Oklahoma Property & Casualty Insurance License, Practice Exams

An Oklahoma surety is asked to guarantee the honesty of a court-appointed receiver, who is nobody's employee. Section 708 brings fidelity insurance within surety insurance and defines it as insurance guaranteeing:

1. The fidelity of the insured's own employees in the course of their employment
2. The fidelity of persons holding positions of public or private trust ✓
3. The performance of contracts other than insurance policies by persons in positions of trust
4. The fidelity of persons holding positions of public trust, private trust being a matter for the casualty section

Why: 36 O.S. § 708(1) is defined by the POSITION rather than by the relationship, and it names both kinds - PUBLIC OR PRIVATE trust - so a public official's bond and a commercial employee dishonesty cover are the same kind of insurance under this article. There is no requirement of employment, which the second option supplies: a trustee, a receiver and an administrator are all within it. Paragraph 2 is the neighbouring and quite different head - guaranteeing the performance of CONTRACTS, other than insurance policies, and guaranteeing and executing bonds, undertakings and contracts of suretyship - and the exclusion of insurance policies from it is what keeps a surety from guaranteeing an insurer's own promises. Note that fidelity is also the quality named in § 1435.20(A)(5)'s limited lines surety category, which reaches 'faithlessness in a position of public or private trust'.

Section 902 forbids the Insurance Commissioner to approve rates that are excessive, inadequate or unfairly discriminatory, and defines each. An excessive rate is one which is unreasonably high for the insurance provided, or which is unreasonable because of two things taken together. Those two are that:

1. A reasonable degree of competition does not exist in the area, and the insurer's loss ratio for the classification has fallen below the one filed for it in that same area
2. Competition to a reasonable degree does not exist in the area for the classification the rate applies to, and the rate is unreasonably high for the insurance ✓
3. The rate exceeds the rate filed by other insurers for the same classification, and the insurer has a dominant share of the market in that area for that classification
4. Competition to a reasonable degree does not exist in the area for that classification, and the rate exceeds by any margin the rate the Commissioner last approved for it

Why: 36 O.S. § 902(A)(1) gives two independent routes to excessiveness and the second is CONJUNCTIVE - want of competition AND unreasonable height - so an absence of competition alone never makes a rate excessive, and neither does height alone under that limb, though height alone suffices under subparagraph (a). The want of competition is measured in the AREA with respect to the CLASSIFICATION, not across the state or across all lines. Note that the whole section is expressed as a limit on APPROVAL - the Commissioner shall not approve such rates - rather than as a prohibition on charging them, which matters because the Property and Casualty Competitive Loss Cost Rating Act at §§ 981 and following governs much commercial business by a different route.

The condition requiring the insured to promptly notify the insurer, protect property from further damage, and cooperate after a loss describes:

1. Abandonment
2. Liberalization
3. Subrogation
4. Duties after a loss ✓

Why: The duties after a loss condition lists the insured's obligations, including prompt notice, protecting property, providing proof of loss, and cooperating.

Section 1209 governs the Commissioner's procedure against a method of competition or an act or practice that section 1204 does NOT define. After serving a statement of charges and a notice, and after a hearing or a waiver of the right to a hearing, the Commissioner:

1. Shall issue and serve an order requiring the person to cease and desist from the method, act or practice complained of
2. May issue a cease and desist order, or go directly to the district court
3. Shall make a report in writing stating findings as to the facts and serve a copy of it upon the person charged ✓
4. Shall determine whether the method, act or practice is one that ought to be added by rule to those Section 1204 defines

Why: 36 O.S. § 1209(A) gives the Commissioner NO power to issue a cease and desist order for an undefined practice - his output is a written report of findings, served on the person - and that is the structural point of the section. If the report charges a violation and the practice has not been discontinued, subsection (B) lets him go to the district court for an injunction; the coercive order comes from a judge, not from him. Contrast § 1207(A), where the same words 'after a hearing or waiver of the right to a hearing' precede a determination that leads directly to his own cease and desist order, because there the practice is one § 1204 defines. Note too that under § 1206 the opening step is mandatory - the Commissioner SHALL issue a statement of charges - while under § 1209(A) it is discretionary: he MAY.

Personal Injury Protection (PIP), where applicable, typically covers:

1. Comprehensive damage to the insured's own vehicle from theft, fire, hail, or falling objects
2. Liability to third parties for bodily injury and property damage the insured causes
3. Property damage to another person's vehicle or fence caused by the insured
4. The insured's medical expenses, lost wages, and certain other economic losses regardless of fault ✓

Why: PIP, common in no-fault states, pays the insured's own medical, wage loss, and related economic benefits without regard to fault.

An Oklahoma claimant has a covered claim against the Association and also has coverage for the same loss under another policy. Section 2012 requires him to exhaust all coverage provided by another policy arising from the same facts, injury or loss, whether or not that other policy was written by a member insurer. Two policies are exempt from that requirement, namely:

1. The policy of the insolvent insurer, and any policy written by a nonmember insurer
2. The policy of the insolvent insurer, and any life insurance policy ✓
3. Any life insurance policy, and any policy under which the claimant is not the named insured
4. The policy of the insolvent insurer, and any policy issued in another state

Why: 36 O.S. § 2012(A)(1) exempts the two policies exhaustion could not sensibly reach: the INSOLVENT INSURER'S OWN policy, which is the whole reason the claim is with the Association, and any LIFE INSURANCE policy, whose proceeds are not an indemnity for the loss at all. Everything else must be exhausted, expressly INCLUDING policies written by non-member insurers. Paragraph 2 then does the arithmetic, and it is severe: the covered claim is reduced by the FULL APPLICABLE LIMITS stated in the other policy, and the Association takes a FULL CREDIT FOR THE STATED LIMITS whether or not the claimant recovered them - unless the claimant demonstrates that he used REASONABLE EFFORTS to exhaust the other coverage, in which case the credit is for the total recovery instead. So a claimant who settles cheaply with another insurer bears the difference himself.

