Georgia Property & Casualty Practice Test

Answer choices

1. A. The excess policy automatically covers the pollution claim once damages exceed the underlying CGL limit, because reaching the attachment point is assumed to eliminate any exclusion that prevented the primary policy from paying.
2. B. The follow-form excess policy generally will not cover the excluded pollution claim simply because damages exceed the underlying limit.
3. C. The excess pays from dollar one because an exclusion is treated as exhaustion of the primary policy.
4. D. The excess must provide pollution coverage because Georgia requires every excess policy to broaden the underlying CGL.

Wrong-answer review

• A. The excess policy automatically covers the pollution claim once damages exceed the underlying CGL limit, because reaching the attachment point is assumed to eliminate any exclusion that prevented the primary policy from paying.: Incorrect. A follow-form excess policy generally carries through relevant underlying exclusions; reaching the attachment point does not erase an exclusion.
• C. The excess pays from dollar one because an exclusion is treated as exhaustion of the primary policy.: Incorrect. An exclusion is not the same as exhaustion of a covered underlying limit.
• D. The excess must provide pollution coverage because Georgia requires every excess policy to broaden the underlying CGL.: Incorrect. There is no blanket Georgia rule requiring excess policies to broaden every underlying exclusion.

Answer choices

1. A. Pay the entire loss as fire damage because any covered peril appearing in the sequence automatically overrides every exclusion in the policy.
2. B. Apply the policy's causation and exclusion language to the actual sequence of events rather than assuming that either the flood exclusion or fire coverage automatically controls the entire loss.
3. C. Deny the entire claim under the flood exclusion because once an excluded peril appears anywhere in the causal sequence, no later fire damage can be separately analyzed under covered-peril provisions.
4. D. Split the loss exactly 50/50 between covered and excluded damage because concurrent causes are always allocated equally under Georgia law.

Answer choices

1. A. Causes of Loss — Special Form alone, on the theory that any sudden internal failure is covered unless the declarations separately list mechanical breakdown.
2. B. A manufacturer's warranty, because warranty protection is assumed to provide the same insured property and resulting-loss coverage as equipment-breakdown insurance.
3. C. Business income coverage alone, because the loss of a critical compressor is assumed to be covered as soon as operations are interrupted.
4. D. Equipment breakdown coverage.

Answer choices

1. A. It permits the insured to collect more than the actual covered loss whenever the insured strongly values the property.
2. B. It eliminates the need for a policy limit because ownership automatically requires full replacement of every loss.
3. C. It helps distinguish insurance from wagering by requiring the insured to have a lawful financial or other recognized interest in avoiding the covered loss.
4. D. It allows a stranger with no economic relationship to the property to insure it solely because the stranger pays the premium.

Answer choices

1. A. The insurer may wait until the producer's next biennial renewal because appointments are never time-sensitive.
2. B. The producer alone appoints the insurer, so the insurer has no filing responsibility after accepting business.
3. C. The appointment becomes unnecessary if the first policy is bound orally rather than in writing.
4. D. The applicable appointment or certificate-of-authority request must be made within the rule's 15-day period tied to the agency contract or first submitted application, as specified by Rule 120-2-3.

Answer choices

1. A. A reduction in coverage requires advance notice, including the statute's 30-day notice requirement for covered reductions, communicated separately as required.
2. B. No notice is required because any renewal may silently remove coverage as long as the premium does not increase.
3. C. The insurer must nonrenew the policy instead because Georgia prohibits all reductions in coverage at renewal.
4. D. The insurer must give five years' notice because a coverage reduction is legally treated as cancellation of a property deed.

Answer choices

1. A. A physical hazard, because the value of the stolen property is a tangible characteristic of the insured premises.
2. B. A moral hazard, because the insured's dishonesty increases the likelihood or amount of loss presented to the insurer.
3. C. A morale hazard, because intentionally inflating the claim is treated as carelessness created by insurance rather than deliberate dishonesty affecting the amount presented to the insurer.
4. D. A legal hazard, because the claim may eventually involve litigation over the amount payable under the policy.

Answer choices

1. A. No compulsory authority; the Commissioner may obtain information only from witnesses who volunteer.
2. B. Authority to imprison the witness immediately without process, hearing, or judicial involvement.
3. C. Authority only to cancel the witness's personal auto policy, even when the witness is not an insured.
4. D. Subpoena authority, including the power to compel attendance and production of records as provided by law.

Answer choices

1. A. Permitted puffery that can never be regulated if the advertisement contains the insurer's logo.
2. B. A policy binder, because advertisements temporarily bind every advertised coverage.
3. C. A premium-fiduciary transaction, because advertising expenses are treated as customer premium funds.
4. D. False or misleading insurance advertising.

Answer choices

1. A. An HO-4 renters policy.
2. B. A Businessowners Policy with higher limits, because increasing the BOP limits automatically makes the standardized package suitable for unusual manufacturing operations and multiple locations.
3. C. An NFIP dwelling form.
4. D. A Commercial Package Policy (CPP) assembled from appropriate commercial coverage parts.