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Tennessee Property & Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full Tennessee Property & Casualty course (Tennessee 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 CGL uses PAYROLL and GROSS SALES as exposure bases. This means the premium will likely be:
Calculated only from the named insured's prior-year tax return data with no further adjustment after policy expiration, a one-time historical method not used in the standard CGL audit processFixed at the deposit amount regardless of any change in actual business activity during the annual policy term, a non-auditable structure not used on a CGL with payroll-and-sales ratingPaid in full at policy inception with absolutely no end-of-term adjustment regardless of actual payroll or sales during the period, which contradicts the auditable nature of CGL exposure basesAdjusted at audit based on actual payroll and sales during the policy period — with additional billing or return premium as applicable.
2. Under the federal Fair Credit Reporting Act, when must an insurer give the applicant an 'adverse action' notice?
Never — FCRA applies only to lenders, not insurers — though only when the underlying contract contains an explicit waiver, which the scenario doesn't establishOnly when an agent requests the credit report personally — applicable to commercial scenarios only, not the personal-lines contextWhenever 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, under the broader consumer-protection construction sometimes applied here
3. An inland marine 'bailee' form differs from a typical property form in what important respect?
Bailee forms insure the named insured's LEGAL LIABILITY for damage to customers' property in the bailee's care, custody, or controlBailee forms cover real property such as the bailee's premises rather than personal property such as the customer goods stored on those premisesBailee forms require no proof of loss because the bailee's possession of the property is treated as conclusive evidence of value and damageBailee forms cover the bailee's own stock and inventory instead of customer property, treating the customer's goods as outside the scope of coverage
4. A producer issues an oral binder for homeowners insurance. Which statement is true?
Oral binders automatically extend coverage indefinitely — required if and only if the policy includes a co-insurance penalty endorsementOral binders require the insured's notarized signature — only when the contract was issued before the regulatory amendment described aboveAn oral binder is a temporary contract of insurance that is enforceable for a limited period (often 30–90 days) until the policy is issued or declined.Oral binders are never enforceable — required under the federal preemption framework that yields here to the state-law rule
5. A peril is best defined as:
A condition that increases the chance of loss.The actual cause of loss.The uncertainty concerning the occurrence of loss.The financial consequence of a loss.
6. Replacement cost (RC) coverage in a liability-adjacent context (e.g., bailee repair of customer property) is usually:
Identical to ACV, under the broader consumer-protection construction sometimes applied hereAvailable only if the insured pays a 50% higher premium.Narrower than ACV — only pays scrap value.Broader than ACV — no depreciation is deducted, but insured must actually repair or replace.
7. 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
8. Two Tennessee homeowners have identical risk characteristics and buy the same policy, but one is charged a higher premium with no actuarial basis. Under Tenn. Code Ann. §56-8-104, this is:
Twisting, because the higher priced insured may replace itA permitted rating variation, since insurers may price freelyBoycott, because two applicants were treated differentlyUnfair discrimination between insureds in the same risk class
9. A dwelling policy differs from a homeowners policy in which key respect?
Dwelling forms are only available for non-owner-occupied dwellingsDwelling forms automatically include flood coverageDwelling forms cover business personal property at full Coverage C limitsDwelling forms do not include Section II liability unless added by endorsement
10. A subcontractor provides a COI showing it is an 'additional insured' on the general contractor's policy. Upon investigating, the GC learns the COI is accurate but no additional-insured ENDORSEMENT was ever issued. What is the correct interpretation?
A COI cannot create coverage that doesn't exist in the policy — if no endorsement was issued, the GC is not an additional insured even if the COI says so.Verbal agreements between the parties override the endorsement requirement, per the safe-harbor exception that activates only for primary-state filingsThe COI itself grants additional-insured status regardless of endorsement — required under a separate compliance provision that doesn't reach this fact patternThe producer's signature on the COI is equivalent to an endorsement.
11. An art collector insures a painting under an 'agreed value' endorsement for $50,000. The painting is stolen. The insurer's appraiser later values the painting at $35,000 in the market. How much does the policy pay, before deductible?
The lesser of agreed value or market value ($35,000).$35,000 — the appraised market value.$50,000 — the agreed value, regardless of later appraisal.The agreed value less the appraiser's depreciation adjustment.