Section 1204's subparagraph on unfair discrimination as to kinds of insurance other than life and accident and health closes with a proviso that the subparagraph shall not apply to a stated class of rate. That class is:

1. Any premium rate approved by the Insurance Commissioner within the preceding twelve months
2. Any premium rate in effect pursuant to Article 9 of the Oklahoma Insurance Code ✓
3. Any premium rate applicable to a risk written in the surplus lines market
4. Any premium rate produced by a rating plan filed by a licensed rating organisation on the insurer's behalf

Why: 36 O.S. § 1204(7)(c) ends by disapplying itself as to any premium rate in effect pursuant to ARTICLE 9, the Code's rate regulation article, and the reason is jurisdictional rather than permissive: a rate that has gone through the Article 9 machinery is policed for unfair discrimination by that article's own standards - rates must not be excessive, inadequate or unfairly discriminatory - and not a second time under the trade practices article. So the subparagraph governs the terms and conditions of the contract and any rate NOT in effect under Article 9. Neither subparagraph (a) nor subparagraph (b) carries an equivalent proviso, which is a real asymmetry between the life and health limbs and the property and casualty one.

The subrogation clause of the Oklahoma standard fire insurance policy states what the company may require of the insured. Under it the company:

1. May require from the insured an assignment of all right of recovery against any party for loss to the extent that payment is made by the company ✓
2. Is subrogated automatically, and without any assignment whatever, to all of the insured's own rights of recovery against any party for that loss
3. May require an assignment of all right of recovery against any party, whether or not it has made any payment
4. May require an assignment of the insured's rights of recovery only where the loss in question was caused by the wilful act of some third party

Why: The subrogation clause in 36 O.S. § 4803(G) is permissive and conditional in both directions - the company MAY REQUIRE an assignment, and only TO THE EXTENT THAT PAYMENT IS MADE by it - so there is no automatic subrogation under the form and no assignment before payment. Compare the mortgagee clause in the same form, where subrogation to the mortgagee's rights arises by the clause's own terms once the company pays a mortgagee while claiming that no liability existed as to the mortgagor - that one operates without any assignment, and expressly without impairing the mortgagee's own right to sue. And compare § 3636(F), where an uninsured motorist insurer takes the PROCEEDS of a settlement or judgment rather than a right of action at all.

Medical Payments coverage typically pays expenses incurred within what time frame after the accident?

1. Within 30 days
2. Indefinitely with no limit
3. Within 1 year
4. Within 3 years ✓

Why: PAP Part B generally pays covered medical and funeral expenses incurred within three years of the date of the accident.

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.

The Homeowners loss settlement (coinsurance) provision generally requires the dwelling to be insured to at least what percentage of replacement cost to receive full replacement-cost settlement on a partial loss?

1. 100%
2. 70%
3. 50%
4. 80% ✓

Why: The replacement-cost loss settlement condition requires the dwelling to be insured to at least 80% of full replacement cost at the time of loss.

Whatever the dollar caps, section 2007 states two outer limits on what the Association may be obliged to pay a claimant. It shall in no event be obliged to pay an amount in excess of the obligation of the insolvent insurer under the policy or coverage from which the claim arises, nor in excess of:

1. The limits of the obligation of the Association existing on the date the claim is submitted to the Association
2. The limits of the obligation of the Association existing on the date of the determination of insolvency
3. The limits of the obligation of the Association as they existed on the date on which the policy was first issued or was last renewed
4. The limits of the obligation of the Association existing on the date on which the order of liquidation is filed with the court clerk ✓

Why: 36 O.S. § 2007(A)(1)'s closing words fix the Association's caps as at THE FILING OF THE ORDER OF LIQUIDATION WITH THE COURT CLERK - not the determination of insolvency, which is the trigger for the thirty-day claims window, and not the claim date or the policy date. So a legislative increase in the caps after that filing does not reach back to that insolvency, and a decrease does not either. The other outer limit is the more intuitive one and is worth stating as a principle: the Association never owes more than the insolvent insurer itself owed, so a claim outside the policy's coverage or above its limits is outside the Association's obligation however far below the statutory cap it falls. The Association is, in the Act's own phrase in paragraph 3, the PAYOR OF LAST RESORT.

Under farm property coverage, livestock such as cattle and horses are usually covered:

1. Only while in transit aboard an ocean vessel to an export market
2. For every cause of loss on an open-perils basis, with no per-animal limit applied
3. On a named-peril basis (e.g., death by lightning, accidental shooting), often with per-animal limits ✓
4. Under the dwelling coverage of the farm form, which is extended to animals kept in the barn and the adjoining pasture

Why: Farm livestock is typically insured on a named-peril basis (lightning, fire, certain accidents) and is frequently subject to per-animal and aggregate limits.

