Free California Accident & Health practice questions

Answer: B. It leaves license action, civil liability, and criminal penalties all available

Section 790.09 provides that a cease and desist order under the unfair practices article, and any later proceeding to enforce it, does not relieve or absolve the person of administrative action against a license or certificate, civil liability, or criminal penalty arising from the conduct found unfair or deceptive. The order therefore shields the agent from none of the three. The choices that treat the order as barring license action, consumer suits, or prosecution each read in a protection the section expressly withholds.

Answer: D. The filing of felony criminal charges against the agent in federal court

Sec. 1729.2(c)(2) defines background information by a list. It includes a felony charge filed in state or federal court, so the duty arises when charges are filed, before any conviction. An arrest that never became a charge is not on the list; for misdemeanors the list reaches a conviction. A bankruptcy counts only where the licensee discharges or tries to discharge an obligation for insurance premiums or fiduciary funds, which medical bills and credit card debt are not. A civil action counts when a government or regulatory agency brings it alleging unlawful conduct, or where there is an admission or judicial finding of fraud, misappropriation, misrepresentation or breach of fiduciary duty; a neighbor's boundary suit with no such finding is neither.

Answer: C. It includes the individual's name and address along with any medical record information

Section 791.02(s) treats as personal information any individually identifiable information, gathered in an insurance transaction, that allows judgments about a person's characteristics, and health is only one of several listed traits, along with matters such as finances, occupation, credit, and reputation. The definition expressly includes the individual's name and address and medical record information, so it is wrong to say medical record information is excluded or that only health data counts. The definition also names no particular source, so it is not confined to information from a consumer reporting agency.

Answer: C. $1,000, the amount set for a third or later offense

The section sets an escalating fine levied by the commissioner: $200 for a first offense, $500 for a second, and $1,000 for a third and each later offense, and no single offense may draw more than $1,000. A third offense therefore carries $1,000. The $200 and $500 figures belong to earlier offenses. Adding the amounts together to $1,700 fails because the ceiling for any one offense is $1,000.

Answer: C. It binds both parties, and it covers facts a party only believes to be material

Sec. 332 places the duty on each party to the contract, so the insurer owes good-faith disclosure just as the applicant does. The duty covers facts within a party's knowledge that are material or that the party believes to be material, so a fact can fall inside it on the party's own belief. The section excludes facts the other party has the means of ascertaining and facts on which the party makes a warranty. Reading the duty as the applicant's alone, or as limited to facts later proved material, misreads the section.

Answer: C. Both the modification Mia is requesting and the policy's original formation

California provides that the provisions of this chapter apply to a modification of an insurance contract just as they apply to its original formation. Adding a spouse to Mia's existing policy is a modification, so her answers on the change request are governed by those provisions as fully as her answers on the original application were. Limiting the chapter to original formation is wrong because the statute expressly extends it to modifications. A new policy number is not required, since an amendment to an existing contract is a modification. A signed writing under penalty of perjury is not a condition the section imposes.

Answer: A. She knew the fact and was a party who ought to have communicated it

Sec. 330 defines concealment as a party's neglect to communicate something the party knows and ought to communicate. Two things are needed: actual knowledge of the fact and a duty to pass it on. Intent to deceive and reliance by the insurer are not part of the definition, so silence can be concealment without either. A fact the applicant never actually knew falls outside the definition, because it turns on what the party knows rather than what the party should have known. Whether the fact later connects to a claim is not one of the elements the definition lists.

Answer: D. Outside that definition, because it draws its information mainly from the insurance institutions

Sec. 791.02(f) makes a person a consumer reporting agency only when three conditions all hold: it regularly assembles or prepares consumer reports for payment, it obtains information primarily from sources other than insurance institutions, and it furnishes consumer reports to other persons. This company meets the first and third conditions, but because its information comes mainly from insurance institutions, it fails the second and falls outside the definition. Being paid and furnishing reports are each only one of the required elements, and the definition sets no license requirement.

Answer: C. Where Section 381 or a standard form the code prescribes requires it

Sec. 337 sets the general rule that information about the nature or amount of one insured's interest need not be given unless the insurer asks. It then names two exceptions: where Section 381 prescribes it, and where the insurance contract's provisions call for it and the code prescribes those provisions as part of a standard form. Outside those exceptions, the information is owed only in answer to an inquiry. The section does not treat an insured's interest as always material, and it ties the duty to an inquiry or a listed exception, not to the value of the interest or to the filing of a claim.

Answer: A. The insurer waived it by failing to ask about a fact plainly implied by her answer

Sec. 336 provides that the right to information of material facts may be waived in two ways: by the terms of the insurance, or by neglecting to inquire about facts that are distinctly implied in other facts that were communicated. Daily insulin injections distinctly imply diabetes, and the insurer asked nothing further, which is the second form of waiver. Because the section names two routes, the view that only policy terms can create a waiver is wrong, and the section requires no signed statement from an officer of the insurer. The absence of the word diabetes does not help the insurer once the fact was distinctly implied by what Lena disclosed.