CPCU 530 - Practice Exam ACTUAL
QUESTIONS AND CORRECT ANSWERS
Miguel seeks to insure his personal auto to comply with state regulations. He
contacts an insurance agent who provides Miguel with a personal auto policy
with Atlas Motorist Insurance Company ("Atlas"). Which one of the following
best describes the contractual relationship between Miguel and Atlas? -
CORRECT ANSWERS An express contract
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? - CORRECT ANSWERS
A bilateral contract
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? - CORRECT ANSWERS It lacks a legal purpose.
Tool Corporation has operated successfully for decades, but in recent years stiff
price competition from overseas suppliers and a lack of skilled labor at
affordable prices have made the company unprofitable. Tool Company has
incurred substantial debt to keep the operation running and save jobs, but they
can no longer access bank financing. Tool Company believes that it can return
to profitability if it reorganizes. Under which chapter of the bankruptcy code
should Tool Corporation file? - CORRECT ANSWERS Chapter 11
Located in a small midwestern town, Bin's Deli hires youthful workers and pays
hourly wages. None of their employees are members of a protected class. Which
,one of the following legal concepts permits Bin's Deli to release any of its
employees at any time for any reason, or no reason? - CORRECT ANSWERS
Employment at will
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 seek 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? - CORRECT ANSWERS
UCC Article 7 permits Fernanda to limit her liability through terms in the
warehouse receipt.
In February, Ann contracts 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? - CORRECT ANSWERS The
court would find for Mahdi because Ann's goods are non-conforming.
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? - CORRECT ANSWERS
Diego lacked capacity to enter into a contract because he was inebriated.
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? -
CORRECT ANSWERS 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.
Tile Roofing is a contractor specializing in roof installation for homes and
commercial accounts. Recently several Tile Roofing workers have fallen and
suffered significant injuries because the workers do not have any safety
harnesses preventing falls. Under which one of the following employee welfare
laws would Tile Roofing potentially be subject to civil or criminal penalties? -
CORRECT ANSWERS Occupational Safety and Health Act
Mustafa met with his insurance agent Lucy to obtain a businessowners 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, - CORRECT ANSWERS
Mustafa will win, if Delmond's s delay on his application was unreasonable.
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 -
CORRECT ANSWERS Policy analysis.
Which one of the following statements distinguishes estoppel from waiver? -
CORRECT ANSWERS Waiver is contractual in nature and rests upon
agreement between parties.
With a contract of indemnity, the insurer agrees, in the event of a covered loss,
to pay - CORRECT ANSWERS An amount directly related to the
amount of loss.
, Which one of the following statements is true regarding warranties? -
CORRECT ANSWERS Warranties may be either material or immaterial
and are part of the final contract.
If an insurance producer tells an insured that the insured's policy covers
something that it does not, the producer might be liable - CORRECT
ANSWERS For misrepresentation.
Cintriell Insurance issued a commercial property insurance policy to Oscar.
Cintriell's insurance application asked applicants to rate the condition of their
buildings and Oscar stated that his building was in "good" condition. The
Cintriell application did not explicitly label the insured's building rating as a
warranty and the application did not state that it is considered part of the
insurance policy. If a dispute arose, a court would most likely view Oscar's
statement about the condition of his building as a - CORRECT ANSWERS
Representation, because it is not clear that the parties intended it to be a
warranty and the statement was not incorporated into the policy.
Magnus, an agent for Insurance Company, received a call from Carla about
orally binding coverage on her home at closing which was today. To be effective
an agreement to insure must have, whether oral or written, which one of the
following components? - CORRECT ANSWERS The object or premises
if any to be insured
Which one of the following reinforces the principle of indemnity? - CORRECT
ANSWERS Subrogation
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
QUESTIONS AND CORRECT ANSWERS
Miguel seeks to insure his personal auto to comply with state regulations. He
contacts an insurance agent who provides Miguel with a personal auto policy
with Atlas Motorist Insurance Company ("Atlas"). Which one of the following
best describes the contractual relationship between Miguel and Atlas? -
CORRECT ANSWERS An express contract
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? - CORRECT ANSWERS
A bilateral contract
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? - CORRECT ANSWERS It lacks a legal purpose.
Tool Corporation has operated successfully for decades, but in recent years stiff
price competition from overseas suppliers and a lack of skilled labor at
affordable prices have made the company unprofitable. Tool Company has
incurred substantial debt to keep the operation running and save jobs, but they
can no longer access bank financing. Tool Company believes that it can return
to profitability if it reorganizes. Under which chapter of the bankruptcy code
should Tool Corporation file? - CORRECT ANSWERS Chapter 11
Located in a small midwestern town, Bin's Deli hires youthful workers and pays
hourly wages. None of their employees are members of a protected class. Which
,one of the following legal concepts permits Bin's Deli to release any of its
employees at any time for any reason, or no reason? - CORRECT ANSWERS
Employment at will
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 seek 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? - CORRECT ANSWERS
UCC Article 7 permits Fernanda to limit her liability through terms in the
warehouse receipt.
In February, Ann contracts 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? - CORRECT ANSWERS The
court would find for Mahdi because Ann's goods are non-conforming.
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? - CORRECT ANSWERS
Diego lacked capacity to enter into a contract because he was inebriated.
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? -
CORRECT ANSWERS 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.
Tile Roofing is a contractor specializing in roof installation for homes and
commercial accounts. Recently several Tile Roofing workers have fallen and
suffered significant injuries because the workers do not have any safety
harnesses preventing falls. Under which one of the following employee welfare
laws would Tile Roofing potentially be subject to civil or criminal penalties? -
CORRECT ANSWERS Occupational Safety and Health Act
Mustafa met with his insurance agent Lucy to obtain a businessowners 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, - CORRECT ANSWERS
Mustafa will win, if Delmond's s delay on his application was unreasonable.
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 -
CORRECT ANSWERS Policy analysis.
Which one of the following statements distinguishes estoppel from waiver? -
CORRECT ANSWERS Waiver is contractual in nature and rests upon
agreement between parties.
With a contract of indemnity, the insurer agrees, in the event of a covered loss,
to pay - CORRECT ANSWERS An amount directly related to the
amount of loss.
, Which one of the following statements is true regarding warranties? -
CORRECT ANSWERS Warranties may be either material or immaterial
and are part of the final contract.
If an insurance producer tells an insured that the insured's policy covers
something that it does not, the producer might be liable - CORRECT
ANSWERS For misrepresentation.
Cintriell Insurance issued a commercial property insurance policy to Oscar.
Cintriell's insurance application asked applicants to rate the condition of their
buildings and Oscar stated that his building was in "good" condition. The
Cintriell application did not explicitly label the insured's building rating as a
warranty and the application did not state that it is considered part of the
insurance policy. If a dispute arose, a court would most likely view Oscar's
statement about the condition of his building as a - CORRECT ANSWERS
Representation, because it is not clear that the parties intended it to be a
warranty and the statement was not incorporated into the policy.
Magnus, an agent for Insurance Company, received a call from Carla about
orally binding coverage on her home at closing which was today. To be effective
an agreement to insure must have, whether oral or written, which one of the
following components? - CORRECT ANSWERS The object or premises
if any to be insured
Which one of the following reinforces the principle of indemnity? - CORRECT
ANSWERS Subrogation
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