An adjuster for an Oklahoma insurer tells a third party claimant that her rights may be impaired unless she completes and returns a release form promptly. Under section 1250.7 such a statement is:

1. Prohibited in all circumstances, an insurer never being permitted to link a claimant's rights to the completion or return of a form
2. Prohibited, unless it is given for the purpose of notifying the third party claimant of the provision of a statute of limitations ✓
3. Permitted, provided the statement is accurate as to the time allowed
4. Permitted, provided the third party claimant is neither an attorney nor represented by one at the time the adjuster makes the statement

Why: 36 O.S. § 1250.7(F) separates a warning from a threat by looking at its PURPOSE: telling a claimant that the limitation period is running is permitted and is in fact required a year after the loss by subsection (E); telling her that returning a form or release is what preserves her rights is not, because it links her position to the insurer's paperwork rather than to the law. The subsection is confined to THIRD PARTY claimants, and it is absolute apart from the limitation-notice exception - the accuracy of the statement about the form is beside the point, and so is whether she is represented. Subsection (E)'s protection, by contrast, applies only to the unrepresented.

What is the standard waiting period before Business Income coverage begins?

1. No waiting period
2. 72 hours ✓
3. 24 hours
4. 30 days

Why: The standard ISO Business Income form has a 72-hour waiting period from the time of direct physical loss before coverage applies.

Section 1204's defamation paragraph reaches a statement, pamphlet, circular, article or literature having a stated quality and calculated to injure a person engaged in the business of insurance. As to that quality, the paragraph is satisfied where the material is:

1. False, or maliciously critical of or derogatory to the financial condition of an insurer, either being enough ✓
2. False and also maliciously critical of or derogatory to the financial condition of an insurer
3. Maliciously critical of or derogatory to the financial condition of an insurer, falsity alone being insufficient
4. False in a material particular concerning the financial condition of an insurer or of any of its officers

Why: 36 O.S. § 1204(3) is a disjunction, and that is its whole difficulty: material may be caught because it is FALSE, or because it is MALICIOUSLY CRITICAL OF OR DEROGATORY TO an insurer's financial condition - so a true but maliciously derogatory circular about a competitor's solvency is within the paragraph. Note that falsity is not tied to financial condition in the first limb; only malicious criticism is. The paragraph also reaches secondary parties - aiding, abetting or encouraging the making, publishing, disseminating or circulating of the material - and it reaches material published DIRECTLY OR INDIRECTLY. The additional requirement that the material be calculated to injure any person engaged in the business of insurance is keyed in the sibling life and health bank.

Under the PAP, intentional bodily injury or property damage caused by an insured is:

1. Covered under Part B only
2. Covered as a supplementary payment
3. Excluded from liability coverage ✓
4. Covered under Part A

Why: Part A excludes injury or damage caused intentionally by or at the direction of an insured.

Which of the following best distinguishes FELA from a typical state workers' compensation system?

1. FELA is fault-based requiring proof of negligence, while state WC is no-fault ✓
2. FELA provides automatic no-fault benefits, while state WC is fault-based
3. FELA covers only federal civilian employees
4. FELA caps medical benefits at a fixed amount

Why: Unlike no-fault state WC systems, FELA requires the injured railroad worker to prove the employer's negligence to recover damages.

An SR-22 is best described as:

1. A title document the state issues when a vehicle changes owners
2. A certificate filed with the state by the insurer verifying that an at-risk driver carries required liability coverage ✓
3. A no-fault accident report the driver must file with the motor vehicle department within 10 days of any crash causing injury
4. A high-risk auto liability policy sold through the state's assigned risk plan

Why: An SR-22 is a financial responsibility certificate the insurer files to confirm a high-risk driver maintains the state's required liability insurance.

A key distinction between the Jones Act and the LHWCA is that:

1. Both require the injured worker to prove employer negligence before any benefit is payable, so neither one operates as a no-fault system
2. The Jones Act covers seamen on a fault (negligence) basis, while LHWCA covers maritime/dock workers on a no-fault basis ✓
3. Both operate as pure no-fault compensation programs, paying scheduled benefits without any regard to who actually caused the injury
4. The Jones Act pays seamen no-fault scheduled benefits, while the LHWCA requires dock workers to prove that their employer was negligent

Why: The Jones Act lets seamen sue for negligence (fault-based), whereas the LHWCA is a no-fault compensation system for longshore and harbor workers who are not seamen.

Auto liability limits of 100/300/50 are an example of:

1. Split limits ✓
2. A coinsurance requirement
3. An aggregate limit
4. A combined single limit

Why: Split limits separate coverage into per-person bodily injury, per-accident bodily injury, and property damage amounts.

Theft coverage under the standard Dwelling Policy is:

1. Provided only for liability claims
2. Automatically included in all forms
3. Only available on DP-1
4. Not included unless added by endorsement ✓

Why: The Dwelling Policy does not include theft coverage by default; it must be added by a theft coverage endorsement.

Section 309.2 of the Oklahoma Insurance Code governs the frequency of examinations. The Commissioner must conduct a financial examination of every domestic insurer licensed in this state not less frequently than once every:

1. 2 years
2. 3 years
3. 5 years ✓
4. 7 years

Why: 36 O.S. § 309.2(A) sets the same five-year floor for FOREIGN insurers licensed here in the very next sentence, so the interval does not turn on domicile. What domicile changes is whose work counts: the Commissioner may accept examinations conducted by other states on foreign insurers domiciled in those states. The floor is a minimum only - the section opens by letting the Commissioner or an examiner conduct an examination, financial or market conduct, as often as he deems appropriate.

