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Maine Property & Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full Maine Property & Casualty course (Maine 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. After a Maine BOI hearing, the Superintendent finds an insurer engaged in unfair claims practices that were NOT knowing or willful. What is the maximum civil penalty per non-knowing violation under 24-A M.R.S. §12-A?
$10,000$2,500$500$1,500
2. A contractor applies for a CGL and fails to disclose a prior $150,000 bodily injury loss when the application asks for all losses in the last five years. Which hazard category does this BEST represent?
Physical hazard (a tangible condition that increases risk)Morale hazard (carelessness or indifference toward loss prevention)Moral hazard (concealment/fraud intended to get coverage or better terms)Legal hazard (court rulings that expand an insured's liability)
3. A business carries Symbol 8 (hired autos only). An employee uses her own car to make a bank deposit for the company and causes an accident. How is her car classified under the policy?
A hired auto, because the business benefited from its useAn owned auto, because the employee was acting within the scope of her jobA temporary substitute auto, because it replaced a company vehicle for the errandA non-owned auto (Symbol 9), not a hired auto, because it belongs to an employee
4. Which of the following best distinguishes a surety bond from a fidelity bond?
A surety bond and a fidelity bond are both three-party agreements with full recourse against the principal; the only difference is that fidelity bonds are written by banks while surety bonds are written by insurers.A surety bond is a three-party agreement (principal, obligee, surety) with recourse against the principal; a fidelity bond is a two-party agreement (employer and insurer) covering employee dishonesty with no recourse against the employee-employer.A surety bond protects the principal against its own losses with no right of recovery; a fidelity bond is a three-party agreement in which the surety may recover from the employer after paying a covered loss.A surety bond is a two-party agreement between the employer and the insurer covering employee theft; a fidelity bond is a three-party agreement guaranteeing that a contractor completes a project on time.
5. The BAP's physical damage coverage is typically written with which type of deductible?
Aggregate annual deductible.Flat dollar-amount deductible per loss (e.g., $500, $1,000).Percentage deductible based on vehicle value.Franchise deductible that disappears at a threshold.
6. Which of the following is typically required by a personal umbrella policy as an 'underlying limit'?
Specified minimum limits on auto liability, personal liability (HO), and sometimes watercraft/RV, often 250/500/100 for auto and $300K for HO.Any auto policy that meets the state minimum financial-responsibility limits, with no homeowners or watercraft liability requirement at all.Proof that the insured has purchased the same limit of coverage from a second umbrella carrier, which then shares losses pro rata with it.Only a homeowners policy with at least $100K personal liability; auto liability is never required beneath a personal umbrella policy.
7. A Maine producer gives each new homeowners client a branded ice scraper worth about 4 dollars. Under 24-A M.R.S. §2160, this is:
Permitted only if the item is described in the policy itselfProhibited, because any gift at all is a rebate in MaineProhibited unless the Superintendent approves the item firstPermitted, because it is a promotional item of nominal value
8. The CGL 'insured contract' provision extends coverage to which liability the insured assumes?
Only the insured's own tort liability for injury it causes, since liability assumed under a contract for another party is always excluded from CGL coverage.Any contractual liability the insured assumes under any written or oral agreement, including promises to pay another party's debts or to guarantee its performance.Tort liability of another party that the insured has assumed under certain categories of written contracts (leases, sidetrack agreements, indemnification of municipalities, etc.).Liability for breach of contract, including damages owed when the insured fails to complete work on time or to the specifications required by the contract.
9. A Maine insurer receives a final order from the Superintendent and wants a court to review it. Where and within what period must the insurer seek review?
Maine Superior Court, within 30 days of the final orderMaine Supreme Judicial Court, within 10 days of the orderMaine District Court, within 60 days of the final orderMaine Superior Court, within 90 days of the final order
10. Workers compensation benefits are generally provided without regard to fault because:
WC is a voluntary benefit program funded by employees, so benefits are paid whenever an employee files a claim, even for injuries that occur off the job.The employer is always presumed negligent for workplace injuries, so the law removes the need for the employee to prove that the employer caused the injury.Federal law requires every employer to self-insure workplace injuries, and the employer may still be sued in tort for the full damages after paying benefits.WC is a no-fault, exclusive-remedy statutory bargain: the employee gives up the right to sue for most workplace injuries in exchange for prompt, defined benefits.
