CPCU 530 EXAM 290 QUESTIONS & CORRECT
ANSWERS LATEST 2025
Diego and Georgia meet in a bar and enjoy cocktails together. Diego has many
more drinks than Georgia and is stumbling and slurring his speech. Sensing an
opportunity, Georgia proposes that Diego sell her his expensive Swiss wristwatch
for a mere $100 and Diego agrees. The next day, Georgia appears at Diego's office
with $100 asking for the wristwatch. Which one of the following arguments is
best for Diego to avoid the contract?
Diego lacked capacity to enter into a contract because he was inebriated.
3 multiple choice options
Fernanda runs a warehouse in New Jersey. The business is successful because it
has major highway access and is close to major consumer markets. Manufacturers
from around the country store goods bound for Northeastern customers at
Fernanda's warehouse. Given the large amount of goods stored by others in her
warehouse, Fernanda is concerned about her exposure if something happens to
the warehouse or the goods, so she seeks advice from a lawyer about how to limit
her exposure to loss. Which one of the following best describes Fernanda's
options in addressing this liability?
UCC Article 7 permits Fernanda to limit her liability through terms in the
warehouse receipt.
3 multiple choice options
Maria owns a commercial building and places insurance with Bastion Insurance.
Because the annual premium is high, and cash is tight, Maria decides to enter into
a premium finance agreement with Finance Co. ("Finance"). Under the premium
finance agreement, Finance pays Bastion the full annual premium and Maria pays
Finance a monthly amount for the premium, a fee and interest. At the midpoint of
the policy year, which one of the following best describes Maria's premium
finance agreement with Finance?
,A bilateral contract
3 multiple choice options
Erin has worked full-time for the last five years as a librarian for a law firm with
100 attorneys located in a large downtown office building. Erin and her husband
are happy to announce that Erin is expecting a baby in six months. She inquires
with the law firm's human resources department about her rights for parental
leave under the Family Medical Leave Act (FMLA). Which one of the following
best describes what the law firm must offer Erin under the FMLA?
The law firm must offer Erin up to 12 weeks of unpaid leave in a 12-month period,
with no loss of accrued employment benefits.
3 multiple choice options
In February, Ann contract with Mahdi to deliver clean garden top soil for $30 a
cubic yard to Mahdi's farm in Pennsylvania. No time for delivery is stated in their
contract but the parties understand that Mahdi wants to use the soil for this
year's planting season. In March, Ann delivers garden soil that is contaminated
and Mahdi refuses to pay because he believes Ann breached their agreement.
Which one of the following best describes how a court would rule on Mahdi's
claim that Ann breached their agreement?
The court would find for Mahdi because Ann's goods are non-conforming.
3 multiple choice options
Daniel offers a ride to Lily, a ten-year-old, and takes her to his house where he
locks her in his cellar and demands money from Lily's parents to secure her
return. The parents agree to pay and Lily is returned, but Daniel never receives
the money. He sues Lily's parents for breach of contract. Which one of the
following explains why Daniel's contract with Lily's parents is not legally binding?
It lacks a legal purpose.
3 multiple choice options
Vincente applied for business insurance with Hallbinger Insurance. Hallbinger's
application asked if Vincente had any prior "serious accidents or losses." Vincente
had a small water loss five years ago, but believing it wasn't serious, he answered
,"no." Hallbinger issued the policy. If Hallbinger subsequently discovers Vincente's
prior water loss, Hallbinger should
Do nothing because Vincente's statement was not a material misrepresentation.
3 multiple choice options
Mustafa met with his insurance agent Lucy to obtain a business owners policy,
Lucy helped Mustafa complete an application and sent the signed application
along with Mustafa's premium check to Delmond Insurance Co. Delmond never
responded to Mustafa. Ninety days later, Mustafa had a loss to his business that
would have been covered by the Delmond policy. If Mustafa files suit against
Delmond to receive compensation for his loss,
Mustafa will win, if Delmond's delay on his application was unreasonable.
3 multiple choice options
Larissa has a property policy covering her auto repair shop. The shop is totally
destroyed by a fire. The process of determining whether and to what extent this
specific loss is covered under Larissa's property policy is known as
Policy analysis.
