AIC 31 Practice Exam 2

1. Which one of the following represents a method commonly used by adjusters and accountants to determine the value owed under a Business Income Coverage (BIC) form?

2. Fire investigation reports should accomplish all of the following, EXCEPT:

3. Which one of the following is an indicator of fraud associated with the claims process?

4. Which one of the following statements is correct regarding cold smoke?

5. When real property is owned by two joint tenants, and one of the tenants dies, the surviving tenant will:

6. A restoration specialist is responsible for:

7. When a Builders Risk policy is written on a reporting basis, which one of the following is the most important for a claims representative to verify?

8. In order for an insurer to void an insurance policy on the basis of concealment, the insurer must prove that the concealment was:

9. Under the water damage table from “Mold Prevention in Mold Remediation in Schools and Commercial Buildings,” which one of the following should potentially be frozen in a frost-free freezer in order to prevent mold growth within 24-48 hours after suffering clean water damage?

10. Which one of the following represents the proper way for an insurer to demand an examination under oath?

11. Which one of the following statements is correct regarding the right of subrogation?

12. Which one of the following statements is correct regarding the peril of lightning?

13. In order to begin a theft claim investigation, an adjuster first:

14. Which one of the following professionals plays a specific role in an arson investigation by preserving chemical residue from a fire scene?

15. The first step in remediating any mold damage is to:

16. Bob’s Bakery experiences a loss and must partially shut down its operation for a few weeks. Their normal net income for that period would have been $7,000, but during the shutdown the actual net income was $3,000. In addition, they incurred $2,000 of extra expenses. What is the settlement under their Business Income (and Extra Expense) policy?

17. ABC Insurance Company has concluded an investigation of a house fire and has decided to deny the claim due to arson. To avoid defaming the insured, ABC Insurance Company should issue the denial through:

18. Merchandise from Ferdinand’s clothing store is damaged. The agreed upon value of the merchandise is $100,000. The claims representative hires a salvor to sell the damaged goods, and the salvor is able to sell the clothing for $45,000. Assuming the salvor charges fee of $2,000, what is the net cost to the insurer for the claim?

19. A clause in an ISO Commercial Property Conditions reads:

“If any person or organization to or for whom we make payments under this Coverage Part has rights to recover damages from another, those rights are transferred to us to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing after loss to impair them.”

These rights are granted to the insurer under the policy’s:

20. Gertrude submits a claim for loss due to a windstorm. Strong winds blew rain through an open window, and the drapes and carpet in her living room are severely stained. Allen, the claims representative, determines that the property needs to be replaced and tells Gertrude to replace the property and send him a copy of the invoices. Gertrude complies with Allen’s request. Later, Allen, reviews the policy and discovers that the property is not covered. Allen should:

21. Reasons for deductibles include:

22. If a homeowner decides to permanently move following damage to a residence premises, the Additional Living Expense coverage from Coverage D - Loss of use applies for:

23. Which one of the following represents the best way for a large contractor that has many pieces of equipment which might be owned, rented, or borrowed to insure their equipment?

24. Which one of the following represents an individual or institution that lends money to a person so they can purchase a home?

25. If an insurer’s ability to fully investigate a claim is hindered by the insured’s late notice of the loss, it is said that the insurer’s rights have been:

26. Horace, a claims adjuster, is assigned a theft claim. Which one of the following should be included in his preliminary report provided to the insurer?

27. Miguel is claims rep assigned to a case involving Additional Living Expenses and Fair Rental Value. Which one of the following methods should he use to determine the Fair Rental Value?

28. Stacy books a cruise on Platinum Diamond Cruise Line and brings most of her expensive dresses and jewelry. What type of insurable interest does Platinum Diamond Cruise Line have in this situation?

29. An insured suffers a loss of personal property due to water damage inside their house. The insured requests an emergency advance payment to buy clothing and some other household items. In this situation, the claims representative should:

30. MegaCorp had net income of $800,000 for 20x1, earned equally throughout the year. In 20x2, MegaCorp experienced a total shutdown of their operations for three months. During that time, they had continuing expenses of $300,000, including $50,000 of payroll expenses. How much will be paid by MegaCorp’s Business Income (and Extra Expense) policy?

31. Various incidental expenses that may result from physical loss or from a delay in completion of a construction project are known as:

32. When making decisions about coverage for a claim, the claims representative needs to do all of the following, EXCEPT:

33. Which one of the following items would be included on an income statement?

34. Which one of the following professionals plays a specific role in an arson investigation by examining an insured’s financial records to identify trends in the insured’s business?

35. The first step after a claims representative is assigned a claim should be to:

36. Which one of the following represents the role of a public adjuster?

37. Which one of the following statements is correct regarding the burden of proof in establishing whether a cause of loss is covered?

38. A tree limb in Elliott’s yard falls and smashes a hole in the roof of his house. Elliott documents the damage and repairs the hole in his roof the following day. One week later, he notifies his insurer of the loss. Will Elliott’s insurer cover the loss?

39. Leticia, a claims representative for Three Rivers Insurance, has just concluded a thorough investigation of an insured’s claim. Her conclusion that coverage does not apply has been reviewed and approved by management. Regardless of the state in which the claimant resides, all states require that coverage denials:

40. Which one of the following statements is correct regarding coverage denials?

41. Which one of the following statements is correct regarding a proof of loss?

42. The contract of carriage between the carrier and the shipper is referred to as the:

43. Determining the replacement cost for merchandise is affected by all of the following, EXCEPT:

44. Which one of the following statements is correct regarding Fair Rental Value in Coverage D - Loss of Use?

45. Joe is a 50% owner of a parcel of land that was titled as Joint Tenants With Rights of Survivorship between Joe and his sister. Assuming Joe dies, what will happen to his 50% interest in the property?

46. Which one of the following coverage extensions to the Business Income (and Extra Expense) Coverage Form is payable in addition to the policy limit?

47. Which one of the following statements is correct regarding Business Income and Extra Expense exposures?

48. Which one of the following statements is correct regarding transportation loss exposures?

49. Which one of the following losses would be covered by a Motor Truck Cargo Liability policy?

50. Which one of the following represents a defense available to a common carrier?