A homeowner fails to clear ice from their walkway and a visitor slips and breaks an arm. Which negligence element is satisfied by the homeowner's failure to maintain the walkway?

1. Duty
2. Proximate cause
3. Damages
4. Breach of duty ✓

Why: Failing to act as a reasonably prudent person would (clearing the ice) is the breach of the duty of care owed to the visitor.

An Oklahoma surplus lines broker knowingly places coverage with a nonadmitted insurer in an unsound financial condition. Section 1112 states three consequences. Besides revocation of the broker's license, they are that the broker:

1. Shall not again be so licensed within a period of 5 years, and is guilty of a misdemeanor punishable by a fine of not more than $1,000 or confinement in jail for not more than 90 days, or both
2. Shall not again be so licensed within a period of 2 years, and is guilty of a felony punishable by a fine of not more than $5,000 or imprisonment for not more than 2 years, or both
3. Shall not again be so licensed within a period of 2 years, and is liable to the insured for the performance of the contract placed with the unsound insurer
4. Shall not again be so licensed within a period of 2 years, and is guilty of a misdemeanor punishable by a fine of not more than $1,000 or confinement in jail for not more than 90 days, or both ✓

Why: 36 O.S. § 1112(B) provides that, in addition to any other penalty provided by law, the surplus lines broker's license shall be revoked and the broker shall not again be so licensed within two years. In addition, a licensee or broker who violates the section is guilty of a misdemeanor and on conviction is punished, for each offense, by a fine of not more than $1,000, confinement in jail for not more than ninety days, or both. Section 1112 itself imposes no personal liability on the broker for performance of the contract. Under subsection (A), the prohibition applies to a knowing placement, and a surplus lines insurer is financially sound if it meets the requirements of § 1106.

Section 3623.3 forbids an insurer at any time to charge the insurance producer for costs of a stated kind. Those costs, and the business the section reaches, are:

1. Costs associated with the necessary documentation or records needed to underwrite a policy, the section applying to all insurance the Code reaches
2. Costs associated with the necessary documentation or records needed to underwrite a policy, the section applying only to personal insurance ✓
3. Costs of any inspection or survey of the risk carried out before the policy is issued, in personal and commercial insurance alike
4. Costs of obtaining a motor vehicle report or a loss history report on the applicant, in personal insurance only

Why: 36 O.S. § 3623.3 is two sentences and both are load-bearing: the prohibition is absolute in time ('at any time') and unqualified as to amount, and the section then confines itself to PERSONAL INSURANCE as defined in 36 O.S. § 952. So the same charge may lawfully be passed to a producer on a commercial account. The mischief is a familiar one in producer economics - underwriting information the insurer requires in order to write the risk is the insurer's cost of doing business, and charging it back to the producer converts it into a cost of placing the account. Read it with § 1435.14 of the Producer Licensing Act, which regulates payment of commissions and service fees from the other direction.

After a fire loss an Oklahoma insured is found to have wilfully misrepresented a material fact concerning the subject of the insurance. Under the concealment and fraud condition of the standard fire policy the consequence is that the entire policy:

1. Shall be void only if the misrepresentation was made before the policy was issued, the condition treating concealment or fraud after a loss as a claims matter
2. Shall be voidable at the company's election, that election being exercisable within a reasonable time of the discovery
3. Shall remain in force as to any part of the loss that is unaffected by the material misrepresentation the insured has made
4. Shall be void, the condition reaching concealment or misrepresentation before or after a loss, and fraud or false swearing ✓

Why: The concealment and fraud condition in 36 O.S. § 4803(G) is the harshest clause in the form and its two features are both keyed here: the whole policy is VOID, not merely the tainted part of the claim, and the condition operates WHETHER BEFORE OR AFTER A LOSS - so lying in the proof of loss destroys the coverage as surely as lying in the application. It reaches wilful concealment or misrepresentation of any material fact or circumstance concerning the insurance, its subject, or the insured's interest in it, and separately reaches any FRAUD OR FALSE SWEARING by the insured relating to it. Note that the standard form is stricter than the Code's general rule for applications in § 3609, under which misrepresentations do not prevent recovery unless fraudulent, material, or such that the insurer would not have issued as it did.

At his golf club, an insured drives his own two-seat golf cart, which cannot exceed 25 mph, into another golfer. How does Homeowners Section II treat the injury claim?

1. Covered, as an owned cart used at a golf facility is excepted from the exclusion ✓
2. Excluded, because every motorized land vehicle falls outside Section ii
3. Covered only by the golf club's commercial general liability policy
4. Excluded unless the cart is scheduled on a personal auto policy

Why: The motor vehicle liability exclusion has an exception for an insured-owned golf cart of this kind while it is on a golfing facility, so Coverage E applies. The club's own liability insurance does not displace the insured's personal coverage.

An Oklahoma jeweller insures its stock of precious stones and gold, which stays in its vault and is never shipped anywhere. Section 705 has a paragraph covering loss or damage to precious stones, jewelry, gold, silver and other precious metals. That paragraph applies:

1. Only while the property is in course of transportation, marine insurance under this article being transit insurance throughout
2. Whether the property is used in business or trade or otherwise, and whether it is in course of transportation or otherwise ✓
3. Only where the property is used in business or trade, a private collection of jewellery being outside the paragraph altogether
4. Only where the property is in course of transportation, or is held at a place of storage awaiting the shipment for which it is intended

Why: 36 O.S. § 705(3) contains two 'or otherwise' clauses and each defeats an assumption a reader brings to a marine statute: the property need not be commercial, and IT NEED NOT BE MOVING. A jeweller's block policy and a private collection at rest are both marine insurance in Oklahoma. That makes paragraph 3 a genuinely free-standing head rather than an extension of paragraph 1's transit cover, which is why the fourth option - accurate as a description of paragraph 1's reach over property awaiting shipment - is wrong here. The same property can also fall inside § 708(3)'s bankers' blanket bond, which reaches jewelry, watches, necklaces, bracelets, gems and precious and semiprecious stones held by banks and financial institutions.

