Free Alabama Property practice questions

Answer: A. Yes, since a resident's complaint that a violation may exist is itself a basis for examination

Section 27-2-20(a) lets the commissioner examine the accounts, records, documents, and transactions affecting the insurance affairs of agents, brokers, adjusters and the others it names in two situations: when the commissioner has reason to believe a violation has occurred or is occurring, or upon a complaint by an Alabama resident indicating that a violation may exist. Either ground is enough on its own, so the resident's complaint permits the examination without independent evidence. Adjusters are expressly listed in the section, and it does not make a court order a precondition.

Answer: D. Deciding to stop accepting claim assignments from one insurer client

The Alabama statute lets the Commissioner refuse to renew, refuse to issue, suspend, revoke or place on probation an independent adjuster's license, or levy a civil penalty, for any of a list of causes. That list includes failing to obey an administrative or court order that imposes a child support obligation, having been convicted of a felony, and cheating on a license examination, including by improperly using notes or other reference material. Declining further claim assignments from one insurer client is not among the listed causes.

Answer: D. Each and every insurer that the producer is licensed or appointed to represent

When the Department institutes a proceeding for licensee penalties, it does so by filing and serving a complaint as to the licensee and giving notice of it to the licensee and to all insurers the licensee is licensed or appointed to represent. Notice is not held back until a ruling, is not limited to an insurer that reported the conduct, and is given by the Department rather than routed through the NAIC.

Answer: C. Boycott or coercion restraining the insurance market

Alabama law forbids any agreement, or any concerted action, to commit boycott, coercion, or intimidation that results in or tends toward unreasonable restraint of, or monopoly in, the business of insurance. Agencies acting together to cut off an insurer unless it meets their demands is a concerted boycott of that kind. Nothing in the facts involves inducing a policyholder to drop or replace a policy, returning premium to an insured, or misstating anything on an application, so the other choices do not describe this agreement.

Answer: C. Continuing the insurer's producer and service representative appointments

The rule directs the Department to develop and maintain a list of insurer contacts, with a person for each insurer whom the insurer designates as responsible for the continuation of appointments for its producers and service representatives. The rule assigns that person no role in consumer complaints, annual statements, or tracking continuing education hours.

Answer: D. The insurer need not hold one, but for this rule its officers and employees are not the insurer.

The chapter states that nothing in it requires an insurer to obtain an insurance producer license. The same subsection then narrows the word: for that section, insurer does not include the insurer's officers, directors, employees, subsidiaries or affiliates. So the insurer's own relief does not pass to those people or companies; whether any of them needs a license is answered by the separate exemptions elsewhere in that section. Because the insurer itself is relieved, it owes neither a license for each line it writes nor a business entity producer license before appointing producers.

Answer: D. The lines of authority that the license grants to the holder

The statute requires a producer or service representative license to state the licensee's name and address, personal identification number, date of issuance, lines of authority and expiration date, along with any other information the Commissioner deems necessary. Lines of authority is on that list. Appointing insurers, continuing education hours and commission rates are not among the items the statute names.

Answer: C. The State of Alabama owns it, and the producer must promptly return it to the Commissioner

Alabama law treats every license issued under the producer licensing chapter as property of the State of Alabama at all times, even though it is issued to the licensee. On notice of a suspension, revocation, refusal to renew, expiration, or other termination, the licensee (or whoever has possession of it) must promptly deliver the license to the Commissioner for cancellation. The producer therefore cannot keep it, the insurer does not own it, and destroying it is not the required step; delivery to the Commissioner is.

Answer: B. A test given by a third-party proctor, passing at 70 percent

Under the continuing education chapter, an independent self-study course sanctioned by an authorized insurer or a recognized state producers association earns its assigned classroom-hour equivalency when the Commissioner approves it and it includes a testing instrument administered by a third-party proctor that requires a passing grade of 70 percent. A test scored by the producer's agency or graded by the sponsoring insurer lacks the required third-party proctor, and an 80 percent or 75 percent passing mark is not the grade the statute sets.

Answer: C. It exceeds the commissioner's authority, since no rule may extend, modify, or conflict with state law.

Section 27-2-17(a) lets the commissioner make reasonable rules needed to carry out the Insurance Code, but it also bars any rule that would extend, modify, or conflict with Alabama law or its reasonable implications. A rule stretching a statutory requirement therefore exceeds the rulemaking power. A finding that the rule is necessary does not cure this, because the rule must both be necessary and stay within the law. Filing a rule as a public record bears on when a rule takes effect, not on whether it may override a statute, and the section gives no rule priority over a law.