coverage only when a flood is imminent.

A trucking company hauling hazardous materials across state lines must meet federal minimum liability amounts that are:

1. Identical for every commodity hauled interstate
2. Generally higher than for non-hazardous freight due to greater public risk ✓
3. Set below the general freight minimum, since tankers run fewer miles
4. Waived entirely for carriers running fewer than five trucks

Why: Federal financial responsibility minimums are tiered by cargo hazard, with higher required limits for hazardous materials than for ordinary property.

The MCS-90 endorsement applies regardless of which auto is involved because it is primarily intended to:

1. Reduce the carrier's premium by letting one federal filing stand in for scheduled auto liability coverage
2. Protect the public by ensuring a source of recovery for injuries/damage caused by the motor carrier ✓
3. Cover the motor carrier's own cargo, so a shipper whose freight is damaged in transit can be paid directly
4. Reward carriers holding clean CSA safety scores with a reduced FMCSA filing fee at each annual renewal

Why: The MCS-90 is a public-protection mechanism guaranteeing that injured members of the public can be paid, even if the specific vehicle was not scheduled.

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.

Under the FCRA, an investigative consumer report differs from an ordinary consumer report because it includes:

1. Only the consumer's numerical credit score and the four factors that most depressed it, with no narrative gathered from any other person
2. Information about a consumer's character, reputation, and lifestyle obtained through interviews with associates or neighbors ✓
3. Records of criminal convictions copied from county courthouse files
4. Flood zone determinations drawn from FEMA mapping data

Why: An investigative consumer report gathers information on a consumer's character, general reputation, and mode of living through personal interviews, triggering additional notice requirements.

The North Carolina standard fire policy suspends coverage while the hazard is increased by any means:

1. Regardless of the insured's knowledge
2. Only if caused by a tenant
3. Only if the increase is permanent
4. Within the control or knowledge of the insured ✓

Why: Subdivision (f)(6)a. provides the insurer is not liable for loss occurring while the hazard is increased by any means within the control or knowledge of the insured.