Pennsylvania Property & Casualty Insurance License, Practice Exams

Under §1738, how does a named insured waive the stacking of UM/UIM coverage?

1. By an oral agreement with the producer noted in the file
2. By insuring only one vehicle under the policy
3. By signing the statutory written waiver form for each coverage ✓
4. By filing a written notice with PennDOT at renewal

Why: Section 1738 provides that stacking may be waived only by the first named insured signing the prescribed written rejection form; the form must be signed and dated to be valid or it is void.

Of the required continuing education credit hours, how many must be on the topic of ethics?

1. At least one credit hour
2. At least two credit hours
3. At least three credit hours ✓
4. At least five credit hours

Why: Section 310.8(b)(2) requires that at least three of the 24 CE credit hours be on the topic of ethics.

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

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

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

Under §1705, if a named insured receives the tort-option notice and never signs or returns any election, what coverage is he conclusively presumed to have chosen?

1. Whichever is cheaper
2. Limited tort
3. Full tort ✓
4. No-fault only

Why: Section 1705 provides that if the named insured does not respond, he is conclusively presumed to have chosen the full tort alternative and is charged the full tort premium.

A bookkeeper embezzles $50,000 from her employer over two years. Which form responds?

1. Liquor liability, since the thefts occurred during business hours
2. A fidelity bond / employee dishonesty coverage ✓
3. A performance bond guaranteeing the bookkeeper's work
4. CGL Coverage A, treating the missing funds as property damage

Why: Employee theft of employer funds is covered by a fidelity bond/employee dishonesty coverage, not the CGL.

A limited tort insured is injured by a driver who is later convicted of driving under the influence in that accident. What is the effect on the insured's tort rights?

1. The insured must first exhaust first-party benefits
2. The insured remains barred from noneconomic damages
3. The insured may recover as if he had full tort coverage ✓
4. The insured may recover only economic loss

Why: Section 1705(d) provides that a limited tort insured may recover as if full tort was elected when the at-fault driver is convicted of, or accepts ARD for, DUI in that accident.

Pure risk differs from speculative risk in that pure risk involves:

1. Only the chance of loss or no loss ✓
2. Voluntary participation for reward
3. Guaranteed profit
4. Both loss and gain possibilities

Why: Pure risk presents only the possibility of loss or no loss, with no opportunity for gain, making it the only insurable type of risk.

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.

Which statement about how coverage parts combine in a CPP is correct?

1. Two or more coverage parts share the Common Declarations and Common Conditions to form a package ✓
2. A monoline policy brings every available coverage part together under one set of common declarations
3. A package may combine property coverage parts only, since liability parts must always be written by themselves
4. Each coverage part must be issued as a separate policy with its own declarations

Why: In a package, two or more coverage parts attach to common declarations and common conditions; a single coverage part written alone is monoline.

An employee suffers a temporary, totally disabling injury and cannot work at all for several weeks but is expected to fully recover. Which benefit classification applies?

1. Temporary partial disability (TPD)
2. Permanent partial disability (PPD)
3. Temporary total disability (TTD) ✓
4. Permanent total disability (PTD)

Why: Temporary total disability (TTD) applies when the worker is completely unable to work for a limited time but is expected to recover and return to work.

Proof of automobile insurance coverage is most commonly evidenced by:

1. A bill of sale showing the dealer collected the first premium
2. An insurance ID card listing the policy number, insurer, and effective dates ✓
3. The registration card alone, since the state checks coverage at renewal
4. A driver's license endorsed by the examining officer

Why: An insurance identification card showing the insurer, policy number, vehicle, and policy period is the standard proof of coverage carried by drivers.

A bailee is a party who:

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

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

Under Pennsylvania law, an insurer must maintain a complete record of all complaints it has received during the preceding how many years?

1. Three years
2. Two years
3. Four years ✓
4. Five years

Why: 40 P.S. §1171.5(a)(11) requires maintaining a complete record of complaints received during the preceding four years.

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.

In a reinsurance arrangement, the company that transfers (gives up) part of its risk is called the:

1. Attorney-in-fact
2. Reinsurer
3. Ceding insurer ✓
4. Surplus lines broker

Why: The ceding insurer is the original insurer that cedes a portion of its risk to a reinsurer.