A non-admitted (unauthorized) insurer is one that:

1. Has no certificate of authority in the state where the risk is located ✓
2. Can never legally write any business in the state, even through a licensed surplus lines broker
3. Is owned by the state government and writes only the residual market business assigned to it
4. Is by definition financially unsound, which is why it was refused a certificate of authority

Why: A non-admitted insurer lacks a certificate of authority in that state, though it may write surplus lines business through licensed surplus lines brokers.

An Oklahoma company under examination refuses to comply with a reasonable written request of the examiners. Under section 309.3 that refusal is grounds for the suspension, refusal or nonrenewal of a licence or authority the company holds. The licences and authorities it reaches are:

1. The certificate of authority for the particular business being examined, and no other authority
2. Any issued to the company under the Oklahoma Insurance Code, but no licence issued elsewhere
3. Any held by the company, and any licence held by its officers, directors or employees
4. Any held to engage in an insurance or other business subject to the Commissioner's jurisdiction ✓

Why: 36 O.S. § 309.3(B) reaches ANY licence or authority the company holds for a business subject to the Commissioner's jurisdiction, not merely the certificate of authority for the business being examined - and no revocation is automatic: proceedings for suspension, revocation or refusal must be conducted pursuant to § 619 of this title. The subsection first states the positive duty: the company and all its officers, directors, employees and agents must give the Commissioner and examiners TIMELY, CONVENIENT AND FREE ACCESS at all reasonable hours at its offices to all books, records, accounts, papers, documents and computer or other recordings relating to the property, assets, business and affairs of the company, and must aid the examination so far as it is in their power. The contempt route in the third option is real but belongs to subsection (C).

An applicant is charged a higher auto premium because of information in a consumer report. The producer fails to send any adverse action notice. This most likely violates:

1. The NFIP waiting-period rule
2. The crop insurance rules
3. The Terrorism Risk Insurance Act
4. The Fair Credit Reporting Act ✓

Why: Failing to provide the required adverse action notice after taking action based on a consumer report violates the FCRA.

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.

Section 1250.8 addresses payment of a motor vehicle total loss to a third party claimant where the vehicle is subject to a registered lien. It requires the insurer to:

1. Include any registered lienholder as copayee to the extent of the lienholder's interest ✓
2. Pay the registered lienholder in full before any balance is paid to the third party claimant
3. Notify any registered lienholder of the settlement and pay the third party claimant alone
4. Withhold payment until the third party claimant produces a release of the registered lien

Why: 36 O.S. § 1250.8(L) protects the lienholder without giving it priority: copayee status TO THE EXTENT OF ITS INTEREST, so the lienholder cannot be paid more than it is owed and the claimant is not left waiting for a release before anything moves. The subsection is expressed for a THIRD PARTY claimant's total loss, which is the situation where the insurer has no contractual relationship with the lienholder and so no other way of knowing its interest is protected. Note the neighbouring provision on the mechanics of payment: subsection (K) requires all payment or satisfaction of a claim for a motor vehicle that has been TRANSFERRED BY TITLE TO THE INSURER to be paid by check, draft or electronic payment, payable on demand.

Several businesses pool their funds to collectively cover one another's losses without buying commercial insurance. This best illustrates risk:

1. Transfer to an insurer
2. Reduction
3. Avoidance
4. Sharing ✓

Why: Risk sharing or pooling spreads the cost of losses among a group of similarly exposed parties.

The Miscellaneous Type Vehicle endorsement to the PAP can extend coverage to:

1. Privately owned aircraft and gliders
2. A commercial dump truck operated by the insured's contracting business
3. Motorcycles, motor homes, golf carts, or all-terrain vehicles ✓
4. Inboard motorboats longer than 40 feet used for personal recreation

Why: The Miscellaneous Type Vehicle endorsement provides PAP coverage for vehicles such as motorcycles, motor homes, dune buggies, golf carts, and ATVs.

A statement that is guaranteed to be true and becomes part of the contract is a:

1. Concealment
2. Representation
3. Warranty ✓
4. Waiver

Why: A warranty is a statement that is guaranteed true and becomes part of the policy; its breach can void coverage.

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.

Section 3610 requires policy and application forms to be filed with and approved by the Insurance Commissioner before use, and requires the filing to be made not less than sixty days in advance of delivery. If the Commissioner neither approves nor disapproves the form by order within that period, the form:

1. Shall be deemed approved, unless the Commissioner has extended the period by not more than 30 additional days by notice given before the initial period expires ✓
2. Shall be deemed disapproved, and may not be issued, delivered or used in this state until the Insurance Commissioner has affirmatively approved it by his order
3. Shall be deemed approved, the Commissioner having no power to extend the period once the filing has been made
4. May be used at the insurer's own risk, subject to withdrawal of the form by the Commissioner at any time

Why: 36 O.S. § 3610(B) is a deemer provision with a single, tightly conditioned extension: the Commissioner may add NOT MORE THAN THIRTY DAYS, and only by giving notice of the extension BEFORE the initial sixty-day period expires. At the end of the extended period, absent affirmative action, the form is deemed approved just the same. Affirmative approval waives any unexpired part of the waiting period, so an insurer is not held to sixty days once the Commissioner has acted. Two powers survive the deemer: the Commissioner may at any time, after notice and for cause shown, WITHDRAW an approval, and by subsection (C) any order disapproving a form or withdrawing approval must state its grounds. The other sixty-day period in this module is § 3629(B)'s deadline for a written offer of settlement or rejection of a claim, which is a claims deadline and not a filing one.

