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37 Solved Problems on Risk and Insurance - Exam 3 | FIN 381, Exams of Credit and Risk Management

Bryant UniversityCredit and Risk Management

Material Type: Exam; Class: Risk Management and Insurance; Subject: Finance; University: Bryant University; Term: Spring 2002;

Typology: Exams

Pre 2010

Uploaded on 08/18/2009

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Fin 381 Risk and Insurance NAME____________________________
Dr. G. Spring 2002 EXAM-2
1) A tort is defined as a
A) breach of contract that is punishable by a fine.
B) legal wrong for which the law allows a remedy in the form of money damages.
C) legal wrong against society that is punishable by fines.
D) legal wrong against society that is punishable by imprisonment or death.
Answer: B
Type: MC
2) All of the following are examples of intentional torts EXCEPT
A) negligence.
B) trespass.
C) slander.
D) assault.
Answer: A
Type: MC
3) A situation in which a person is held legally liable even though fault or negligence cannot be proven is an example of
A) general damages.
B) comparative negligence.
C) an intentional tort.
D) absolute liability.
Answer: D
Type: MC
4) The failure to exercise the degree of care required by law to protect others from harm is
A) premeditated liability.
B) vicarious liability.
C) punitive damages.
D) negligence.
Answer: D
Type: MC
5) All of the following are elements of a negligent act EXCEPT
A) the existence of a no-fault law.
B) the failure to perform a legal duty to use reasonable care.
C) damages or injuries to a claimant.
D) a proximate cause relationship between the negligent act and the infliction of damages.
Answer: A
Type: MC
6) Which of the following statements about the elements of a negligent act is (are) true?
I. The negligence of the tortfeasor may arise from a failure to act.
II. The damage that results must be in the form of property damage.
A) I only
B) II only
C) both I and II
D) neither I nor II
Answer: A
Type: MC
7) Jury awards for losses that can be determined or measured are
A) special damages.
B) general damages.
C) punitive damages.
D) comparative damages.
Answer: A
Type: MC
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Download 37 Solved Problems on Risk and Insurance - Exam 3 | FIN 381 and more Exams Credit and Risk Management in PDF only on Docsity!

Fin 381 Risk and Insurance NAME____________________________

Dr. G. Spring 2002 EXAM-

  1. A tort is defined as a A) breach of contract that is punishable by a fine. B) legal wrong for which the law allows a remedy in the form of money damages. C) legal wrong against society that is punishable by fines. D) legal wrong against society that is punishable by imprisonment or death. Answer: B Type: MC
  2. All of the following are examples of intentional torts EXCEPT A) negligence. B) trespass. C) slander. D) assault. Answer: A Type: MC
  3. A situation in which a person is held legally liable even though fault or negligence cannot be proven is an example of A) general damages. B) comparative negligence. C) an intentional tort. D) absolute liability. Answer: D Type: MC
  4. The failure to exercise the degree of care required by law to protect others from harm is A) premeditated liability. B) vicarious liability. C) punitive damages. D) negligence. Answer: D Type: MC
  5. All of the following are elements of a negligent act EXCEPT A) the existence of a no-fault law. B) the failure to perform a legal duty to use reasonable care. C) damages or injuries to a claimant. D) a proximate cause relationship between the negligent act and the infliction of damages. Answer: A Type: MC
  6. Which of the following statements about the elements of a negligent act is (are) true? I. The negligence of the tortfeasor may arise from a failure to act. II. The damage that results must be in the form of property damage. A) I only B) II only C) both I and II D) neither I nor II Answer: A Type: MC
  7. Jury awards for losses that can be determined or measured are A) special damages. B) general damages. C) punitive damages. D) comparative damages. Answer: A Type: MC
  1. Which of the following statements about monetary damages awarded by a jury is (are) true? I. The purpose of general damages is to provide benefits for medical expenses or loss of earnings. II. The purpose of punitive damages is to punish the tortfeasor so that others are deterred from committing the same wrongful act. A) I only B) II only C) both I and II D) neither I nor II Answer: B Type: MC
  2. Heather sued Robert for injuries received in an automobile accident. Based upon the facts presented, the jury concluded that Heather was 40 percent at fault in the accident and Robert was 60 percent at fault. Under the common law doctrine of contributory negligence, the jury should award Heather A) nothing. B) 40 percent of her actual damages. C) 60 percent of her actual damages. D) 100 percent of her actual damages. Answer: A Type: MC
  3. Which of the following statements about comparative negligence laws is (are) true? I. Under the pure rule, any negligence by the plaintiff automatically bars recovery for damages. II. Under the 50 percent rule, parties who are equally at fault are each allowed to recover damages. A) I only B) II only C) both I and II D) neither I nor II Answer: B Type: MC
  4. All of the following requirements must be met to satisfy the doctrine of res ipsa loquitur EXCEPT A) The injured party has not contributed to the accident in any way. B) The injured party must prove negligence on the part of the defendant. C) The event is one that normally does not occur in the absence of negligence. D) The defendant has exclusive control over the instrumentality causing the accident. Answer: B Type: MC
  5. Which of the following statements about the legal obligations of a property owner is (are) true? I. A property owner must inspect the premises for the benefit of an invitee and correct any unsafe conditions. II. A property owner has the right to set a trap designed to injure a trespasser. A) I only B) II only C) both I and II D) neither I nor II Answer: A Type: MC
  6. Which of the following persons is most likely to be classified as an invitee? A) a mail carrier B) a social guest C) a door-to-door salesperson D) a solicitor for a charitable organization Answer: A Type: MC
  7. The doctrine of respondeat superior applies to a(n) A) parent's liability for a negligent child. B) pet owner's liability for the pet. C) employer's liability for a negligent employee.