An injured worker recovers WC benefits, then sues and recovers from a negligent third party who caused the injury. The WC insurer typically has what right regarding that recovery?

1. The right to rescind the employer's policy back to inception and bill the employer for benefits paid
2. A right of subrogation/lien to recover benefits it paid ✓
3. A duty to double the benefits already paid
4. No interest in the recovery, because the exclusive remedy rule bars the insurer from sharing in a tort settlement

Why: The WC insurer generally has subrogation (lien) rights against a third-party recovery, allowing it to be reimbursed for benefits paid out of the worker's recovery.

Where a deceased worker leaves only one dependent child and no surviving spouse, the death benefit is:

1. 51% of the deceased's wages
2. 66 2/3% of the deceased's wages
3. 32% of the deceased's wages ✓
4. 42% of the deceased's wages

Why: Section 307 sets the death benefit for one dependent child (no spouse) at 32% of the deceased's wages, increasing with additional children.

Which Dwelling Policy coverage reimburses the owner for lost rents when a rented dwelling becomes uninhabitable due to a covered loss?

1. Coverage D — Fair Rental Value ✓
2. Coverage B — Other Structures
3. Coverage E — Additional Living Expense
4. Coverage C — Personal Property

Why: Coverage D — Fair Rental Value pays the landlord for lost rental income when the rented premises cannot be used because of a covered peril.

Under §1702, an unidentified 'phantom' vehicle that causes injury may be treated as an uninsured motor vehicle only if the accident is reported to police and the claimant notifies his insurer within what period?

1. 48 hours
2. 30 days ✓
3. 10 days
4. 90 days

Why: Section 1702's definition of 'uninsured motor vehicle' includes an unidentified vehicle if the accident is reported to police and the claimant notifies his insurer within 30 days, or as soon as practicable.

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.

Under the standard fire policy, if loss is made payable to a designated mortgagee, that mortgagee's interest may be cancelled by giving the mortgagee written notice of at least how many days?

1. Ten days ✓
2. Thirty days
3. Twenty days
4. Five days

Why: 40 P.S. §636 provides a mortgagee's interest may be cancelled by giving the mortgagee a ten days' written notice of cancellation.

Defining key terms (often in quotation marks or bold) so they have a consistent meaning throughout the contract is the purpose of the:

1. Definitions section ✓
2. Endorsements
3. Exclusions section
4. Declarations

Why: The definitions section clarifies the precise meaning of specific terms used throughout the policy.

Violations of 18 U.S.C. § 1033 can result in:

1. A written warning letter from the state insurance department and nothing further
2. Loss of eligibility to write NFIP flood policies, with no other consequence
3. A surcharge added to the producer's errors and omissions premium at renewal
4. Federal criminal penalties including fines and imprisonment ✓

Why: Section 1033 carries federal criminal penalties, including fines and imprisonment, depending on the offense and resulting harm.

Which is an example of a direct loss?

1. Fire damage to the structure of a building ✓
2. Loss of rental income after a fire
3. Extra expense to operate at a temporary location
4. Spoiled food after a power outage

Why: Direct loss is immediate physical damage to property; the fire damage to the structure is direct, while income/expense impacts are indirect.

Under 40 P.S. §1171.5(a)(9), the residential cancellation/nonrenewal protections apply to policies covering:

1. Only individually owned condominium units located in the Commonwealth
2. Only rental dwellings that the named insured leases to other persons for residential use
3. Owner-occupied private residential properties or personal property of individuals ✓
4. Only commercial buildings that also contain at least one owner-occupied residential unit

Why: 40 P.S. §1171.5(a)(9) applies to policies covering owner-occupied private residential properties or personal property of individuals in force 60 days or more.

A single limit of insurance covering multiple items or multiple locations under one amount is:

1. Specific insurance
2. Scheduled insurance
3. Blanket insurance ✓
4. Valued insurance

Why: Blanket insurance applies a single limit across multiple properties, items, or locations rather than assigning separate limits.

Under §1786(d), in lieu of serving a registration suspension for an insurance lapse, an owner may pay a civil penalty of what amount (plus a restoration fee and proof of coverage)?