Intentional injury caused by an insured is treated under Section II how?

1. Covered under Coverage F only
2. Fully covered
3. Excluded ✓
4. Covered under Coverage D

Why: Bodily injury or property damage expected or intended by the insured is excluded under Section II liability coverage.

Underinsured motorists (UIM) coverage applies when:

1. The insured wants collision limits raised above the actual cash value of the covered auto without paying more premium
2. The at-fault driver's liability limits are insufficient to fully cover the insured's damages ✓
3. The at-fault driver has no liability insurance whatsoever
4. The insured driver is the one at fault and wants their own injuries paid from their liability limits

Why: UIM applies when the at-fault driver has insurance, but with limits lower than the damages, allowing the insured to recover the difference up to the UIM limit.

For a property insurance policy, when must the insured generally have an insurable interest?

1. At the time of loss (typically), and arguably at policy inception ✓
2. Only at the time of the loss, and never at any earlier point
3. Never - insurable interest is a life insurance requirement and has no application to property
4. Only at the time the policy is purchased, and never afterwards

Why: In property insurance, insurable interest must exist at the time of loss because the policy indemnifies actual financial loss to the property. Many insurers also expect it at inception.

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

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

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

Under the PAP, a vehicle furnished or available for the regular use of the named insured but not the covered auto is generally:

1. Covered for comprehensive losses only, with collision and liability left to the vehicle owner's own policy
2. Covered in full for liability, because the pap follows the named insured into any auto driven with permission
3. Covered under Part C uninsured motorists only, and then only if the regular-use auto is itself uninsured
4. Excluded from liability coverage for the named insured unless endorsed ✓

Why: The PAP excludes liability for autos furnished or available for the named insured's regular use that are not the covered auto, addressed via the extended non-owned endorsement.

An insured who leaves a car unlocked with keys inside because insurance will cover it demonstrates:

1. A legal hazard
2. A morale hazard ✓
3. A physical hazard
4. A moral hazard

Why: A morale hazard arises from carelessness or indifference to loss because insurance exists, increasing the likelihood of loss.

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

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

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

The 'collapse' coverage is provided under which dwelling/homeowners forms?

1. Every dwelling and homeowners form alike, the basic DP-1 included, as an additional coverage
2. Only the basic DP-1 form, where it appears as an additional coverage for abrupt falling down
3. Only Section ii liability, for a collapse that injures a guest
4. Broad and special forms (e.g., DP-2/DP-3, HO-2/HO-3), not the most basic form ✓

Why: Collapse is an additional coverage in the broad and special forms (such as DP-2, DP-3, HO-2, HO-3) but is not provided under the most basic DP-1.

Dividends paid to the policyholders of a mutual insurer are:

1. Not guaranteed and are a return of surplus ✓
2. Guaranteed each year by contract
3. Taxable as ordinary income to the insured
4. Paid only to the stockholders

Why: Mutual policy dividends are not guaranteed; they represent a return of unused premium and are generally not taxable.

Section 1250.7 deals separately with a claim denied for a reason other than a specific policy provision, condition or exclusion, where the denial is made by some means other than writing. In that case the property and casualty insurer shall make an appropriate notation in its claim file:

1. And need take no further step, the dated notation standing as the record of the denial given
2. And furnish a copy of that notation to the claimant within ten days of making the denial
3. Until such time as a written confirmation of the denial can be made ✓
4. Until the claimant acknowledges in writing that the denial of the claim has been received

Why: 36 O.S. § 1250.7(B) is a BRIDGING provision rather than an exception: the claim file carries the record only until the written confirmation catches up, so the written denial is still owed. It applies only where the denial is for reasons OTHER than those described in subsection (A) - that is, other than a specific policy provision, condition or exclusion - and that limit is what makes the subsection narrow, because subsection (A) requires a denial on a policy provision to be given in writing, to reference the provision relied on, and to be copied into the claim file, and admits of no interim notation at all. Nothing in subsection (B) requires the notation to be sent to the claimant or the claimant to acknowledge anything; the notation is an internal record with a deadline attached to it by implication rather than a substitute for the writing.

A lender requires flood insurance as a condition of a mortgage because the property is in a Special Flood Hazard Area. This requirement comes from:

1. The federal Do-Not-Call rules
2. State law, which conditions the recording of every mortgage on proof of flood insurance before the closing may occur
3. TRIA's make-available requirement
4. Federal flood law requiring federally regulated lenders to mandate flood coverage in high-risk zones ✓

Why: Federal law requires lenders regulated or insured by the federal government to require flood insurance on properties located in Special Flood Hazard Areas.

A driver with 25/50/15 limits causes an accident injuring three people for $20,000 each ($60,000 total). How much does BI liability pay?

