Washington Property & Casualty Insurance License, Practice Exams

Under RCW 48.19.040, every insurer or rating organization must, before using them, file with the commissioner:

1. only the rates it intends to charge for personal automobile insurance
2. its classifications manual, manual of rules and rates, rating plans, and rating rules ✓
3. the names of all producers authorized to quote the rates
4. the loss experience of its competitors for each policy period the coverage remains in force

Why: RCW 48.19.040(1) requires every insurer or rating organization, before using, to file with the commissioner every classification manual, manual of rules and rates, rating plan, rating schedule, minimum rate, class rate, and rating rule, and every modification.

An insured with 50/100/25 split limits injures one person for $80,000. How much does the policy pay for that injured person?

1. $25,000
2. $80,000
3. $100,000
4. $50,000 ✓

Why: The per-person bodily injury limit is $50,000, so the most payable for one injured person is $50,000 regardless of the per-accident limit.

A building valued at $1,000,000 carries an 80% coinsurance clause. The insured carries $600,000 of coverage and suffers a $200,000 loss (before deductible). What does coinsurance pay?

1. $200,000
2. $120,000
3. $160,000
4. $150,000 ✓

Why: Required = 80% of $1,000,000 = $800,000. Penalty factor = $600,000/$800,000 = 0.75. Payment = 0.75 x $200,000 = $150,000.

A manufacturer being held liable for injury caused by a defective product, without the injured party needing to prove negligence, is an example of:

1. Comparative negligence
2. Strict liability ✓
3. Contributory negligence
4. Vicarious liability

Why: Strict liability in product cases holds the manufacturer responsible for defective products regardless of the level of care exercised.

All of the following are prohibited unfair practices under chapter 48.30 RCW EXCEPT:

1. defaming an authorized insurer with false statements according to the schedule adopted by rule
2. guaranteeing the payment of future policy dividends as a condition of doing business in this state
3. charging a reduced fee for extra services beyond customary solicitation, as permitted by the commissioner ✓
4. twisting an insured into surrendering a policy by misleading comparisons after notice and an opportunity for a hearing

Why: RCW 48.30.157 expressly permits the commissioner to allow a producer to enter reasonable arrangements to charge a reduced fee for services beyond those customarily provided. Defamation (48.30.080), guaranteeing dividends (48.30.100), and twisting (48.30.180) are prohibited.

When the commissioner conducts an examination, a person being examined must:

1. produce and make freely accessible the accounts, records, and documents relating to the examination ✓
2. retain independent counsel to certify the accuracy of all records first
3. submit the records only after a subpoena has been issued by a court whenever the circumstances reasonably require it
4. provide copies exclusively to the National Association of Insurance Commissioners

Why: RCW 48.03.030 requires every person being examined, and its officers and representatives, to produce and make freely accessible the accounts, records, documents, and files relating to the examination and to otherwise facilitate it.

The characteristic that requires certain acts, such as paying premium and providing proof of loss, before the insurer must pay a claim is that insurance is a contract of:

1. Aleatory nature
2. Conditional nature ✓
3. Indemnity
4. Adhesion

Why: Insurance is a conditional contract because both parties must meet certain conditions before the contract can be enforced.

Under RCW 48.18.480, what discrimination is expressly NOT prohibited?

1. Charging higher private passenger auto premiums based only on the vehicle's garaging ZIP code
2. Charging higher auto premiums based on a driver's ZIP code alone
3. Fair discrimination by a life insurer between individuals having unequal expectation of life ✓
4. Varying homeowners rates based solely on the insured's marital status

Why: RCW 48.18.480 provides that the prohibition does not bar fair discrimination by a life insurer as between individuals having unequal expectation of life.

A producer wants to cold-call prospects by phone to sell insurance. Before calling, the producer should:

1. Send a flood notice
2. Call only after 10 p.m unless an exception clearly applies for the coverage that is in force
3. Ignore any lists
4. Scrub the call list against the National Do-Not-Call Registry and honor registered numbers ✓

Why: Telemarketers must check the Do-Not-Call Registry and avoid calling registered numbers absent an applicable exception, to comply with federal telemarketing rules.

Under RCW 48.18.230, if the premium used in a binder differs from the actual policy premium by less than ten dollars, the insurer:

1. must issue a corrected binder to the insured whenever the circumstances reasonably require it
2. is not required to notify the insured and may use the actual policy premium ✓
3. must refund the difference within thirty days
4. must cancel the binder and rewrite the coverage

Why: RCW 48.18.230(3) provides that where the premium used in the binder differs from the actual policy premium by less than ten dollars, the insurer is not required to notify the insured and may use the actual policy premium.

A reciprocal insurer is best described as:

1. An insurer owned by the federal government unless an exception clearly applies for the coverage that is in force
2. A corporation owned by stockholders
3. An unincorporated group of subscribers who insure one another, managed by an attorney-in-fact ✓
4. A foreign insurer writing surplus lines

Why: A reciprocal or interinsurance exchange is an unincorporated association of subscribers who exchange insurance among themselves, administered by an attorney-in-fact.

Transportation expenses coverage under PAP Part D typically reimburses the insured for:

1. Rental/temporary transportation costs after a covered loss, subject to a daily and total maximum ✓
2. Lost wages while the car is repaired
3. Towing on every breakdown
4. The full value of a rental car indefinitely unless an exception clearly applies for the coverage that is in force

Why: Transportation expenses coverage pays temporary transportation (e.g., rental) costs following a covered Part D loss, subject to per-day and per-occurrence limits.

The Peak Season endorsement is most useful for an insured whose:

1. Personal property (inventory) increases significantly during certain periods ✓
2. Auto fleet expands
3. Liability exposure decreases in winter unless an exception clearly applies for the coverage that is in force
4. Building value never changes

Why: Peak Season provides additional limits on business personal property during seasonal periods of higher inventory, such as a retailer before the holidays.