3 multiple choice options
Georgia applied for a homeowner policy with Insurance Company (IC). IC's
application asked if Georgia's home had an alarm system and Georgia answered
that it did. IC issued the policy to Georgia. Two months later, burglars entered
Georgia's house and stole several personal property items. At that time, IC
discovered that Georgia's home did not have an alarm system. If Georgia's
application statement about the alarm were determined to be a warranty
IC could avoid Georgia's policy, whether or not the statement was material.
3 multiple choice options
Which one of the following statements correctly states the effect of consideration
on whether waivers are binding underinsurance law?
Some waivers are binding without consideration
3 multiple choice options
, Oliver contacted his insurance agent Maria about homeowners insurance. Oliver
said: "I want homeowners insurance." Maria responded: "You got it." Which one
of the following is the best statement of why no agreement to provide insurance
was likely reached by the parties?
The agreement was not sufficiently specific on key terms.
3 multiple choice options
Cian purchased a house with money loaned to him by Keithly Mortgage Co.
(KMC). Cian obtained a homeowner policy from Melfor Insurance--containing a
standard mortgage clause--which covered the house for damage due to
windstorm. A windstorm destroyed Cian's house three years later. Which one of
the following correctly states who is entitled to the proceeds payable under Cian's
homeowners policy?
KMC, as its interests appear.
3 multiple choice options
An insurance contract is often said to be a contract of adhesion. Which one of the
following is the basis of this characteristic of insurance contracts?
The insurer writes the insurance policy so the insured must "take or leave" the
policy.
3 multiple choice options
Ida desperately needed to purchase homeowners insurance on her newly
purchased dwelling. When she talked with Grace, an agent with Jancy's Insurance
Company, Ida lied on the application when she denied having previous total fire
losses. She also told Grace she had not had any previous total fire losses. Ida had
recently been declined by three other companies for having previous total fire
losses that were caused by physical hazards under Ida's control. The type of
behavior that Ida has exhibited is called
Concealment.
3 multiple choice options
Which one of the following is an element that must be present for a reservation
of rights notice to be effective?
ANSWERS LATEST 2025
Diego and Georgia meet in a bar and enjoy cocktails together. Diego has many
more drinks than Georgia and is stumbling and slurring his speech. Sensing an
opportunity, Georgia proposes that Diego sell her his expensive Swiss wristwatch
for a mere $100 and Diego agrees. The next day, Georgia appears at Diego's office
with $100 asking for the wristwatch. Which one of the following arguments is
best for Diego to avoid the contract?
Diego lacked capacity to enter into a contract because he was inebriated.
3 multiple choice options
Fernanda runs a warehouse in New Jersey. The business is successful because it
has major highway access and is close to major consumer markets. Manufacturers
from around the country store goods bound for Northeastern customers at
Fernanda's warehouse. Given the large amount of goods stored by others in her
warehouse, Fernanda is concerned about her exposure if something happens to
the warehouse or the goods, so she seeks advice from a lawyer about how to limit
her exposure to loss. Which one of the following best describes Fernanda's
options in addressing this liability?
UCC Article 7 permits Fernanda to limit her liability through terms in the
warehouse receipt.
3 multiple choice options
Maria owns a commercial building and places insurance with Bastion Insurance.
Because the annual premium is high, and cash is tight, Maria decides to enter into
a premium finance agreement with Finance Co. ("Finance"). Under the premium
finance agreement, Finance pays Bastion the full annual premium and Maria pays
Finance a monthly amount for the premium, a fee and interest. At the midpoint of
the policy year, which one of the following best describes Maria's premium
finance agreement with Finance?
,A bilateral contract
3 multiple choice options
Erin has worked full-time for the last five years as a librarian for a law firm with
100 attorneys located in a large downtown office building. Erin and her husband
are happy to announce that Erin is expecting a baby in six months. She inquires
with the law firm's human resources department about her rights for parental
leave under the Family Medical Leave Act (FMLA). Which one of the following
best describes what the law firm must offer Erin under the FMLA?
The law firm must offer Erin up to 12 weeks of unpaid leave in a 12-month period,
with no loss of accrued employment benefits.
