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Arizona Property & Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full Arizona Property & Casualty course (Arizona Insurance Producer — Property and Casualty — Exam Prep). Answer all 20, then grade yourself — most state exams require 70% to pass. Explanations for every question are part of the full course.

1. A liability claim is settled. The injured party receives $50,000 for medical expenses, $20,000 for lost wages, and $30,000 for pain and suffering. The $30,000 for pain and suffering is commonly categorized as:
Consequential damagesSpecial (economic) damagesPunitive damagesGeneral (non-economic) damages
2. Under most states' laws, an insurance producer who receives a signed application but does not promptly submit it to the carrier, causing a loss to go uninsured, may be liable under which theory?
Strict liability only — under the older rule that was superseded by the post-2018 model amendmentsCriminal fraud automatically — only when the contract was issued before the regulatory amendment described aboveNegligence (errors and omissions); the producer owed a duty of reasonable care.No theory — producers have no duty to transmit applications — applies if the loss is partial; this question describes a constructive total loss
3. On an application, the insured omits mentioning that the garage contains flammable solvents stored for a side business. The insurer does not ask the question. A later fire destroys the home. Which defense is the insurer most likely to rely on, and what must it prove?
Misrepresentation — the insurer must prove the insured affirmatively stated something false, consistent with the model regulation but inapplicable to this scenarioBreach of warranty — any undisclosed fact voids the policy — applicable to commercial scenarios only, not the personal-lines contextFraud — the insurer must prove the insured intentionally burned the home — required under a separate compliance provision that doesn't reach this fact patternConcealment — the insurer must prove the insured intentionally withheld a material fact that it had a duty to disclose.
4. Under the CGL, which of the following is CORRECTLY described as an 'occurrence'?
Any claim made against the insured during the policy period, regardless of when the underlying injury or property damage actually took placeA specific peril named in the declarations and listed among the covered causes of loss on the commercial property coverage part of the policyAn accident, including continuous or repeated exposure to substantially the same general harmful conditions, not expected or intended by the insuredA single deliberate act of battery by the insured, provided the insured did not intend the specific bodily injury that resulted from the contact
5. 'Computer fraud' coverage on a crime policy typically covers:
Loss of money/securities/other property resulting DIRECTLY from the use of a computer to fraudulently transfer property from inside the premises to a person or place outside the premises.Any loss involving the use of a computer — applicable to surplus-lines placements, which the scenario explicitly excludesHardware failures and downtime — applies if the loss is partial; this question describes a constructive total loss, under the broader consumer-protection construction sometimes applied hereData breach expenses and notification costs — under the older rule that was superseded by the post-2018 model amendments
6. The SFIP Dwelling Form settles building claims on what basis for an insured's primary residence meeting the 80%-to-value requirement?
Market valueReplacement costAgreed valueActual cash value
7. An insured totals her car during a covered collision. The vehicle had a pre-loss actual cash value of $18,000, and the loan payoff is $22,000. She has Part D with no GAP endorsement. What does her PAP pay, and who owes what?
The PAP pays $18,000 (ACV) minus the deductible; the insured owes the $4,000 gap to the lender herself.The PAP pays $18,000 to the lender and $4,000 to the insured as gap coverage — applies if the loss is partial; this question describes a constructive total lossThe PAP pays $22,000 because the lender is a loss payee, under the broader consumer-protection construction sometimes applied hereThe PAP pays $22,000 so the loan is fully satisfied — only when the contract was issued before the regulatory amendment described above
8. Under A.R.S. §20-411, before a surplus lines broker may place a risk with a non-admitted insurer, the broker generally must:
Pay the Guaranty Fund assessment in advance under §20-666, even though §20-661 expressly excludes surplus lines from the FundProvide the applicant with FAIR Plan denial paperwork as required in true FAIR-plan states, despite no FAIR Plan existing in AZObtain DIFI's pre-approval of the specific risk and the proposed non-admitted carrier under the §20-411(B) export-list processDocument a diligent search showing coverage was unavailable from admitted insurers
9. An insured's house is located in a Special Flood Hazard Area (SFHA) and has a federally regulated mortgage. What does the mandatory purchase requirement require?
The insured must carry private flood coverage at full replacement cost, with NFIP coverage explicitly disallowed when the property is financed through a federally regulated lenderThe insured is not required to buy flood coverage if the home was built before 1974, when the Flood Disaster Protection Act established the SFHA mapping frameworkThe insured must buy earthquake coverage as well, because federal lenders treat all natural-catastrophe perils as part of a single mandatory-purchase packageThe lender must require flood insurance in an amount equal to the lesser of the outstanding loan balance, the NFIP maximum, or the insurable value of the building
10. Under the Gramm-Leach-Bliley Act Financial Privacy Rule, when must an insurance agency first deliver a privacy notice to a new customer, and what key consumer right must the notice describe?