1. $100
2. $500 ✓
3. $300
4. $1,000

Why: Section 1786(d)(1.1) allows an owner, in lieu of a registration suspension, to pay a $500 civil penalty plus the restoration fee and furnish proof of financial responsibility — usable no more than once in a 12-month period.

A coal miner who develops pneumoconiosis (black lung disease) from workplace dust exposure may receive benefits under:

1. The Defense Base Act, which covers respiratory illness in workers at government-contracted sites
2. The Jones Act, for dust below decks
3. The Black Lung Benefits Act (Federal Mine Safety) ✓
4. FELA, on proof of employer negligence

Why: The Black Lung Benefits Act provides compensation to coal miners who are totally disabled by pneumoconiosis (black lung) arising from mine employment.

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.

Installing a sprinkler system and smoke alarms in a warehouse is an example of risk:

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

Why: Risk reduction lowers the frequency or severity of potential losses through measures like safety devices.

Under Section 1171.8, which power does the Commissioner have at the administrative hearing?

1. To impose a term of imprisonment directly on any person found to have violated the Act, without a criminal trial
2. To administer oaths, examine witnesses, subpoena witnesses, and compel production of records ✓
3. To dispense with any written order and rely instead on an oral ruling announced at the hearing
4. To delegate the entire hearing to the district attorney of the county where the person resides

Why: Section 1171.8(d) authorizes the Commissioner to administer oaths, examine and cross-examine witnesses, receive evidence, subpoena witnesses, compel their attendance, and require production of books, papers, and records relevant to the hearing.

To qualify to self-insure, a Pennsylvania employer must apply to the department showing financial ability and must:

1. Post a bond or other acceptable security ✓
2. Reinsure with SWIF
3. Obtain approval from every county court
4. Deposit five years of premiums in advance

Why: Section 305 requires an employer wishing to self-insure to establish sufficient security by posting a bond or other acceptable security (such as qualifying letters of credit).

Because an insurance policy is a contract of adhesion, any ambiguity in its wording is generally:

1. Considered void and unenforceable, so the provision containing it is struck out
2. Resolved in favor of the insured, against the insurer who drafted it ✓
3. Sent to the state insurance department for an authoritative interpretation
4. Resolved in favor of the insurer who drafted it, since it chose the wording

Why: Since the insurer drafts the contract, ambiguities are construed against the drafter and in favor of the insured.

The Pennsylvania FAIR Plan primarily functions as:

1. A guaranty fund that pays the claims of insurers placed in liquidation
2. A rate-setting bureau that files homeowners rates on behalf of member insurers
3. An insurer of last resort assuring fair access to basic property insurance ✓
4. A federal program that writes flood insurance on Pennsylvania properties

Why: 40 P.S. §1600.102 establishes the FAIR Plan to assure fair access to insurance requirements so no property is denied basic property insurance except after physical inspection and fair evaluation.

Under Pennsylvania's standard fire policy, the insurer's basic recovery obligation to the insured is measured by which valuation standard?

1. Agreed value stated in the declarations
2. Replacement cost with no deduction for depreciation
3. Actual cash value of the property at the time of loss ✓
4. Market value of the real estate

Why: 40 P.S. §636 provides the company insures to the extent of the actual cash value at the time of loss, not exceeding the cost to repair or replace with like kind and quality.

A worker can return to light-duty work at reduced hours and lower pay while still recovering. The wage-loss benefit during this period is classified as:

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

Why: Temporary partial disability (TPD) compensates for the wage loss when a recovering worker can perform some work but earns less than before the injury.

An Extended Reporting Period (tail coverage) on a claims-made policy:

1. Removes the retroactive date from the policy so that injuries from any earlier year become covered claims
2. Extends the time within which claims may be reported for injuries that occurred during the policy period ✓
3. Increases the each-occurrence limit throughout the reporting window without any additional premium charge
4. Extends the period during which the injury itself must occur, adding a further year of covered exposure time

Why: A tail/ERP extends only the reporting window for claims arising from covered occurrences; it does not extend the period during which injury must take place.

