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California Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full California Casualty course (California Casualty Broker-Agent 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. An Oakland property management company carried CR 00 21 loss sustained employee theft coverage from the same insurer continuously for four years, and its controller stole throughout that time. How are the losses from the earlier policy years handled?
The prior years are paid only if the controller is convicted, because prior losses require proof beyond a reasonable doubtThe prior years are uninsured, because a loss sustained form covers only loss sustained during the current policy periodThe prior years are treated as loss sustained under the current policy, subject to the highest single limit in forceThe prior years are paid under each earlier policy separately, so the limits of all four policies are added together
2. A client whose home was heavily damaged tells the public adjuster she wants to hand the property over to the insurer and collect the full Coverage A limit. Which statement is correct?
She may do so, because a severe partial loss gives the insured the option to abandon the propertyShe may not, because abandonment is permitted only after an appraisal award has been filedShe may not, because both the ISO form and section 2071 provide that there can be no abandonment of property to the insurerShe may do so only if the insurer has already exercised its option to take the property at its appraised value
3. A Long Beach employer's CGL carries ISO CG 21 47, Employment-Related Practices Exclusion. A dismissed employee sues for wrongful termination and for defamatory statements made in the termination meeting. Under the CGL, the suit is:
Excluded only if the employee was terminated for cause and the insurer receives notice within the policy periodCovered under Coverage A, because emotional distress from a termination is bodily injuryCovered under Coverage B, because defamation is a listed personal and advertising injury offenseExcluded, because the endorsement removes injury arising out of termination and employment-related practices
4. A Sacramento life applicant discloses a recent diagnosis. The underwriter orders an attending physician statement, places the applicant in the substandard class, and offers the policy at a higher premium. Which underwriting step does the higher premium represent?
Issue and review, because the premium will be reconsidered at the first renewalThe decision to accept the risk with a modification that matches its chance of lossClassification, because the premium is what defines the substandard classGathering additional information, because the premium reflects what the physician reported
5. Why would an auto dealership insure under the Garage Coverage Form rather than combining a commercial general liability policy with a business auto policy?
Because a CGL policy cannot be issued to any business that owns more than four autos, so an auto business must find its general liability coverage elsewhereBecause the garage form is the only form that covers bodily injury on the premises, and a CGL policy never responds to a customer's fall in a dealer's showroomBecause the business auto form provides no coverage for permissive users of covered autos, so customers driving demonstrators would be uninsured under itBecause the CGL excludes auto liability and the business auto form excludes products, completed operations and care, custody or control, leaving gaps the garage form fills
6. A personal auto policy expires on August 31. The insurer mails a written notice of nonrenewal on August 15. What is the status of the policy under Cal. Ins. Code section 663?
It continues for 45 days after August 15, because a late notice extends it 45 daysIt must be renewed for a full term, because a late notice forfeits the right to nonrenewIt continues unchanged for 30 days after August 15, because the notice was lateIt ends August 31, because the notice was mailed more than 10 days before expiration
7. A Modesto homeowner stops replacing worn roof shingles and leaves the garage unlocked at night, saying that the insurance company will pay if anything happens. Which kind of hazard does this conduct present?
Moral hazard, because the homeowner is dishonestly planning to collect on a claimMorale hazard, because the homeowner is indifferent to loss because insurance existsPhysical hazard, because the worn shingles are a tangible condition of the propertyLegal hazard, because the homeowner is relying on the policy's terms to shift the loss
8. Why does an EPL policy's bodily injury exclusion carry a carve-out for emotional distress, mental anguish, defamation, invasion of privacy and humiliation?
Because nearly every employment claim alleges emotional harm, and without the carve-out the policy would exclude itBecause workers' compensation pays for those harms, and the carve-out coordinates the two benefitsBecause California law requires every liability policy to cover emotional distress arising from employmentBecause those harms are bodily injury under the CGL, so the EPL carve-out avoids duplicate coverage
9. A policy carries a $250,000 combined single limit. One accident causes $200,000 of injury to a single person and $40,000 of property damage. How much does the policy pay?
$250,000, because the full limit is paid whenever an accident occurs$200,000, because a combined single limit pays bodily injury only$240,000, because one limit applies to all injury and damage combined$125,000 for injury and $40,000 for property, split equally by type
10. A Riverside homeowner sends a surety a complete proof of claim under a contractor's performance bond. Fifty calendar days later the surety has neither accepted nor denied the claim, and no litigation or arbitration is pending. Under 10 Cal. Code Regs. section 2695.10:
The surety has complied, because surety claims are exempt from the Fair Claims Settlement Practices RegulationsThe surety has complied, because a surety must respond only within a reasonable time set by the bondThe surety has violated the regulation, because it must accept or deny the claim within 40 calendar days after proof of claimThe surety has violated the regulation, because it must tender payment within 15 calendar days of receiving any claim
11. A porch railing on a Santa Cruz residence premises gives way, injuring two people: a boarder who rents a room in the house, and a live-in au pair employed by the family who was on duty. Under Coverage F and its exclusions on the HO 00 03, which analysis is correct?