3 multiple choice options
In February, Ann contract with Mahdi to deliver clean garden top soil for $30 a
cubic yard to Mahdi's farm in Pennsylvania. No time for delivery is stated in their
contract but the parties understand that Mahdi wants to use the soil for this
year's planting season. In March, Ann delivers garden soil that is contaminated
and Mahdi refuses to pay because he believes Ann breached their agreement.
Which one of the following best describes how a court would rule on Mahdi's
claim that Ann breached their agreement?
The court would find for Mahdi because Ann's goods are non-conforming.
3 multiple choice options
Daniel offers a ride to Lily, a ten-year-old, and takes her to his house where he
locks her in his cellar and demands money from Lily's parents to secure her
return. The parents agree to pay and Lily is returned, but Daniel never receives
the money. He sues Lily's parents for breach of contract. Which one of the
following explains why Daniel's contract with Lily's parents is not legally binding?
It lacks a legal purpose.
3 multiple choice options
Vincente applied for business insurance with Hallbinger Insurance. Hallbinger's
application asked if Vincente had any prior "serious accidents or losses." Vincente
had a small water loss five years ago, but believing it wasn't serious, he answered
,"no." Hallbinger issued the policy. If Hallbinger subsequently discovers Vincente's
prior water loss, Hallbinger should
Do nothing because Vincente's statement was not a material misrepresentation.
3 multiple choice options
Mustafa met with his insurance agent Lucy to obtain a business owners policy,
Lucy helped Mustafa complete an application and sent the signed application
along with Mustafa's premium check to Delmond Insurance Co. Delmond never
responded to Mustafa. Ninety days later, Mustafa had a loss to his business that
would have been covered by the Delmond policy. If Mustafa files suit against
Delmond to receive compensation for his loss,
Mustafa will win, if Delmond's delay on his application was unreasonable.
3 multiple choice options
Larissa has a property policy covering her auto repair shop. The shop is totally
destroyed by a fire. The process of determining whether and to what extent this
specific loss is covered under Larissa's property policy is known as
Policy analysis.
3 multiple choice options
Georgia applied for a homeowner policy with Insurance Company (IC). IC's
application asked if Georgia's home had an alarm system and Georgia answered
that it did. IC issued the policy to Georgia. Two months later, burglars entered
Georgia's house and stole several personal property items. At that time, IC
discovered that Georgia's home did not have an alarm system. If Georgia's
application statement about the alarm were determined to be a warranty
IC could avoid Georgia's policy, whether or not the statement was material.
3 multiple choice options
Which one of the following statements correctly states the effect of consideration
on whether waivers are binding underinsurance law?
Some waivers are binding without consideration
3 multiple choice options
, Oliver contacted his insurance agent Maria about homeowners insurance. Oliver
said: "I want homeowners insurance." Maria responded: "You got it." Which one
of the following is the best statement of why no agreement to provide insurance
was likely reached by the parties?
The agreement was not sufficiently specific on key terms.
3 multiple choice options
Cian purchased a house with money loaned to him by Keithly Mortgage Co.
(KMC). Cian obtained a homeowner policy from Melfor Insurance--containing a
standard mortgage clause--which covered the house for damage due to
windstorm. A windstorm destroyed Cian's house three years later. Which one of
the following correctly states who is entitled to the proceeds payable under Cian's
homeowners policy?
KMC, as its interests appear.
3 multiple choice options
An insurance contract is often said to be a contract of adhesion. Which one of the
following is the basis of this characteristic of insurance contracts?
The insurer writes the insurance policy so the insured must "take or leave" the
policy.
3 multiple choice options
Ida desperately needed to purchase homeowners insurance on her newly
purchased dwelling. When she talked with Grace, an agent with Jancy's Insurance
Company, Ida lied on the application when she denied having previous total fire
losses. She also told Grace she had not had any previous total fire losses. Ida had
recently been declined by three other companies for having previous total fire
losses that were caused by physical hazards under Ida's control. The type of
behavior that Ida has exhibited is called
Concealment.
3 multiple choice options
Which one of the following is an element that must be present for a reservation
of rights notice to be effective?