Under the PAP, a trailer owned by the named insured is:

1. Covered only under Part B, because a trailer has no separate liability exposure of its own while in tow
2. Never covered unless a separate trailer policy is purchased
3. Covered only if it is used for commercial hauling and rated as a commercial unit on the declarations
4. A covered auto for liability (and physical damage if scheduled), within policy terms ✓

Why: Owned trailers are included as covered autos for liability; physical damage on a trailer generally requires it to be scheduled.

A first-party property claim is NOT a 'covered claim' under the Guaranty Association Act if the insured's net worth exceeds what amount as of December 31 of the year before the insolvency?

1. $50 million
2. $10 million
3. $25 million ✓
4. $100 million

Why: 40 P.S. §991.1802 excludes any first-party claim by an insured whose net worth exceeds $25,000,000 (calculated on a consolidated basis with subsidiaries).

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

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

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

'Completed operations' coverage applies when:

1. The product is still in the insured's inventory awaiting shipment
2. A customer slips on a wet floor inside the insured's showroom
3. Work is still in progress at the job site and the insured's crew has not yet turned the finished project over to the owner
4. The insured's work is completed or abandoned and bodily injury or property damage occurs away from the premises ✓

Why: Completed operations responds after the work is finished, typically for injury/damage occurring away from owned/rented premises.

An insured increases jewelry coverage by scheduling items. Scheduled items differ from blanket Coverage C because they:

1. Are excluded from theft coverage unless a burglar alarm is installed
2. Have lower limits than Coverage C provides for the same class of property
3. Require a mortgage clause naming the lender before the schedule takes effect
4. Are individually listed and valued, often with broader perils and no deductible ✓

Why: Scheduled personal property is individually listed and valued, generally insured on a broader open-peril basis, often with no deductible and above Coverage C sublimits.

A crew member (seaman) injured aboard a vessel in navigation would most likely pursue a claim under which law?

1. The Defense Base Act
2. The Jones Act ✓
3. FECA
4. FELA

Why: The Jones Act protects seamen (crew members of vessels in navigation), allowing them to sue their employer for injuries caused by negligence, borrowing FELA's fault-based framework.

Under a Homeowners HO-4 (renters) policy, the Coverage A (Dwelling) limit is typically:

1. Always set at 80% of the Coverage C limit to satisfy the coinsurance requirement
2. Equal to the building's replacement cost, with the landlord's policy applying excess of it
3. Not applicable / minimal, since the tenant does not own the building ✓
4. The largest of the Section I limits

Why: Because tenants do not own the structure, HO-4 has no meaningful Coverage A; the emphasis is on Coverage C personal property and Section II liability.

Self-insurance is best defined as:

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

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

Under Act 86, midterm cancellation of a commercial property and casualty policy is PROHIBITED except for enumerated grounds. Which of the following is such a permitted ground?

1. The insurer's decision to reduce the size of its commercial property book of business in the territory
2. Loss of reinsurance, certified to the commissioner as directly affecting in-force policies ✓
3. A single small first-party claim paid during the current policy term
4. A change in the insurer's marketing plan for the class of business, approved by its board of directors

Why: 40 P.S. §3402(2) permits midterm cancellation for loss of or substantial decrease in reinsurance, certified to the commissioner as directly affecting in-force policies.

A producer moves and gets a new phone number and email. Within what time must the producer notify the department of these changes?

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

Why: Section 310.11(19) makes it a prohibited act to fail to notify the department of a change of address, telephone number and email address within 30 days.

Under §1712, the income loss benefit does not begin until how much time has been lost after the date of the accident?

1. Five working days ✓
2. Fourteen calendar days
3. Three working days
4. Twenty-four hours

Why: Section 1712 states income loss shall not commence until five working days have been lost after the date of the accident.

When may a licensee charge a fee in addition to a commission under Section 310.74?

1. For any personal lines policy, with no written disclosure required
2. For the sale of commercial business, if disclosed in advance in writing and reasonable ✓
3. For completing an application for insurance, so long as the insured agrees in writing beforehand
4. Only on renewals of existing personal lines policies

Why: Section 310.74(a) permits an additional fee for the sale of commercial business if disclosed in advance in writing and reasonable in relationship to the services provided.

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.