Both are covered, because both were on the insured location with permission when a condition on the premises caused their injuriesThe boarder is excluded because she regularly resides on the insured location; the au pair is covered as a residence employee unless workers' compensation appliesNeither is covered, because both regularly reside on the insured location and Coverage F never pays a member of the householdThe boarder is covered and the au pair is excluded, because persons employed by an insured are never covered under medical payments to others
12. A Fresno insurance agent's E&O policy is written claims-made and reported. A client's demand letter reaches the agent on the last day of the policy period, and the agent reports it to the insurer a month after the policy expires, with no reporting window. Is the claim covered?
No, because an E&O policy covers only claims that result in a lawsuit filed during the policy periodNo, because a claims-made and reported form requires the claim to be both made and reported during the policy periodYes, because a claims-made policy responds to any claim first made during the policy period, whenever reportedYes, because the wrongful act occurred while the policy was in force, which is what triggers the coverage
13. Which section of the California Insurance Code divides insurance in this state into classes?
Section 100, with the classes defined in sections 101 through 120Section 22, together with the definition of insurance itselfSection 620, with the classes defined in sections 621 through 640Section 250, together with the definition of insurable events
14. A landlord leasing retail space to a Sacramento tenant requires the tenant's CGL policy to protect the landlord against claims arising out of the leased premises. Which ISO endorsement accomplishes this?
ISO CG 20 18, Additional Insured, Mortgagee, Assignee or ReceiverISO CG 20 11, Additional Insured, Managers or Lessors of PremisesISO CG 20 37, Additional Insured, Owners, Lessees or Contractors, Completed OperationsISO CP 12 18, Loss Payable Provisions, attached to the commercial property coverage part
15. An employer's worker is injured on the job, and a passenger is injured by the employer's delivery van. Under Cal. Ins. Code sections 100 and 108, how are the two coverages that respond classified?
The worker's injury is liability class; the passenger's injury is automobile classBoth are liability class, because each pays for injury to a natural personThe worker's injury is workers' compensation class; the passenger's injury is liability classBoth are automobile class, because the employer's operations include a vehicle
16. A Los Angeles dentist refuses to consent to a $50,000 settlement that her malpractice insurer recommends and the patient would accept. The case goes to trial and the judgment is $200,000. Under a typical hammer clause, what does the insurer owe?
The $50,000 refused settlement plus defense costs to that date, with the dentist bearing the restThe full $200,000 judgment plus all defense costs, because the dentist had a contractual right to refuseHalf of the $200,000 judgment, because the hammer clause splits any excess equally between the partiesNothing at all, because refusing a recommended settlement voids the dentist's coverage for that claim
17. An employee driving a Fremont company's van is sideswiped by a vehicle that speeds away and is never identified. The employee reports the collision to the police the next morning, about twelve hours later, and claims under the company's uninsured motorist coverage. Which section 11580.2 requirement decides whether the hit-and-run vehicle qualifies as an uninsured motor vehicle?
Whether the employee first exhausted the company's collision coverage on the vanWhether the employee filed suit against the unknown driver within one year of the accidentWhether there was physical contact with the vehicle and the accident was reported to the police within 24 hoursWhether the company's policy lists the van under symbol 2 rather than under symbol 7
18. A San Diego insured cancels his annual auto policy four months into the term. Which statement correctly uses the terms earned and unearned premium?
The four months of premium is earned; the eight months is unearned and is refunded, less any short-rate chargeThe entire annual premium is unearned until the term ends, so the full amount is refunded on cancellationThe entire annual premium is earned at inception, so nothing is refunded when the insured cancels earlyThe four months of premium is unearned and is refunded; the eight months is earned and is kept by the insurer
19. Under Cal. Ins. Code section 1734(b), how much must a licensee's premium trust account hold at all times?
At least ten percent of the premiums the agency wrote the prior yearAt least the gross premiums received, before any commission is takenAt least the premiums and return premiums received, net of commissionsAt least the commissions the agency has earned in the current month
20. Under the unendorsed ISO HO 00 03 and Cal. Ins. Code section 2051(b), personal property is valued at:
the agreed amount stated for each item in a schedule attached to the policyreplacement cost without deduction for depreciation, up to the policy limitthe original purchase price shown on the insured's receipt, without adjustmentcost to repair or replace less physical depreciation, or the policy limit, whichever is less

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