Washington Property & Casualty Insurance License, Practice Exams

A vessel departs from its customary route for no necessity, and a loss occurs. The insurer may deny coverage based on:

1. Lack of a deductible
2. Coinsurance
3. Breach of the implied warranty of no deviation ✓
4. The Special form exclusion under the policy's terms

Why: Unjustified deviation from the agreed or customary route breaches the implied warranty against deviation, allowing the insurer to deny coverage.

An insurer incorporated in the state where it is transacting business is classified as:

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

Why: A domestic insurer is one organized under the laws of the state in which it is doing business.

Under RCW 48.17.535, how is a license suspended for noncompliance with a support order reinstated?

1. Reissuance is automatic upon receipt of a DSHS release stating the licensee is in compliance, if all other requirements are met ✓
2. The licensee must reapply and retake the licensing examination
3. Reinstatement requires payment of a fee equal to twice the license fee
4. The suspension remains in effect until the licensee requests and completes a formal contested hearing before the insurance commissioner

Why: RCW 48.17.535 provides that if the person has continued to meet all other requirements, reissuance is automatic upon the commissioner's receipt of a release from DSHS stating the licensee is in compliance.

Employee Benefits Liability (EBL) coverage protects an employer against:

1. Errors or omissions in the administration of the company's employee benefit programs ✓
2. Discrimination claims
3. Employee bodily injury unless an exception clearly applies for the coverage that is in force
4. Product liability

Why: EBL covers negligent acts, errors, or omissions in administering employee benefit plans (e.g., failing to enroll an employee).

The policy section that defines the rights and duties of both parties, such as duties after a loss and cancellation, is the:

1. Insuring agreement
2. Declarations
3. Conditions ✓
4. Definitions

Why: The conditions section spells out the rules, rights, and duties governing how the policy operates for both insurer and insured.

A building worth $200,000 has an 80% coinsurance clause and is insured for $120,000. A $40,000 loss occurs (no deductible). The insurer pays:

1. $40,000
2. $24,000
3. $32,000
4. $30,000 ✓

Why: Required = 80% × $200,000 = $160,000. Payment = ($120,000 ÷ $160,000) × $40,000 = $30,000.

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.

A deductible in a property policy is the portion of a loss that:

1. The insurer pays first
2. Is paid as salvage
3. The insured retains/pays before the insurer pays ✓
4. Is added to the premium in that particular circumstance

Why: A deductible is the amount the insured must absorb on a covered loss before insurance benefits apply.

Under RCW 48.30.015, before filing an action for unreasonable denial of a first party claim, the claimant must provide written notice to the insurer and the commissioner at least:

1. ten days prior to filing
2. twenty days prior to filing ✓
3. thirty days prior to filing
4. sixty days prior to filing

Why: RCW 48.30.015(8)(a) requires a first party claimant, twenty days prior to filing an action, to provide written notice of the basis for the cause of action to the insurer and the office of the insurance commissioner.

A worker loses the use of both hands and is permanently unable to engage in any gainful employment. This is classified as:

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

Why: Permanent total disability (PTD) applies when the worker is permanently and completely unable to return to any gainful employment.

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.

Which Part of the Workers Compensation and Employers Liability Policy pays the benefits required by the workers' compensation law of a listed state, with no dollar limit on the amount paid?

1. Part Three — Other States Insurance
2. Part One — Workers Compensation ✓
3. Part Four — Your Duties
4. Part Two — Employers Liability

Why: Part One pays promptly all benefits required by the workers' compensation law of the states listed; because the law sets the benefits, there is no policy limit on Part One.

Under the Washington Insurance Code, how is "insurance" defined?

1. A contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies ✓
2. Any agreement between two competent parties to share potential financial losses equally once the applicable waiting period has elapsed
3. A written promise by an insurer to pay all costs an insured incurs during a policy period
4. A legal arrangement that transfers ownership of property to a third party for safekeeping

Why: RCW 48.01.040 defines insurance as a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies.

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

1. Extend liability for certain business activities of an insured (e.g., a teacher or clerk) ✓
2. Cover an insured's full-scale business operation unless an exception clearly applies for the coverage that is in force
3. Add scheduled jewelry
4. Provide flood coverage

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

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

1. Part E — Duties After an Accident or Loss ✓
2. Part C
3. Part A general conditions in most situations
4. Part B

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

The standard mortgage clause in a Homeowners or Dwelling policy protects the mortgagee by:

1. Increasing the policy limit
2. Covering the mortgage balance as liability unless an exception clearly applies for the coverage that is in force according to the insurer's rules
3. Allowing the mortgagee to collect even if the insured's act voids coverage, and requiring notice of cancellation ✓
4. Eliminating the deductible

Why: The standard (union) mortgage clause preserves the mortgagee's right to recover despite acts of the insured and entitles the lender to advance notice of cancellation or nonrenewal.