When a business hires independent contractors, the business's own CGL primarily protects it against:

1. Injuries to the contractor's own employees, which the hiring firm's CGL settles as medical payments
2. The contractor's sole negligence in performing the work, even where the hiring firm did nothing wrong
3. Vicarious liability and its own negligence in hiring or supervising the contractors ✓
4. Damage to and liability from the contractor's trucks while they are driven to and from the job

Why: The hiring firm's CGL responds to its vicarious liability and its own negligence; the contractor should carry separate coverage for its operations.

To insure a $25,000 diamond ring for all-risk coverage with no special sublimit and often no deductible, the best option is:

1. Increase the Coverage A dwelling limit so the ring falls within the larger amount of insurance
2. Add the inflation guard endorsement
3. Add a Scheduled Personal Property endorsement / Personal Articles Floater ✓
4. Rely on the unendorsed Coverage C jewelry limit

Why: Scheduling the ring on a Personal Articles Floater (scheduled personal property endorsement) provides broad coverage above the Coverage C jewelry sublimit, typically with no deductible.

The Watercraft endorsement on a Homeowners policy is generally used to:

1. Schedule jewelry and other valuables that the insured keeps aboard the boat
2. Extend limited liability for certain larger boats otherwise excluded ✓
3. Insure large yachts for both hull damage and liability without a separate marine policy
4. Cover flood damage to the home when rising water reaches it from the adjoining lake

Why: The watercraft endorsement extends Section II liability for boats that exceed the size/horsepower thresholds otherwise excluded by the base policy.

In a typical Homeowners policy, Coverage C (Personal Property) is provided as a percentage of Coverage A equal to about:

1. 100%
2. 20%
3. 50% ✓
4. 10%

Why: Coverage C is commonly set at 50% of the Coverage A limit, though this percentage can be adjusted by endorsement.

Within a business entity's structure, what is a "designated licensee"?

1. A licensed producer designated as responsible for the entity's compliance with insurance laws ✓
2. The surviving spouse operating under the temporary license the department issues when a licensee dies
3. A nonresident producer whom another state has licensed on a reciprocal basis for the same lines of authority
4. An employee of the business entity who only inspects and rates risks and therefore needs no license

Why: Section 310.1 defines a "designated licensee" as an individual licensed as a producer who is designated by a business entity to be responsible for the entity's compliance with the Commonwealth's insurance laws and regulations.

Which loss would be covered under HO-3 on the dwelling but NOT on personal property, due to the difference in covered perils?

1. A fire loss originating in the home's attached garage
2. An accidental, non-named-peril physical loss to the structure ✓
3. A lightning strike that damages the roof
4. A windstorm loss to the siding and shingles

Why: HO-3 covers the dwelling open-peril, so an accidental loss not on the named-perils list is covered for the structure but not for Coverage C personal property, which is named-peril only.

For total disability, weekly workers' compensation in Pennsylvania is calculated at:

1. 75% of the employee's average weekly wage
2. 100% of the employee's average weekly wage
3. 66 2/3% of the employee's average weekly wage ✓
4. 50% of the employee's average weekly wage

Why: Section 306(a) sets total-disability compensation at sixty-six and two-thirds per centum (66 2/3%) of the injured employee's average weekly wage.

Under Act 86, after cancellation or nonrenewal of a claims-made commercial policy, the insurer must give the insured a period of at least how many days to purchase an extended reporting (tail) endorsement?

1. Sixty days ✓
2. One hundred eighty days
3. Thirty days
4. Ninety days

Why: 40 P.S. §3405 requires insurers to provide a 60-day period after cancellation or nonrenewal of a claims-made policy during which the insured may purchase extended reporting (tail) coverage.

Speculative risk is generally uninsurable because it:

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

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

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

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

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

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 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.

Under Act 86 governing COMMERCIAL property and casualty policies, the general written notice period for both midterm cancellation and nonrenewal is at least how many days before the effective date of termination?

1. Thirty days
2. Sixty days ✓
3. Fifteen days
4. Forty-five days

Why: 40 P.S. §3403(a)(2)-(3) generally requires at least 60 days' advance written notice for both nonrenewal and midterm cancellation of commercial policies.

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.