1. $25,000 (the per-person bodily injury limit)
2. $60,000 (the combined single limit for the policy)
3. $50,000 (limited by the per-accident BI maximum) ✓
4. $15,000 (the minimum financial-responsibility limit)

Why: Each person's $20,000 is under the $25,000 per-person limit, but the total $60,000 exceeds the $50,000 per-accident maximum, so BI pays $50,000.

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.

A technology consultant gives faulty advice causing a client a large financial loss (no bodily injury or property damage). The proper coverage is:

1. A liquor liability endorsement
2. Technology/Professional E&O ✓
3. CGL Coverage A for property damage
4. A $10,000 bid bond

Why: Pure financial loss from negligent professional advice is covered by professional E&O, not the CGL which requires BI/PD (or a covered offense).

To provide both hired and non-owned auto liability for a business that owns no vehicles, an agent would typically assign which symbols?

1. Symbol 2 only
2. Symbol 4 only
3. Symbols 8 and 9 ✓
4. Symbol 7 only

Why: Symbols 8 (hired autos) and 9 (non-owned autos) together provide hired and non-owned liability for a business without owned vehicles.

Section 2014 is one sentence long and limits the scope of covered claims by reference to a date. It provides that a covered claim shall not include any claim filed with the Association after:

1. The date the order of liquidation is filed with the court clerk, that date also fixing the limits of the Association's obligation
2. One year after the determination of insolvency of the insurer, whatever date the court may set for filing claims against the liquidator
3. The final date set by the court for filing claims, unless the claimant satisfies the Association that there was good cause for the delay
4. The final date set by the court for the filing of claims against the liquidator or receiver of the insolvent insurer ✓

Why: 36 O.S. § 2014 provides that a covered claim shall not include any claim filed with the Association after the final date set by the court for the filing of claims against the liquidator or receiver of an insolvent insurer. The section ties the limit to that court-set bar date, not to the date the liquidation order is filed or to a fixed period after insolvency, and it contains no good cause exception. Because it is framed as a limit on what a covered claim includes, a claim filed after that date is not a covered claim.

"Specified Causes of Loss" physical damage coverage under the BACF differs from Comprehensive in that it:

1. Includes collision damage as well, so a separate collision coverage need not be purchased for the auto
2. Covers only named perils such as fire, theft, windstorm, vandalism, and certain others ✓
3. Covers a broader range of perils than comprehensive does, and therefore carries a higher premium
4. Applies with no deductible at all, while comprehensive coverage must always be written with one

Why: Specified Causes of Loss is a named-peril coverage (fire, lightning, theft, windstorm, hail, flood, mischief, etc.), narrower and cheaper than comprehensive.

Under Homeowners loss settlement, before paying replacement cost on the building, the insurer may require that:

1. The insured sell the home within 180 days so the insurer can verify the replacement value
2. The mortgage be paid off in full before any replacement cost settlement is released
3. Earthquake coverage be added by endorsement before the building limit can be paid in full
4. The repairs actually be completed (or pay ACV until they are) ✓

Why: Replacement cost on buildings is often paid only after repairs are completed; until then the insurer may pay actual cash value and reimburse the balance upon completion.

In an insurance contract, the consideration given by the insured is:

1. The promise to pay covered claims that arise during the policy period
2. The certificate of authority that the insurer holds from its state of domicile
3. The policy document itself, once it has been delivered to the applicant
4. The payment of premium and the statements made in the application ✓

Why: The insured's consideration is the premium plus the representations made in the application; the insurer's consideration is its promise to pay covered losses.

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

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

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

When a worker dies from a compensable injury, workers' compensation typically provides:

1. Death/survivor benefits to dependents plus a burial allowance ✓
2. Only reimbursement of medical bills
3. A lump sum equal to lifetime earnings to the estate
4. Nothing, because death ends the claim

Why: Death benefits provide income (survivor) benefits to the deceased worker's dependents and a statutory burial/funeral allowance.

In a life insurance contract (by contrast with property), insurable interest must exist:

1. At the inception of the policy only ✓
2. Never
3. Continuously throughout the policy
4. At the time of loss only

Why: Life insurance requires insurable interest only at policy inception, whereas property/casualty requires it at the time of loss.

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

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

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

PAP Part A supplementary payments include all of the following EXCEPT:

1. Interest that accrues on a judgment after it is entered, until the insurer pays its limit
2. Bail bonds up to $250 after an accident
3. The full bodily injury damages owed to the claimant ✓
4. Attorney fees and the cost of defending a suit

Why: Supplementary payments include defense, bail bonds, post-judgment interest, and certain expenses, but NOT the damages themselves, which are paid within the liability limit.

A products liability claim alleges a manufactured part injured a user three years after sale. This is covered under the CGL as:

1. Premises and operations, because the part injured the user away from the insured's premises
2. Damage to premises rented to the insured, subject to the fire damage sublimit
3. Coverage B, because selling a defective part is an advertising injury offense
4. Products and completed operations, subject to that separate aggregate ✓

Why: Injury from a sold product is a products liability claim subject to the Products-Completed Operations Aggregate.

The maximum NFIP contents coverage available to a residential policyholder is:

1. $250,000
2. $50,000
3. $500,000
4. $100,000 ✓

Why: Residential contents coverage under the NFIP is capped at $100,000, separate from the building limit.

