Free California Property practice questions

Answer: B. 24 months from the inception of the loss

Sec. 2060(b)(1) requires additional living expense coverage for a covered loss relating to a state of emergency to run for at least 24 months from the inception of the loss, subject to other policy provisions. The insurer must then grant an extension of up to 12 more months, for a total of 36, when an insured acting in good faith and with reasonable diligence faces reconstruction delays beyond the insured's control, and further six-month extensions are available for good cause. Twelve months is shorter than the statutory minimum. Thirty-six months is the total reachable with the extension, not the starting minimum, and the statute counts from the inception of the loss rather than from a payment. The proclamation of the emergency is not the starting point either, because the period runs from the inception of the loss.

Answer: A. Yes, because the cat showed consistent signs before coverage began

Cal. Ins. Code Sec. 12880(f) makes a condition preexisting if any one of three things happened before the policy's effective date or during a waiting period: a veterinarian gave medical advice for it, the pet was treated for it, or the pet showed signs or symptoms consistent with it. The limping and reluctance to jump were signs consistent with the arthritis and appeared before coverage began, so the third trigger is met on its own. The lack of a veterinary visit does not matter, because advice and treatment are alternatives to signs, not requirements. The date of the formal diagnosis does not control either, since the definition looks at when signs appeared. Heredity is a separate definition at Sec. 12880(c) and is not an element of a preexisting condition.

Answer: A. All 400 issuances are treated together as one single act for purposes of the civil penalty

Cal. Ins. Code Sec. 790.035(a) makes a person who commits a practice defined in Sec. 790.03 liable for a civil penalty of up to $5,000 per act, or up to $10,000 per act when the conduct was willful, and lets the commissioner decide what counts as an act. It then provides that when issuing, amending, or servicing a policy or endorsement is inadvertent, all of those acts count as one act. Counting each policy separately at $5,000 ignores that inadvertence rule. The $10,000 figure is the ceiling for willful acts, and a clerical error is not willful. The section is not limited to willful conduct: the $5,000 ceiling applies to acts that are not willful.

Answer: D. A 30-day waiting period for orthopedic conditions not caused by accident

Cal. Ins. Code Sec. 12880(l) defines a waiting period as the time a pet insurance policy specifies must pass before some or all of its coverage can begin. Sec. 12880.7(b) lets a pet insurer, after disclosure, impose waiting periods of up to 30 days for illnesses or orthopedic conditions that do not result from an accident, so a 30-day orthopedic waiting period is within the limit. The same subdivision bars any waiting period for accidents, which rules out the 7-day period on accidental injuries, and a 45-day illness period exceeds the 30-day ceiling. Under Sec. 12880.7(c), a waiting period may not be applied to a renewal of existing coverage, so one that restarts at each renewal is prohibited.

Answer: B. The insured may require the insurer to examine the building, the parties fix the value then, and a clause in the policy states it was fixed

Two sections work together. Under Cal. Ins. Code Sec. 2052, an insured who wants a valuation named in a fire policy on a building may require the insurer to examine it, and the parties fix the value of the insured's interest at that time. Sec. 2053 then requires a clause in the policy stating substantially that the value of the insured's interest has been fixed in that way. Because Sec. 2052 puts the examination at the insured's requirement and fixes the value when the examination is made, a valuation the insurer sets alone and a valuation made after the loss are both outside what that section provides. Neither section calls for the commissioner's approval or for an independent appraisal.

Answer: D. When its fire coverage, judged as a whole, is substantially equivalent to or better for the insured than the standard form

California Insurance Code Section 2070 requires fire policies on California subject matter to be on the standard form, but it excuses a policy covering fire alone or with other perils from following the standard form's text where its fire coverage, taken in its entirety, is either substantially equivalent to the standard form or more favorable to the insured than it is. Covering other perils is not enough by itself; the equivalence test still applies. The word-for-word option ignores the exception Section 2070 creates. The red-ink warning comes from Section 2081, which governs clauses limiting liability for fire caused by hurricane, volcanic action or other disturbance of nature; it does not license departing from the standard form generally.

Answer: B. Investing the insurer's reserves after a policy is issued

Cal. Ins. Code Sec. 35 lists four activities within transacting insurance: solicitation, negotiations preliminary to execution, execution of the contract, and matters after execution that arise out of the contract. Soliciting a prospect, negotiating before execution, and handling post-execution matters arising from the policy each appear on that list. Managing an insurer's investment of its reserves appears nowhere among the four listed activities.

Answer: B. Keep operating for 60 days past expiration, or until told the renewal is deficient, whichever comes first

Cal. Ins. Code Sec. 1720(a) lets a licensee who has applied to renew continue under the existing license for 60 days after its expiration date, or until the department gives notice that the renewal application is deficient, whichever happens first. That protection depends on meeting the renewal requirements, including a timely application and completed continuing education, which this licensee did. The period is 60 days rather than 30, and it is capped rather than open-ended, so operating with no time limit is wrong. Stopping on the expiration date gives up a grace period the statute grants. Under Sec. 1720(b), the grace period is unavailable for a license that is suspended or revoked.

Answer: C. A manufactured home serving as the applicant's residence at a fixed site

In the FAIR Plan chapter, basic property insurance covers direct loss to real or tangible personal property at a fixed location within areas the commissioner designates, against the perils of the standard fire policy and extended coverage endorsement plus vandalism and malicious mischief. The definition expressly reaches manufactured homes and mobilehomes, on the same terms offered for other residential dwellings, so a manufactured home used as a residence qualifies. The same definition carves out three categories: automobile risks, which removes the delivery vans; commercial agricultural commodities or livestock, which removes walnuts held for sale; and farm equipment used for cultivating or for transporting agricultural commodities or livestock, which removes the tractor.

Answer: A. The named insured must be offered coverage for loss caused by earthquake

Section 10081 of the Insurance Code makes an offer of earthquake coverage a condition of issuing or delivering a residential property policy in California. The duty is to offer, not to sell, so the named insured is free to decline and is not required to buy the coverage. The statute does not make a signed waiver the trigger; what it requires is that the offer be made. It also draws no line by seismic zone: the requirement attaches to residential property policies issued or delivered in the state. If accepted, the coverage may be provided by endorsement or a specific provision in the policy itself, or in a separate earthquake policy or certificate.