The purpose of the Washington Insurance Guaranty Association under RCW 48.32.010 is to provide a mechanism for:

1. reinsuring the catastrophe risks of member insurers unless the commissioner directs otherwise
2. the payment of covered claims to avoid excessive delay and financial loss because of an insurer's insolvency ✓
3. setting uniform property and casualty rates statewide whenever the circumstances reasonably require it
4. licensing and disciplining insurance producers in the manner prescribed by the commissioner

Why: RCW 48.32.010 states the purpose is to provide a mechanism for the payment of covered claims to avoid excessive delay in payment and financial loss to claimants or policyholders because of an insurer's insolvency, and to assist in detecting and preventing insolvencies.

An insurer may deliver a required notice to a party by electronic means under RCW 48.185.005 only if the party:

1. holds an active email account with a commercial provider to the extent permitted under the insurance code
2. has affirmatively consented to that method of delivery and has not withdrawn the consent ✓
3. resides outside the state of Washington in the ordinary course of business
4. waives the right to receive any paper documents permanently

Why: RCW 48.185.005(4)(a) permits electronic delivery only if the party has affirmatively consented to that method of delivery and has not withdrawn the consent, among other conditions.

Which describes the typical underwriting attitude of a surety toward the principal?

1. The surety expects frequent losses
2. The surety ignores the principal's finances unless an exception clearly applies for the coverage that is in force according to the insurer's rules
3. The surety insures the obligee's solvency
4. The surety underwrites the principal's character, capacity, and capital expecting NO loss, similar to a credit decision ✓

Why: Surety underwriting evaluates the principal's character, capacity, and capital like a credit risk, anticipating no loss because the principal must indemnify the surety.

An employee files a claim, and the only question is whether to pay statutory benefits set by the state law. Which Part of the policy responds?

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

Why: Payment of the benefits required by the state WC statute is handled by Part One — Workers Compensation.

The principle of indemnity states that an insured should:

1. Profit from a covered loss
2. Receive replacement cost on every policy
3. Be restored to approximately the same financial condition that existed before the loss ✓
4. Always receive the full face amount regardless of loss for the coverage that is in force

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

Which of the following is included within the definition of an "insurance transaction" under RCW 48.01.060?

1. Only the physical delivery of the executed insurance policy to the insured
2. Solicitation, negotiations preliminary to execution, and the execution of the contract ✓
3. Nothing occurring before an application has been formally accepted by the insurer
4. Only matters that arise after a claim has been submitted to the insurer

Why: RCW 48.01.060 defines an insurance transaction to include solicitation, negotiations preliminary to execution, execution of the contract, matters subsequent to execution, and insuring.

For a medical malpractice insurance policy, RCW 48.18.290 requires written notice of cancellation to be delivered or mailed to the named insured at least:

1. 30 days before the effective date
2. 60 days before the effective date
3. 90 days before the effective date ✓
4. 120 days before the effective date

Why: RCW 48.18.290(1)(b) requires, for medical malpractice policies, that the insurer deliver or mail written notice of cancellation at least 90 days before the effective date, including the actual reason and significant risk factors.

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

1. Tail coverage only
2. Coverage for occurrences that took place before the policy's inception but on or after the retroactive date ✓
3. Coverage for claims made before the policy began unless an exception clearly applies for the coverage that is in force
4. Doubling the aggregate

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

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.

Under RCW 48.17.510, what is the maximum period for which the commissioner may issue a temporary insurance producer license without requiring an examination?

1. Ninety days from the date of issuance
2. Thirty days, unless extended by the sponsor
3. One year, renewable once for good cause
4. One hundred eighty days ✓

Why: RCW 48.17.510(1) authorizes the commissioner to issue a temporary insurance producer license for a period not to exceed one hundred eighty days without requiring an examination when necessary to service an insurance business.

Under RCW 48.15.060, insurance contracts properly procured as surplus line coverage from unauthorized insurers in accordance with the chapter are:

1. valid only until an authorized insurer offers replacement coverage
2. fully valid and enforceable as to all parties, like contracts of authorized insurers ✓
3. enforceable only by the surplus line broker for each policy period the coverage remains in force
4. subject to cancellation at any time by the commissioner

Why: RCW 48.15.060 provides that insurance contracts procured as surplus line coverage in accordance with the chapter are fully valid and enforceable as to all parties and are given recognition to the same effect as like contracts issued by authorized insurers.