Free Alabama Property & Casualty practice questions

Answer: D. A limited liability company organized to sell insurance

Section 27-7-1(1) defines a business entity by listing corporations, associations, partnerships, limited liability companies, limited liability partnerships and other legal entities, so a limited liability company qualifies. The same section defines a person as either an individual or a business entity, treating the two as separate categories, so an individual producer is not a business entity. A service representative is defined there as a natural person, and the producer designated as responsible for an entity's compliance is an individual licensee, so neither of those is a business entity.

Answer: C. An insured under the policy violated one of the policy's terms and conditions

Alabama makes a cancellation notice on a covered auto liability policy ineffective unless it rests on a reason in the statutory list, and a breach by any insured of the policy's terms and conditions is one of the listed reasons. A move to another Alabama county, the insurer's own decision to shrink its auto business, and a single hail claim are not among the listed reasons, so none of them supports the notice by itself.

Answer: C. Before she begins doing any business under the Riverbend name

An Alabama producer doing business under any name other than the producer's legal name must notify the Commissioner before using the assumed name. Notice after the name is already in use, whether within 30 days or at renewal, comes too late under that requirement. The duty attaches to using any name other than the legal name, so it does not depend on forming a separate business entity.

Answer: D. They are confidential and privileged and not subject to the subpoena

Documents and information furnished to the department by an insurer or producer, or obtained by the Commissioner in an investigation under the appointment statute, are confidential by law and privileged. They fall outside open records and freedom of information laws, are not subject to subpoena, and are neither discoverable nor admissible in a private civil action, whatever their relevance. The Commissioner, however, may use them to further regulatory or legal action brought as part of the Commissioner's duties, so they are not closed to the Commissioner.

Answer: B. Only the demands about coverage adequacy and insurer financial strength

Alabama law forbids a lender on the security of property, and its officers, agents, and employees, from requiring as a condition of the loan that the borrower buy the insurance on that property through a particular insurer, agent, solicitor, or broker. The same section preserves the lender's right to set reasonable and nondiscriminatory requirements about the insurer's financial standing, the policy's terms, and the adequacy of coverage on mortgaged property. So the bank may insist on adequate limits and a sound insurer, but it may not make its own agency a condition of closing, although it remains free to solicit the business voluntarily. Holding a mortgage does not authorize that steering, and the section expressly keeps the lender's power to set coverage standards.

Answer: C. The insurer, for each emergency adjuster it deploys in Alabama

The Department rule on emergency independent adjusters places the registration duty on the insurer, which must complete the Department's online registration process for each emergency adjuster it deploys in Alabama. The rule does not assign that step to the adjuster personally, to the producer who sold the policies, or to the Alabama Insurance Guaranty Association.

Answer: C. A civil fine of up to $10,000

For a licensee who has turned in a false or fraudulent certificate of compliance, the continuing education chapter lets the Commissioner, in the Commissioner's sole discretion and in place of suspension, impose a civil fine of not more than $10,000 after a hearing, and the licensee may waive that hearing. The $1,000 figure understates the cap. A fine measured at three times the commissions is not the measure this section uses. The section sets no fixed one-year waiting period; instead it bars further licenses until the person shows the Commissioner that all requirements have been met.

Answer: A. To help detect and prevent insurer insolvencies and spread the cost of claim protection among insurers

The purpose section of the guaranty association chapter names a mechanism for paying covered claims, avoiding excessive delay and financial loss to claimants or policyholders caused by an insurer's insolvency, assisting in detecting and preventing insurer insolvencies, and providing an association to assess the cost of that protection among insurers. Guaranteed investment returns, replacing the commissioner's examinations, and paying producers' unpaid commissions are not among the stated purposes.

Answer: B. The commissioner may hold one for any purpose within the Code's scope that the commissioner deems necessary

Section 27-2-28(a) gives the commissioner a broad, discretionary power to hold hearings for any purpose within the scope of the Insurance Code that the commissioner considers necessary. Elsewhere in the same section, a hearing becomes mandatory when a provision requires one or when an aggrieved person makes a written demand, but those are cases in which the commissioner must hold a hearing, not limits on when the commissioner may hold one. The section does not make court approval a condition of holding a hearing.

Answer: A. The Commissioner of Insurance

Alabama law gives the commissioner the job of organizing, supervising, and administering the Department of Insurance, so that the department carries out its lawful functions efficiently. The section that lists this duty names the commissioner and no other official. The Attorney General, the Secretary of State and the Governor are not given this duty by that section.