11. Replacement cost (RC) coverage in a liability-adjacent context (e.g., bailee repair of customer property) is usually:
Identical to ACV, because a bailee's liability is always limited to the depreciated value.Broader than ACV, and payment is made in full whether or not the property is repaired.Narrower than ACV, since depreciation is deducted twice, once at the loss and once at repair.Broader than ACV, no depreciation is deducted, but insured must actually repair or replace.
12. Which of the following is NOT one of the four basic elements of a contract?
Competent partiesOffer and acceptanceConsiderationNotarization by a licensed notary
13. Insurance contracts are called 'aleatory' contracts because:
The values exchanged by the two parties are usually UNEQUAL, depending on whether and when a loss occurs.Both parties exchange values that are equal and known at inception, regardless of whether a loss occurs.Only the insurer makes a legally enforceable promise, while the insured may stop paying at any time.The terms are negotiated point by point between the insurer and the insured before coverage is bound.
14. A commercial tenant's desk (age 6 years, typical life 10 years) is destroyed. Replacement cost is $1,800. On an ACV basis, the claim payment is approximately:
$720, 4/10 of RC, reflecting remaining useful life$1,080, 6/10 of RC, reflecting depreciation of used life$1,800$0, desks are not covered by casualty insurance
15. A delivery driver runs a red light. A witness films it and reports the driver to police, but no vehicle or pedestrian is struck and no property is damaged. A bystander sues the driver's employer for negligence. Which element of a negligence claim is MISSING?
Damages, no actual injury or loss resulted from the breachDuty, the driver owed no duty to other road usersBreach, running the light was not a breach of the duty of reasonable careCausation, the breach did not cause the specific harm alleged
16. A signed insurance application typically becomes part of the policy because:
The agent signs the application, which binds the insurer to its statements.The policy's entire contract clause specifically incorporates the application by reference.State law requires every application to be printed on the declarations page itself.The insurer files a copy with the insurance department at the time of issuance.
17. In January, a homeowner sells a rental house to a new buyer but does not cancel her existing homeowners policy on the property. In March, while the policy is still technically in force, a fire destroys the house. The buyer failed to arrange his own coverage. Can the former owner collect under her policy?
Yes, she paid the premium and the policy was in force on the date of the loss, so the insurer must pay her claim in full.Yes, in property insurance insurable interest only has to exist at policy inception, and she owned the house when the policy was written.No, in property insurance, insurable interest must exist at the time of loss, and she no longer had a financial stake in the house.No, a property policy automatically terminates the moment the property is sold, so there was no policy in force on the date of loss.
18. Under the standard mortgagee clause, if the insurer voids the policy because the INSURED committed arson, the mortgagee's interest is:
Reduced to 50 percent of the outstanding mortgage balance at the time of loss.Protected; the mortgagee's coverage remains in force despite the insured's acts.Also voided, because the mortgagee has no rights independent of the insured's.Protected only if the mortgagee itself reported the arson to the insurer.
19. Under the federal Fair Credit Reporting Act, when must an insurer give the applicant an 'adverse action' notice?
Never, because the FCRA applies only to lenders and employers, and insurers are governed by state unfair trade practice law instead of the federal statute.Only when the agent personally requests the credit report; a report ordered by the insurer's underwriting department is exempt from the adverse action notice rule.Whenever information from a consumer report contributes to a denial, higher premium, or less favorable terms than the applicant would otherwise have received.Only when an application is declined outright because of the report; a higher premium or a larger deductible based on the report requires no notice to the applicant.
20. In casualty insurance, 'pure risk' is distinguished from 'speculative risk' because pure risk involves:
Only losses within the insured's direct control.The possibility of loss OR gain, such as stock investments.Only losses caused by criminal acts.The possibility of loss or no loss, no chance of gain.

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