12. Which statement correctly compares the DP-1 Basic Form and the DP-3 Special Form?
Both are open-peril on the dwelling, but DP-1 settles losses on ACV while DP-3 pays replacement cost — applicable to surplus-lines placements, which the scenario explicitly excludesBoth cover the same perils, but DP-3 adds built-in personal liability — under the older rule that was superseded by the post-2018 model amendmentsDP-1 is a narrow named-peril form settling dwelling losses on ACV; DP-3 is open-peril and pays replacement cost on the dwellingDP-1 is open-peril with ACV settlement; DP-3 is named-peril with replacement-cost settlement — required if and only if the policy includes a co-insurance penalty endorsement
13. An 'Extended Reporting Period' (ERP) on a claims-made CGL:
Converts a claims-made policy into an occurrence policy retroactively — applies if the loss is partial; this question describes a constructive total loss, per the safe-harbor exception that activates only for primary-state filingsExtends the policy period and covers new wrongful acts indefinitely — applicable to surplus-lines placements, which the scenario explicitly excludes — required under a separate compliance provision that doesn't reach this fact patternAllows claims to be REPORTED after policy expiration for wrongful acts that occurred during or prior to the policy period (after the retro date); does NOT extend coverage for new wrongful acts.Is automatic and free for all claims-made policies — under the older rule that was superseded by the post-2018 model amendments — though only when the underlying contract contains an explicit waiver, which the scenario doesn't establish
14. A homeowner and her insurer agree that a hailstorm (a covered peril) damaged the roof but disagree sharply on the repair cost. The insurer demands appraisal. The insured's appraiser says $32,000; the insurer's appraiser says $14,000; the umpire says $25,000. What is the binding amount of loss?
The dispute must be sent to court because the appraisers disagreed — though only when the underlying contract contains an explicit waiver, which the scenario doesn't establish$14,000 — the lowest figure always controls — applies if the loss is partial; this question describes a constructive total loss, under the broader consumer-protection construction sometimes applied here$23,000 — the average of the three figures, consistent with the model regulation but inapplicable to this scenario — applicable to commercial scenarios only, not the personal-lines context$25,000 — agreement of any two of the three (insured's appraiser + umpire, insurer's appraiser + umpire, or both appraisers) binds the parties; here the umpire's figure is the one any two can agree to.
15. 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$1,800$1,080 — 6/10 of RC, reflecting depreciation of used life$0 — desks are not covered by casualty insurance
16. An insurer receives the verified report of a TDCI examination of its affairs. What happens to that report next?
It becomes public after a period to review and respond, generally 30 daysIt is published immediately, with no opportunity for the insurer to respondIt goes to the Governor for approval before it may be released publiclyIt is sealed permanently and is never released to the public at all
17. A hailstorm destroys a 15-year-old composition-shingle roof. The roof has an estimated 20-year useful life. The cost to install an identical new roof today is $16,000. The homeowner's policy is written on an actual cash value basis with a $1,000 deductible. Ignoring any supplemental endorsements, what is the insurer's payment?
$15,000$4,000$3,000$12,000
18. A general liability policy has a $1,000,000 per-occurrence limit and a $2,000,000 general aggregate limit. During the policy year, the insured pays two covered claims of $900,000 each. A third covered claim arises for $600,000 before the policy ends. How much is available for the third claim?
$0 — the aggregate is exhausted.$1,000,000 — the full per-occurrence limit resets each claim.$600,000 — fully covered, because it is under the per-occurrence limit.$200,000 — the remaining aggregate after the first two claims.
19. A personal auto policy's 'policy territory' generally covers:
The United States, its territories and possessions, Puerto Rico, and Canada; limited coverage while being transported between.Only the contiguous continental United States and explicitly not Alaska, Hawaii, Puerto Rico, or Canada, a narrowing that no standard ISO Personal Auto Policy actually adopts in its territory clauseOnly the single state where the policy was issued and not any other state, a parochial restriction not actually imposed under any standard ISO Personal Auto Policy form in current useAnywhere in the world without any geographic restriction at all, an unrestricted worldwide territory that the standard ISO Personal Auto Policy does not actually adopt under any current edition
20. Two competing Tennessee insurers agree they will not write coverage on any applicant who has been non-renewed by the other. Under the Tennessee Unfair Trade Practices Act, this conduct is:
Permissible underwriting cooperation, under the broader consumer-protection construction sometimes applied hereA misdemeanor handled exclusively under federal antitrust law — applicable to commercial scenarios only, not the personal-lines contextPermitted only if filed with TDCI in advance, consistent with the model regulation but inapplicable to this scenarioBoycott, coercion, or intimidation, prohibited under Tenn. Code Ann. \u00a756-8-104

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