A) I only B) II only C) both I and II D) neither I nor II Answer: D Type: MC

  1. Unless changed by endorsement, what is the amount of coverage for personal property under the Homeowners 3 policy? A) 10 percent of the amount of insurance on the dwelling B) 30 percent of the amount of insurance on the dwelling C) 50 percent of the amount of insurance on the dwelling D) 80 percent of the amount of insurance on the dwelling Answer: C Type: MC
  2. Which of the following property is covered under the personal property coverage (Coverage C) of the Homeowners 3 policy? A) a pet iguana owned by the named insured's spouse B) a bicycle owned by a foster child living with the named insured C) stereo tapes located in the named insured's automobile D) a stamp collection insured under a separate floater Answer: B
  3. All of the following are covered perils under the personal property coverage (Coverage C) of the Homeowners 3 policy EXCEPT A) earthquake. B) theft. C) windstorm. D) explosion. Answer: A Type: MC
  4. Which of the following losses to a dwelling would be covered under the Homeowners 3 policy? A) smoke damage resulting from agricultural operations of a neighboring farmer B) the theft of property from any part of the premises rented to someone other than an insured C) damage caused by the weight of heavy snow D) damage to a floor caused by water backing up through a sewer pipe Answer: C Type: MC
  5. Which of the following statements about covered perils under the personal property coverage (Coverage C) of the Homeowners 3 policy is true? A) Theft losses to boats and watercraft are covered only if they occur at the insured's residence. B) Damage from an explosion is covered only if the explosion is the result of fire or lightning. C) Property damage from vehicles is covered only if it is caused by the insured. D) Smoke damage is covered only if it arises from agricultural or industrial operations. Answer: A
  6. David has a Homeowners 3 policy that provides $280,000 of insurance on his dwelling, which has a current replacement value of $400,000. Ignoring any deductible, how much will David collect if a kitchen with a replacement value of $40,000 but an actual cash value of $20,000 is destroyed in a fire? A) $20, B) $32, C) $35, D) $40, Answer: C Type: MC
  7. Which of the following statements about the appraisal clause in the Homeowners 3 policy is true? A) The appraiser for each party is selected by a judge. B) A binding settlement can be reached only if the umpire agrees with both appraisers. C) Both the insured and the insurer must agree that the appraisal process be used. D) Appraisal expenses are shared by the insured and the insurer. Answer: D Type: MC
  8. Under the Homeowners 3 policy, all of the following are options of the insurer for settling claims EXCEPT

A) paying the claim in cash. B) replacing the property. C) repairing the property. D) paying the claim with insurance company stock. Answer: D