Under RCW 48.18.300, after receiving an insured's cancellation notice for a homeowners, dwelling fire, or private passenger auto policy, within what time must the insurer pay any unearned premium?

1. No later than forty-five days after receipt of the notice of cancellation
2. No later than thirty days after receipt of the notice of cancellation ✓
3. No later than ten business days after receipt of the notice
4. No later than sixty days after the policy's next anniversary

Why: RCW 48.18.300(2) requires the insurer to pay any unearned premium as soon as possible and no later than thirty days after receipt of the policyholder's cancellation notice for homeowners, dwelling fire, and private passenger auto insurance.

Under RCW 48.22.005, PIP medical and hospital benefits are payable for reasonable and necessary expenses incurred within:

1. one year from the date of the accident
2. two years from the date of the accident
3. three years from the date of the accident ✓
4. five years from the date of the accident

Why: RCW 48.22.005(7) defines medical and hospital benefits as payments for reasonable and necessary expenses incurred within three years from the date of the automobile accident.

A recreational vehicle (motorhome) used for travel is most appropriately insured under:

1. A homeowners policy unless an exception clearly applies for the coverage that is in force
2. A crop-hail policy
3. A surety bond
4. A specialized RV/motorhome policy combining auto and dwelling-type coverages ✓

Why: RVs require specialized policies that blend automobile coverages (liability, physical damage) with personal-property and living-quarters coverages.

Under RCW 48.30.100, no insurer, producer, or other person may:

1. issue a binder without stating the identity of the insurer unless the commissioner directs otherwise
2. guarantee or agree to the payment of future dividends or refunds in any specific or approximate amount ✓
3. advertise the existence of the guaranty association whenever the circumstances reasonably require it
4. collect premium before delivering the policy as a condition of doing business in this state

Why: RCW 48.30.100 provides that no insurer, producer, title insurance agent, or other person may guarantee or agree to the payment of future dividends or future refunds of unused premiums or savings in any specific or approximate amounts or percentages.

A producer who handles premium funds belonging to the insurer and the insured holds those funds in a:

1. Fiduciary capacity ✓
2. Personal capacity
3. Reciprocal capacity
4. Speculative capacity

Why: A producer holding others' money, such as premiums, acts in a fiduciary capacity and must handle those funds with trust and care.

Under RCW 48.19.010, the rate-regulation provisions of chapter 48.19 RCW do NOT apply to:

1. standard fire policies
2. life insurance ✓
3. commercial casualty insurance
4. private passenger automobile insurance

Why: RCW 48.19.010(1) excludes life insurance, disability insurance, certain reinsurance, aircraft insurance, ocean marine, and title insurance from the scope of the rate chapter.

Under the Dwelling Policy, Coverage A applies to which of the following?

1. Detached garages and sheds
2. Household personal property
3. The dwelling itself ✓
4. Loss of rental income

Why: Coverage A is the Dwelling coverage, insuring the described residence structure. Other structures are Coverage B, personal property is Coverage C.

Medical Payments to Others (Coverage F) typically does NOT pay for injuries to:

1. The named insured or a resident relative ✓
2. A delivery person hurt on the walkway
3. A guest tripping on the stairs
4. A child injured at a party

Why: Coverage F excludes the named insured and regular residents of the household; it is intended for injuries to third parties, not the insureds themselves.

Compared with the standard CGL, professional liability and D&O policies most often pay defense costs:

1. Within the limit of insurance, eroding the available limit ✓
2. Only after the SIR is doubled in that particular circumstance
3. In addition to the limit
4. Never

Why: Many specialty/management liability policies use defense-within-limits, so defense costs reduce the amount available for settlements.

The Products-Completed Operations Aggregate is separate from the General Aggregate primarily because:

1. Products and completed operations exposures can produce numerous severe claims, so they are given a distinct limit ✓
2. They share the medical expense limit unless an exception clearly applies for the coverage that is in force according to the insurer's rules
3. Products claims are minor
4. They are never covered

Why: A separate aggregate protects products/completed operations capacity from being eroded by premises/operations claims and vice versa.

Under the law of agency, the acts of the producer (agent) are generally considered to be the acts of the:

1. Reinsurer
2. Insured
3. State insurance department
4. Insurer ✓

Why: An agent represents the insurer; under the law of agency, the agent's actions within authority are treated as those of the insurer (principal).

Theft coverage under the standard Dwelling Policy is:

1. Provided only for liability claims
2. Automatically included in all forms
3. Only available on DP-1
4. Not included unless added by endorsement ✓

Why: The Dwelling Policy does not include theft coverage by default; it must be added by a theft coverage endorsement.

For homeowners', dwelling fire, and private passenger auto policies, RCW 48.18.290 requires the unearned pro rata premium to be paid to the insured no later than:

1. 15 days after the date of notice of cancellation
2. 30 days after the date of notice of cancellation
3. 45 days after the date of notice of cancellation ✓
4. 60 days after the date of notice of cancellation

Why: RCW 48.18.290(4) requires the unearned portion of premium, computed pro rata, to be paid or mailed to the insured as soon as possible and no later than 45 days after the date of notice of cancellation for homeowners', dwelling fire, and private passenger auto policies.

Under RCW 48.19.043, after a commercial property casualty rate has been filed, the commissioner may disapprove it if, within thirty days, the commissioner finds it does not meet the chapter's requirements. The commissioner may extend the review period by:

1. another ten days
2. another fifteen days ✓
3. another thirty days
4. another sixty days

Why: RCW 48.19.043(3) allows the commissioner to disapprove a commercial property casualty rate filing within thirty days, and to extend the time for review by another fifteen days by giving notice before the original period expires.