Free Arizona Property & Casualty practice questions

Answer: D. It is a prohibited misrepresentation, and knowingly making it in a sale is a class 5 felony

Ariz. Rev. Stat. Sec. 20-443(A) forbids a person from making, issuing or circulating, or causing another to make, issue or circulate, any estimate, illustration, circular, sales material or statement of the kinds it then lists, and paragraph (5) reaches a misrepresentation made to a policyholder in order to induce, or to tend to induce, the policyholder to lapse, forfeit, surrender, retain or convert an insurance policy. The violation is complete once the misrepresentation is made for that purpose, so the fact that this policyholder kept her policy does not undo it, and the quality of the replacement is beside the point because the paragraph addresses the truth of what was said rather than the merits of what was sold. The criminal provision is conditional on a sale: Ariz. Rev. Stat. Sec. 20-443.01(A) makes it unlawful to knowingly make a misrepresentation proscribed by Sec. 20-443 in the sale of insurance, and subsection (B) makes a violation a class 5 felony. This policyholder kept her existing policy, so nothing was sold and the felony provision would be reached only if the misrepresentation were made in a sale; the trade practice prohibition in Sec. 20-443(A)(5) is complete without one. And it is a statutory matter rather than a private contractual one, because Ariz. Rev. Stat. Sec. 20-442 forbids any person to engage in a trade practice that this article prohibits.

Answer: C. Permitted, so long as that particular payment would not violate the rebating statute

Ariz. Rev. Stat. Sec. 20-298(D) is the provision on point. It lets an insurer or an insurance producer pay a commission, service fee or brokerage to an insurance agency, or assign one to it, and equally to people who do not themselves sell, solicit or negotiate insurance in Arizona. One condition rides on that permission and it is the only one: the payment must not amount to a violation of Ariz. Rev. Stat. Sec. 20-451, Arizona's rebating statute for lines other than life and disability. So routing the commission to the agency is lawful, while using the money to put a rebate or some other unspecified inducement into a buyer's hands is not, which is also why the payment does not sit outside the statute altogether. Nothing in the section ties payment to whoever did the work: subsections (A) and (B) bar paying, and accepting, compensation for selling, soliciting or negotiating insurance only where the person doing that work needed a license and did not hold one. No subsection asks the director to approve a payment of this kind. Subsection (E) adds only that the section leaves alone the regular salaries of a licensee's employees and the ordinary business distribution of compensation and profits among a business entity's members and other owners.

Answer: C. He need not document his citizenship or alien status.

Ariz. Rev. Stat. Sec. 41-1080(A) stops an Arizona agency from issuing a license to an individual who does not document citizenship or alien status with one of thirteen listed documents. Subsection (B)(2) switches the section off where three things are true together: the applicant resides in another state, holds an equivalent license of the same type there, and wants the Arizona license in order to satisfy Arizona's licensing laws rather than to establish residency here. All three hold on these facts, so the documentation requirement never attaches and no document has to be produced. A United States passport and an Arizona driver license issued after 1996 are both on the list in subsection (A), so each answers a requirement these facts switch off. Renewal is wrong twice over: the requirement does not reach him at all, and even for an applicant it does reach, subsection (C) excuses further documentation on renewal or reinstatement once United States citizenship or a nonexpiring federal work authorization has been affirmatively established. Subsection (D) is the opposite case, where a limited work authorization has expired and must be documented again.

Answer: D. Fifteen thousand dollars.

Under Ariz. Rev. Stat. Sec. 20-295(F)(2), each intentional failure or violation carries as much as two thousand five hundred dollars, and the same paragraph then caps the aggregate at fifteen thousand dollars. Eight intentional violations priced at the per-violation maximum would come to twenty thousand dollars, so the arithmetic answer is not the legal answer: the aggregate ceiling controls and holds the total to fifteen thousand dollars. The other two figures belong to the unintentional tier, read onto intentional conduct. Paragraph (F)(1) prices an unintentional failure or violation at no more than two hundred fifty dollars, which is where two thousand dollars for eight violations comes from, beneath an aggregate of two thousand five hundred dollars. Neither applies once the violations are found to be intentional, and subsection (F) operates after a hearing, in addition to or instead of suspension, revocation or refusal to renew.

Answer: B. Returning dividends, savings or unabsorbed premium deposits to participating policyholders

Ariz. Rev. Stat. Sec. 20-451 is Arizona's rebating statute for lines other than life and disability, and its subsection (A) does two jobs. It first ties the premium an insurer, employee, producer or representative may charge to whatever rate filing the company has lodged with the director, which is why charging a premium that departs from that filing is prohibited by the opening sentence rather than permitted by it. It then reaches value handed over outside the contract: a rebate, a discount, a cut in the premium the policy states, a preferential share of the dividends or benefits the policy earns, or any other unspecified inducement, caught whether it is used to win the business or given once the cover is in force, caught whether it passes directly or through an intermediary, and excepted only so far as an applicable filing provides for it. Waiving part of the stated premium for a favored account reduces that premium. Promising one applicant a bigger share of the dividends than the policy provides for is the special advantage in dividends or other benefits that the same sentence names. Subsection (A) closes by naming what it leaves alone: commissions and other compensation earned by licensed producers, and an insurer handing its participating policyholders, members or subscribers their dividends, savings or unabsorbed premium deposits. The second of those is the key, named in the statute as an exception rather than argued for by inference. Arizona also exempts two things that no option here describes: subsection (B) clears loss-prevention goods and services, smoke detectors and risk audits among them, and subsection (C) clears a third-party customer-feedback incentive, presumed reasonable at $200 or less.