Within 30 days after the first claim is filed; the right to receive a free credit report — applies if the loss is partial; this question describes a constructive total lossOnly at policy renewal; the right to cancel the policy without penalty, under the broader consumer-protection construction sometimes applied hereAt or before the time the customer relationship is established (policy issuance); the right to opt out of disclosure of nonpublic personal information to nonaffiliated third parties.Only if the agency plans to share data with nonaffiliates; no consumer opt-out is required — applicable to commercial scenarios only, not the personal-lines context
11. A demolition contractor performing blasting operations in strict compliance with every applicable safety regulation nonetheless causes vibration damage to a neighbor's foundation. The neighbor sues. On what liability theory is the contractor most likely to be held responsible, and is compliance a defense?
Vicarious liability; the contractor is liable only for the acts of its employees.Absolute liability; blasting is an ultra-hazardous activity and compliance is not a defense.No liability; the plaintiff must prove the contractor breached a duty of care.Negligence; compliance with safety regulations is a complete defense.
12. 'Hired autos' under the BAP means:
Autos the named insured owns and hires to its own employees — applies if the loss is partial; this question describes a constructive total lossAutos of competing contractors, under the broader consumer-protection construction sometimes applied hereAny auto used on a hired job site, consistent with the model regulation but inapplicable to this scenarioAutos the named insured leases, hires, rents, or borrows — except from employees/family.
13. An insured's CGL has a $1M per-occurrence limit, $2M general aggregate, and $2M products-completed operations aggregate. A product-liability claim exhausts $1M on the per-occurrence, and earlier product claims in the policy period have already paid $800,000 from the products-completed operations aggregate. How much is left in each aggregate after this claim?
General aggregate $1M, Products-CO aggregate $1MGeneral aggregate $2M, Products-CO aggregate $200,000General aggregate $2M, Products-CO aggregate $2MGeneral aggregate $1M, Products-CO aggregate $200,000
14. An insured has $400,000 of BPP building coverage with 80% coinsurance. The building is valued at $600,000 at the time of a $50,000 loss. What is the loss payment, ignoring the deductible?
$50,000$60,000$41,667$33,333
15. The Personal Auto Policy (PAP) contains how many main coverage parts labeled A through F?
Three — A (Liability), B (Medical), C (UM).Two — Liability and Physical Damage only — required if and only if the policy includes a co-insurance penalty endorsementSix — A (Liability), B (Medical Payments), C (UM/UIM), D (Damage to Your Auto), E (Duties After Loss), F (General Provisions).Four — A, B, C, D — required under the federal preemption framework that yields here to the state-law rule
16. Which of the following is TRUE about a non-admitted (surplus lines) insurer writing a wildfire risk in Arizona?
The insurer must be on DIFI's list of eligible non-admitted insurers, and policies must contain a surplus-lines disclosureRates must be filed and pre-approved by DIFI, consistent with the model regulation but inapplicable to this scenarioClaims are backed by the Arizona Property and Casualty Guaranty Fund if the insurer becomes insolventThe producer does not need a surplus-lines license to place the business
17. An Arizona homeowner in a wildfire-prone area cannot obtain coverage in the standard market. Where will the producer most likely place the risk?
The Arizona FAIR PlanThe Arizona Workers' Compensation PoolThe non-admitted (surplus lines) marketThe Arizona Property and Casualty Guaranty Fund
18. The principle of indemnity states that:
The insurer must pay enough to put the insured in a better position than before the loss.The insurer must indemnify third parties before paying the insured, under the broader consumer-protection construction sometimes applied hereThe insurer must pay enough to restore the insured to approximately the same financial position as before the loss — no better, no worse.The insurer must pay the full policy limit on every covered loss, consistent with the model regulation but inapplicable to this scenario
19. On a commercial crime policy, which insuring agreement responds when an employee steals $50,000 from the company?
Money and Securities — Inside the PremisesForgery or AlterationComputer Fraud and Funds Transfer FraudEmployee Theft
20. Which of the following is typically required by a personal umbrella policy as an 'underlying limit'?
No underlying coverage — the umbrella stands alone.Specified minimum limits on auto liability, personal liability (HO), and sometimes watercraft/RV — often 250/500/100 for auto and $300K for HO.Minimum limits only if the insured has a swimming pool, per the safe-harbor exception that activates only for primary-state filingsA minimum of $1,000,000 on every underlying policy.

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