An insured runs a small in-home daycare for several children. The appropriate way to address the liability and incidental property exposure is the:

1. Mortgage clause, which extends the policy's protection to everyone lawfully on the premises
2. Home Day Care / business pursuits-type endorsement ✓
3. Inflation guard endorsement, raising the limits as the number of children enrolled grows
4. Personal Injury endorsement, which covers bodily injury to children left in the insured's care

Why: A home day care endorsement (a form of permitted incidental occupancy/business endorsement) addresses the liability and limited property exposure of running a daycare from the home.

Coverage E in a Homeowners policy provides:

1. Personal Liability ✓
2. Medical Payments to Others
3. Other Structures
4. Loss of Use

Why: In Section II of the Homeowners policy, Coverage E is Personal Liability, paying for bodily injury and property damage the insured is legally liable for.

The Fair Credit Reporting Act (FCRA) primarily regulates:

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

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

Under the FCRA, before an insurer obtains an investigative consumer report on an applicant, it must:

1. Notify FEMA that an applicant file has been opened
2. Obtain a court order permitting the interviews
3. Cancel any policy already in force with the applicant before ordering it
4. Clearly and accurately disclose to the consumer that such a report may be obtained ✓

Why: The FCRA requires advance written disclosure to the consumer that an investigative consumer report may be requested, along with a description of the consumer's rights.

Generally, to whom may an insurance entity pay a commission for selling, soliciting or negotiating a contract of insurance?

1. A licensee ✓
2. Only the insurer's salaried employees
3. Any unlicensed marketing firm
4. Any consumer who refers a friend for a percentage

Why: Section 310.72(a) allows an insurance entity or licensee to pay a commission to a licensee, but generally not to a non-licensee, for activities related to the sale, solicitation or negotiation of insurance.

Under §1786(d), if the Department of Transportation determines that required financial responsibility was not maintained, the registration of the vehicle is suspended for how long?

1. One month
2. Twelve months
3. Three months ✓
4. Six months

Why: Section 1786(d) directs the Department to suspend the vehicle registration for a period of three months when required financial responsibility was not secured.

The Motor Carrier Act and related federal regulations require interstate motor carriers to maintain:

1. Workers compensation coverage on all drivers and nothing more, since federal rules leave liability limits to each state
2. Minimum levels of public liability (financial responsibility) coverage based on cargo type ✓
3. Comprehensive and collision coverage on every power unit and trailer in the fleet, at limits set by the FMCSA
4. No federal filing at all when the truck is owner-operated, because an owner-operator is not classed as a motor carrier

Why: Federal law sets minimum public liability limits for interstate carriers, which vary by the type and hazard of cargo transported (e.g., higher for hazardous materials).

A building valued at $1,000,000 carries an 80% coinsurance clause. The insured carries $600,000 of coverage and suffers a $200,000 loss (before deductible). What does coinsurance pay?

1. $200,000
2. $120,000
3. $160,000
4. $150,000 ✓

Why: Required = 80% of $1,000,000 = $800,000. Penalty factor = $600,000/$800,000 = 0.75. Payment = 0.75 x $200,000 = $150,000.

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.

Under the CGL, which limit applies to the cost of medical care for a third party regardless of fault?

1. General Aggregate
2. Personal and Advertising Injury Limit
3. Medical Expense Limit ✓
4. Each Occurrence Limit

Why: The Medical Expense Limit (Coverage C) caps no-fault medical payments per person for third parties.

Under §1715, the FUNERAL benefit that must be made available for purchase is what amount?

1. $5,000
2. $1,500
3. $25,000
4. $2,500 ✓

Why: Section 1715 requires that funeral benefits of $2,500 be made available for purchase.

Under Pennsylvania's specific-loss schedule, the loss of a hand is compensated for how many weeks?

1. 335 weeks ✓
2. 275 weeks
3. 250 weeks
4. 410 weeks

Why: Section 306(c) sets the loss of a hand at 335 weeks (an arm is 410 weeks, a foot 250 weeks, an eye 275 weeks).

Under 31 Pa. Code § 146.6, an insurer must complete investigation of a claim within how many days after notification, unless it cannot reasonably be completed in that time?

1. 30 days ✓
2. 60 days
3. 15 days
4. 45 days

Why: Section 146.6 requires every insurer to complete investigation of a claim within 30 days after notification, unless the investigation cannot reasonably be completed within that time.