Answer: B. She may take it again only after the one year bar on that line ends.

Ariz. Rev. Stat. Sec. 20-284(H) stops the director from letting anyone sit a given line of authority "more than four times within a twelve month period", and shuts that line to a candidate for a year once they have failed it four times. Four failures inside eight months trigger both halves, so the one year bar on the property line controls. Paying the fee again does not reach the bar: Sec. 20-284(F) requires a fresh application and fees before any rescheduling, which is a step on top of subsection H rather than a way around it. The limit is counted by attempts within a twelve month window, not by consecutive failures. And the director's power under Sec. 20-284(C) to require a reasonable waiting period is expressly subject to subsection H, so it cannot shorten the one year bar.

Answer: C. Forty-eight credit hours, at least six of them in ethics.

Ariz. Rev. Stat. Sec. 20-2902(A)(2) governs a license period that commenced on or after January 1, 2014: to qualify for renewal the licensee must have completed, during that period, forty-eight or more credit hours of approved insurance continuing education from an approved provider, and at least six of those hours must be ethics training. The forty hour option is the figure from the paragraph immediately above it, Sec. 20-2902(A)(1), which reaches only a license period that commenced before January 1, 2014 and during which the licensee also held a nonresident license in another state, so the stem's facts put it out of reach. Neither the twenty-four hour nor the sixty hour figure appears in Sec. 20-2902, the section that fixes the credit hours Sec. 20-289(C)(3) requires evidence of at renewal. The requirement has teeth at renewal, because Sec. 20-2902(G) bars the director from renewing a resident license unless the licensee has provided evidence that the required hours were completed. Subsection (B) lifts subsection (A) only for a narrow class: a licensee continuously licensed in this state since January 1, 1995 who has held no nonresident producer license elsewhere since that date and has never been the subject of one of the director's orders listed there.

Answer: A. Negotiating, because the producer confers directly about a particular contract's substantive terms

Ariz. Rev. Stat. Sec. 20-281 defines each of these acts separately, and the facts are built to pull them apart. Under its paragraph (11) a person negotiates by conferring directly with, or offering advice directly to, a buyer or would-be buyer about the substantive benefits, terms or conditions of one identified insurance contract, provided that person either sells insurance or procures it from insurers for purchasers. That is this producer exactly: she is walking a prospective client through the deductible and the exclusions of one named commercial package policy, and she places business with insurers. Paragraph (15) makes selling the exchange of an insurance contract, for money or its equivalent, on an insurer's behalf, and nothing here has been exchanged. Paragraph (16) makes soliciting an attempt to sell, or asking or urging someone to apply to a named company for a named kind of coverage, and no application has been requested. The first limb of that definition does not rescue the option either: an attempt to sell is an attempt at the very exchange for money that paragraph (15) describes, and this producer has proposed no exchange. Reading advice about one policy's substantive terms as an attempted sale would also fold negotiating into soliciting, which the section treats as distinct acts. Adjusting is claim handling, and the facts contain no claim. Selling, soliciting and negotiating all require a license under Ariz. Rev. Stat. Sec. 20-282, so what the distinction decides is which act the producer is performing, not whether a license is needed at all.

Answer: D. The director may not grant it while those obligations stand, unless the insurer secures them as allowed

Ariz. Rev. Stat. Sec. 20-217(D) bars the director from granting a termination request while the insurer has outstanding obligations under a policy to Arizona resident policyholders or claimants, and it names the ways out of that bar: a deposit of acceptable securities with the state treasurer equal to the insurer's liabilities, full reinsurance of the obligations under an agreement filed with and approved in writing by the director, or a merger in which the surviving insurer is authorized here and assumes those obligations. This insurer has done none of them. The other answers each contradict a different subsection. Subsection (C) states that the certificate "remains the property of this state" and must be delivered back to the director on termination or revocation, so it is not the insurer's to surrender at will. Subsection (B) provides that a certificate remains in effect until terminated at the insurer's request or suspended or revoked by the director, so there is no annual term that lapses on its own. And nothing in 20-217 transfers the obligations to a guaranty fund as a consequence of termination.

Answer: B. It terminates at the same moment as the producer license.

Ariz. Rev. Stat. Sec. 20-293(B) ties the vending machine authority to the producer license twice over: the authority granted under the section expires coincident with that license, and the director is told to suspend, revoke or end the machine authority coincidentally with the producer's own. Revoking the license therefore ends the machine authority at the same moment. Nothing in the section ties the authority to the machine's physical service life, so withdrawal from service is not the trigger. The authority cannot pass to the insurer either, because subsection (A) requires a licensed producer to supervise each machine and subsection (B) requires evidence of that producer's own authority to be displayed on or near it. And the section sets no calendar term of any kind, so there is no year-end to run to.