Section 3602 defines 'policy' for the insurance contracts article. Besides the contract of or agreement for effecting insurance, or the certificate of it by whatever name called, the definition includes:

1. All clauses and riders, but not endorsements added after the policy is issued
2. All clauses, riders, endorsements and papers attached to it and a part of it ✓
3. All documents the insurer has issued to the insured in connection with the risk
4. All clauses, riders and endorsements, and the application whether or not attached

Why: 36 O.S. § 3602 has a two-part test for the extra papers - ATTACHED to the policy AND A PART of it - so a document that is merely enclosed is not swept in, and the definition makes no distinction between papers attached at issue and papers attached later. That squares with § 3621, which requires every insurance contract to be construed according to the entirety of its terms as amplified, extended or modified by any rider, endorsement or application attached to and made part of the policy. The application is not automatically part of the policy: § 3608(A) makes an application inadmissible in evidence in an action on a LIFE policy unless a true copy was attached to or made part of the policy when issued. § 3603 supplies the companion definition in one line - 'premium' is the consideration for insurance, by whatever name called.

The portion of the rate intended to cover the insurer's expected losses and loss-adjustment expenses is the:

1. Expense loading
2. Pure premium / loss cost ✓
3. Profit factor
4. Reserve

Why: The pure premium (loss cost) component reflects expected claim costs; loading is added for expenses and profit.

Section 704 defines property insurance as insurance on real or personal property of every kind and interest in it, against loss or damage from any or all hazard or cause and against loss consequential upon it, other than noncontractual legal liability for such loss or damage. The section then adds a second sentence, under which property insurance shall also include:

1. Miscellaneous insurance as defined in the casualty insurance section, except as to any noncontractual liability coverage includable in it ✓
2. Miscellaneous insurance as defined in the casualty insurance section, together with any noncontractual liability coverage that is includable within that definition
3. Marine insurance as defined in this article, so far as it insures property situated in this state against the perils of transportation while on inland waterways
4. Any coverage the Commissioner has not disapproved as contrary to law

Why: 36 O.S. § 704's second sentence reaches across to § 707(11), the miscellaneous insurance catch-all inside casualty insurance, and pulls it into property insurance too - but it carries the same carve-out as the first sentence, EXCEPT AS TO ANY NONCONTRACTUAL LIABILITY COVERAGE includable in it. So a novel coverage that is essentially first-party is both property and casualty insurance, and one that is essentially third-party liability is casualty insurance only. That is § 701 in action: certain coverages are intended to come within the definitions of two or more kinds, and inclusion within one does not exclude the coverage from another within whose definition it is reasonably includable. The fourth option is § 707(11)'s own condition, which governs whether a coverage is miscellaneous insurance at all rather than what § 704 does with it.

A statement made by an applicant on an insurance application that is believed to be true to the best of the applicant's knowledge is a:

1. Waiver
2. Representation ✓
3. Concealment
4. Warranty

Why: A representation is a statement believed to be true to the best of one's knowledge; it need not be absolutely true, only true in material respects.

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.

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 Agreed Value option in commercial property insurance does which of the following?

1. Adds flood coverage at the described premises subject to its own deductible
2. Increases the deductible in exchange for a lower rate per $100 of insured value
3. Provides replacement cost valuation automatically on both buildings and contents
4. Suspends the coinsurance clause for the policy period ✓

Why: Agreed Value suspends the coinsurance condition once the insurer and insured agree on a value, eliminating any coinsurance penalty at loss.

The CGL Aircraft, Auto, or Watercraft exclusion eliminates coverage for:

1. Bodily injury or property damage arising from ownership, operation, or use of autos, aircraft, or most watercraft ✓
2. Every claim for bodily injury the insured causes, whether or not a vehicle, aircraft, or watercraft was involved in the accident
3. Personal and advertising injury offenses such as libel, slander, and wrongful eviction
4. Slip-and-fall claims on premises the insured owns or rents for its business

Why: This exclusion routes auto, aircraft, and watercraft exposures to separate policies (e.g., business auto, aircraft, marine).

The amount added to the pure premium to cover operating expenses, commissions, and profit is called the:

1. Deductible
2. Loading ✓
3. Salvage
4. Coinsurance

Why: Loading is added to the pure premium to account for the insurer's expenses, contingencies, and profit margin.

Under the CGL 'Who Is An Insured' provision, if the named insured is a partnership, who is an insured?

1. The partnership and its members/partners, but only for the conduct of the partnership business ✓
2. Only the senior or managing partner shown on the declarations
3. Only the partnership entity itself, so individual partners must buy their own personal liability coverage
4. Any employee of the firm, including conduct outside the scope of employment

Why: Partners are insureds only with respect to the conduct of the partnership's business.

In commercial trucking, a non-trucking ("bobtail") liability policy covers an owner-operator's tractor when it is:

1. Being used without a trailer or not in the business of the motor carrier (e.g., personal use) ✓
2. Parked at the motor carrier's terminal under load while awaiting the dispatcher's next assignment
3. Hauling a loaded trailer under dispatch for the motor carrier identified in the operating lease
4. Carrying placarded hazardous materials that require the carrier to make a federal MCS-90 filing

Why: Non-trucking/bobtail liability covers the tractor when used outside the motor carrier's business, filling the gap when the carrier's policy does not apply.

A homeowner experiences a sewer backup that floods the basement. Standard Homeowners coverage for this is best obtained through:

1. The earthquake endorsement, which adds earth movement and the water damage that follows
2. Coverage F, medical payments to others
3. A water backup / sump overflow endorsement ✓
4. The base HO-3 form, automatically

Why: Damage from sewer or drain backup is excluded under the base form; a water backup and sump discharge or overflow endorsement is needed.