Free California Life practice questions

Answer: C. No, because the exception for pretext interviews reaches only claim investigations

Cal. Ins. Code Sec. 791.03 bars an insurance institution, agent or insurance-support organization from using or authorizing the use of pretext interviews to obtain information in connection with an insurance transaction. Its single exception allows a pretext interview of a person or institution with no privileged relationship to the subject, and only to investigate a claim where there is a reasonable basis to suspect criminal activity, fraud, material misrepresentation or material nondisclosure in connection with that claim. This is underwriting of an application, not a claim, so the exception is unavailable. Suspected misrepresentation on the application is not enough because the exception ties the suspicion to a claim; the neighbors' lack of a privileged relationship is only one condition of the exception and does not supply the claim; and the section makes no provision for a signed authorization.

Answer: D. An expectancy coupled with her existing interest in the orchard itself

Cal. Ins. Code Sec. 282 lists three forms an insurable interest in property may take: an existing interest, an inchoate interest founded on an existing interest, and an expectancy coupled with an existing interest in the thing from which the expectancy arises. Lena's expected profit is an expectancy, and it arises from the orchard she already owns, so it fits the expectancy form. The profit has not been earned yet, so it is not an existing interest in its own right. An inchoate interest must be founded on an existing interest, and contracts she has not signed do not exist. The section expressly includes an expectancy, so it is wrong to say it reaches only tangible property.

Answer: D. The agent files a notice of termination of the appointment

California Insurance Code Sec. 1704(a) keeps each appointment in force until one of two things happens: the license applied for or held when the appointment was filed is canceled or expires, or a notice of termination is filed by the insurer or by the appointed life agent. The agent's own notice of termination is one of those events. The section expressly allows other insurers to file additional appointments while the license remains in force, so a second appointment does not end the first. It sets no one-year term, and a policy lapse is not among the events it lists.

Answer: A. Through the Attorney General, seek a superior court injunction once 30 days pass after the report is served

Sec. 790.06 covers a practice that the Code does not define in Sec. 790.03. After the commissioner's hearing and written report, if the practice has not been discontinued, the commissioner may act through the Attorney General, at any time after 30 days following service of the report, to have a petition filed in the superior court of the county where the person resides or has its principal place of business, asking the court to enjoin the practice. The civil penalty in Sec. 790.035 attaches to practices defined in Sec. 790.03, so it does not fit a practice that section does not define. Sec. 790.06 sends the matter to a state superior court through the Attorney General, not to a federal court the next day, and it provides no immediate revocation without a hearing or court proceeding.

Answer: A. It is canceled, and its lawful custodian must return it to the commissioner

California Insurance Code Sec. 1704(c) provides that when every appointment of a person licensed under a certificate of convenience terminates, the certificate is canceled and its lawful custodian returns it to the commissioner. Becoming inactive and being reactivated by a new appointment is the treatment Sec. 1704(b) gives a permanent license, not a certificate of convenience. Neither subdivision keeps a certificate of convenience alive until its expiration date or converts it into a permanent license.

Answer: A. It covers classes other than life, disability, or health, acting for an admitted insurer

Under California Insurance Code Sec. 31, an "insurance agent" is a person an admitted insurer authorizes, on the insurer's behalf, to transact every class except life, disability, or health insurance. Because the defined term leaves out life, the option that includes life is wrong, and so is the option limited to life, disability, and health. The definition also ties the agent to an admitted insurance company and to acting on the insurer's behalf, so neither the option that reaches nonadmitted insurers nor the option describing a person acting for the applicant matches it.

Answer: C. No, because it appears neither in the policy nor in a signed instrument the policy incorporates

Sec. 443 requires an express warranty made at or before execution to be contained in the policy itself or in another instrument that the insured signed and that the policy refers to as part of it. An unsigned worksheet the policy never mentions meets neither condition. The fact that the insurer's examiner wrote the statement down supplies neither the insured's signature nor the policy's reference. A warranty may indeed relate to the future under Sec. 444, but that concerns what a warranty may cover, not where it must be written. That same Sec. 444 rule is also why the claim that future statements are mere belief is wrong; the defect here is placement, not subject matter.

Answer: D. A right to rescind, because a material violation by either party lets the other party rescind

Sec. 447 provides that violating a material warranty or other material provision of a policy, by either party, entitles the other party to rescind. The rule runs both ways, so an insurer's material violation gives the policyowner the right to rescind. Reserving rescission for insurers contradicts the words either party. Sec. 447 requires materiality, not fraud, so a fraud requirement adds a condition the section omits. Sec. 447 also makes no mention of any approval by the commissioner.

Answer: C. It is void and has no effect as proof of the insured's interest

California Insurance Code Sec. 287 makes void any policy stipulation that the policy is to be received as proof of the insured's interest, and likewise any stipulation to pay a loss whether or not the insured has an interest in the insured property. The clause in the stem is the proof-of-interest kind, so it is void. Paying the full premium does not rescue it, because the section declares the stipulation void without any exception for payment. The section does not convert the clause into a burden-shifting rule; it gives the clause no effect at all. A signed application stating an interest does not validate the clause either, since the section contains no such condition.

Answer: D. The name of the agent who sold the policy

California Insurance Code Sec. 381 lists what a policy must specify: the parties to the contract; the property or life insured; the insured's interest in insured property where the insured is not its absolute owner; the risks insured against; the period the insurance is to continue; and either a statement of the premium or, where the exact premium can be determined only when the contract ends, the basis and rates for the final premium. The parties, the period of coverage and the risks insured against all appear on that list. The name of the selling agent does not appear in Sec. 381, so it is the item the section does not require.