  1. Mark’s home was destroyed by a tornado. The home was insured for $200,000 under a Homeowners 3 policy. If the actual damage plus the cost debris removal exceeds $200,000, how much additional coverage is available under Coverage A for debris removal? A) $5, B) $7, C) $10, D) $20, Answer: C Type: MC
  2. Darla purchased an unendorsed Homeowners 3 policy. While the policy was in force, a fire occurred that destroyed a living room set. The living room set cost $4,000 new, but was 25 percent depreciated when the loss occurred. Replacement furniture will cost $4,400. Assuming no deductible, how much will Darla receive from her insurer? A) $3, B) $3, C) $3, D) $4, Answer: B Type: MC
  3. Ted purchased a home. To fund the purchase, he borrowed $140,000 from ABC Mortgage Bank, pledging the home as collateral. Shortly after purchasing the home, Ted lost his job. He could not find another job and could not pay the monthly mortgage payment. Ted set fire to the home. The claims adjuster suspected arson, and an investigation proved that Ted intentionally caused the loss. Under the mortgage clause of the Homeowners 3 policy, how will this loss be settled? A) The insurer has no liability because the loss was intentional. B) The insurer will pay Ted the actual cash value of the loss as intentional loss is not excluded. C) The insurer will pay ABC the value of its insurable interest and pay Ted the value of his insurable interest. D) The insurer will pay ABC the value of its insurable interest and then attempt to recoup this loss payment from Ted. Answer: D
  4. All of the following persons are insureds for personal liability insurance under the homeowners policy EXCEPT A) children of the named insured under age 24 who are attending college full time and temporarily residing elsewhere. B) foster children under the age of 21 who reside with the named insured. C) nonresident employees of the named insured. D) the spouse of the named insured if a resident of the same household. Answer: C Type: MC
  5. Persons insured for personal liability coverage under the homeowners policy include which of the following? I. Relatives while visiting the named insured II. Overnight guests who are not relatives of the named insured A) I only B) II only C) both I and II D) neither I nor II Answer: D Type: MC
  6. All of the following statements about the personal liability coverage (Coverage E) of the homeowners policy are true EXCEPT A) Coverage is written on an occurrence basis. B) Coverage is provided for bodily injury liability. C) Coverage is provided for property damage liability. D) The minimum amount of coverage is $25,000. Answer: D Type: MC
  7. Which of the following statements about the insurer's obligation to provide a legal defense under the personal liability coverage (Coverage E) of the homeowners policy is (are) true? I. The insurer agrees to defend the insured only if the suit is not groundless, false, or fraudulent. II. The insurer's obligation to defend the insured ceases after the amount paid for damages from an occurrence equals the policy limit. A) I only
  1. Patrick and LuAnn Adams would like to save money on their homeowners premium. All of the following steps will help them to reduce their homeowners premium EXCEPT A) raising the deductible in the homeowners policy to a higher amount. B) shopping around a homeowners policy. C) installing burglar alarms, smoke detectors, and dead-bolt locks. D) insuring the value of the land beneath the house. Answer: D Type: MC
  2. Reggie just purchased a home. A friend told him to be sure to consider coverage for natural disasters. All of the following natural disasters are covered under an unendorsed Homeowners 3 policy EXCEPT A) tornadoes. B) floods. C) hurricanes. D) forest fires. Answer: B Type: MC
  3. All of the following losses are excluded from coverage under Section II of an unendorsed Homeowners 3 policy EXCEPT A) Phyllis, a medical technician, misread a lab test and the patient is suing her. B) A canoe Bert was piloting hit another canoe and the other canoe sank. Bert is being sued. C) Violet runs a for-profit daycare service out of her home. The parents of a child injured at Violet’s home are suing Violet. D) The homeowner’s young son was injured when he fell off a swing in the insured’s yard. Answer: B
  4. Which of the following losses would be covered under the medical payments coverage of the Homeowners 3 policy? A) injuries to another person arising out of the insured’s negligent operation of a car B) medical payments resulting from the transmission of a communicable disease C) injury to a resident employee at the insured home D) workers compensation medical payments Answer: C Type: MC
  5. Which of the following losses would be covered under the personal liability coverage of the Homeowners 3 policy? A) liability arising out of the manufacture and sale of illegal narcotics B) liability arising out of damage to a neighbor’s property that occurred over time C) liability arising out of damage to non-owned property in the care of the insured D) liability arising out of bodily injury to an insured Answer: B
  6. Which of the following statements about the payment of defense costs by the PAP is (are) true? I. They are paid in addition to the policy limits. II. They are payable even after the limit of liability is exhausted. A) I only B) II only C) both I and II D) neither I nor II Answer: A Type: MC
  7. All of the following are covered autos under the liability section of the PAP EXCEPT A) a nonowned van that is driven by the insured on a regular basis. B) a trailer owned by the named insured. C) a borrowed auto used by the insured as a substitute for a covered auto that has been stolen. D) a newly acquired auto that replaces a vehicle previously described in the policy. Answer: A Type: MC
  8. All of the following are insured persons under the liability coverage of the PAP EXCEPT A) a friend to whom the named insured loans a covered auto. B) the employer of the named insured for actions resulting from the named insured's use of a covered auto. C) the spouse of the named insured whether or not a member of the same household. D) a relative of the named insured if a member of the same household. Answer: C Type: MC
  1. Which of the following persons is (are) covered for liability insurance under the PAP? I. A family member who drives a covered auto. II. A family member who drives the auto of a friend. A) I only B) II only C) both I and II D) neither I nor II Answer: C Type: MC
  2. All of the following are covered as supplementary payments under the liability section of the PAP EXCEPT A) the cost of an appeal bond in a lawsuit. B) the cost of a bail bond for a traffic violation when no accident is involved. C) interest that accrues on a liability judgment covered by the policy. D) reasonable expenses incurred by the insured to testify at a trial involving a lawsuit covered by the policy. Answer: B Type: MC
  3. Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable? A) The insured injures a pedestrian while "trying out" a friend's new motorcycle. B) The insured backs into and damages the garage door of his rented house. C) A friend's furniture is damaged when the insured has an accident while helping the friend move. D) The insured damages a parked car while driving a dump truck for his or her employer. Answer: B Type: MC
  4. What is the purpose of the extended nonowned liability coverage endorsement to the PAP? A) to provide liability coverage for an insured's employer when an insured uses his or her auto for business purposes B) to provide liability coverage for an insured who occasionally operates a nonowned auto C) to provide liability coverage for anyone who loans a covered auto to another driver D) to provide liability coverage for an insured who operates a nonowned auto on a regular basis Answer: D Type: MC
  5. Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state that has a minimum financial responsibility limit of $50,000 for bodily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state? A) Larry's policy was suspended while he was in the neighboring state. B) Larry had only $25,000 of liability coverage. C) Larry's policy automatically provided $50,000 of liability coverage. D) Larry's policy complied with the neighboring state's financial responsibility limit only if Larry's policy provided no-fault benefits. Answer: C Type: MC
  6. John occasionally borrows the car of his friend, Sophie. Sophie has the car insured for $300,000 of liability insurance under a PAP. John is also a covered person under his mother's PAP which provides $500,000 of liability insurance. If John has an accident while using Sophie's car and is found to be legally liable in the amount of $400,000, how much will be paid by each policy? A) Sophie's policy will pay $150,000, and the mother's policy will pay $250,000. B) Sophie's policy will pay $300,000, and the mother's policy will pay nothing. C) Sophie's policy will pay $300,000, and the mother's policy will pay $100,000. D) The mother's policy will pay the entire judgment. Answer: C
  7. All of the following are covered persons under the medical payments coverage of the PAP EXCEPT A) a family member of the named insured if struck by an auto while crossing the street. B) a pedestrian struck by the named insured's auto. C) the named insured who is injured while occupying a friend's auto. D) a friend who is injured while occupying the named insured's auto. Answer: B Type: MC
  8. Tony has a PAP which provides medical payments coverage. Under which of the following circumstances would the injured person be eligible for benefits under Tony's policy? I. A friend is injured while Tony is driving a nonowned auto.
  1. Sarah purchased a Personal Auto Policy (PAP) with limits of 50/100/25. Sarah ran a stop sign and hit a van. The van sustained $15,000 in damages. The following bodily injuries were suffered by passengers in the van: Passenger #1, $15,000; Passenger #2, $60,000; and Passenger #3, $10,000. Sarah sustained $5,000 in medical expenses, and Sarah’s car sustained $10,000 in damages. How much will Sarah’s insurer pay under Part A: Liability Coverage? A) $90, B) $100, C) $115, D) $125, Answer: A Type: MC
  2. Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver who fled the scene. Patricia suffered severe whiplash, migraine headaches, and lower back pain resulting from the accident. She was unable to work. Which of the following coverages will cover Patricia’s lost work earnings? A) medical payments B) uninsured motorists C) underinsured motorists D) bodily injury liability Answer: B
  3. Angie was injured when her car was struck by a driver who ran a red light. The other driver carried only the minimum amount of liability coverage necessary to be considered financially responsible in the state. Angie’s injuries were $15,000 above the minimum per-person bodily injury limit. There is a coverage that can be added to the PAP that applies when a negligent driver carries at least the minimum amount of liability insurance required by the state, but the limits carried are less than the insured’s actual damages for bodily injury. This coverage is called A) medical payments coverage. B) underinsured motorists coverage. C) bodily injury liability coverage. D) uninsured motorists coverage. Answer: B .