Free Kentucky Property practice questions

Answer: A. At least 75 days before the effective date of cancellation

Under Kentucky law, a cancellation notice for a policy subject to KRS 304.20-300 to 304.20-350 must be in writing and must be mailed or delivered at least 75 days before cancellation takes effect once the policy has been in effect more than 60 days. An eight-month-old policy canceled for a reason other than nonpayment needs the 75-day notice. The 14-day period applies only when the cancellation is for nonpayment of premium or occurs within 60 days of issuance. This section sets no 20-day cancellation period, and its 30-day figure concerns an insurer's renewal offer, not a cancellation notice.

Answer: D. Prohibited, because an auto application may not be declined solely for a prior declination

Kentucky's automobile cancellation and nonrenewal statute bars an insurer or agent from declining, refusing to renew, or canceling a covered auto policy solely because another insurer previously declined the applicant or ended a policy in which the applicant was the named insured. A declination resting on that reason alone is prohibited. A prior declination is not among the reasons the statute allows for cancellation, which are limited to grounds such as nonpayment of premium, a suspended or revoked license or registration, and fraud or material misrepresentation. The statute's 60-day rule concerns which cancellation reasons apply to a new policy; it does not limit the bar on declining for a prior declination. Credit history is a separate listed reason, and the bar on a prior declination stands on its own.

Answer: B. On April 10, when the insurer issues the policy for which the binder was given

Under Kentucky's binder statute, a binder is valid only until the policy it was given for is issued or until 90 days from its effective date, whichever is shorter. Here the policy was issued on April 10, which is earlier than 90 days after March 1, so the binder ended at issuance. The 90-day limit does not apply regardless of issuance, because the shorter of the two periods controls. The statute sets no 30-day limit; the commissioner's written approval matters only for extending a binder beyond 90 days when no policy has been issued. The statute does not make a binder's end depend on a notice to the insured.

Answer: C. 24 hours of approved courses, including 3 hours in ethics

KRS 304.9-295(4) requires a nonexempt agent licensee to complete at least 24 hours of continuing education each biennium, and 3 of those hours must concentrate on ethics. Subsection (6)(a) adds that only courses the commissioner approves count toward the requirement. A 20-hour or 30-hour total misstates the required minimum, and 6 ethics hours doubles the ethics share the statute sets.

Answer: B. $400,000, the amount beyond what authorized insurers would write

KRS 304.10-040(1) permits surplus lines placement through a licensed surplus lines broker only after a licensed agent, using diligent effort, cannot obtain the full amount of coverage from authorized insurers that actually write that kind and class in Kentucky. Where a smaller amount can be obtained, only the excess needed to reach the full amount may be exported. Here that excess is $400,000. Exporting the full $1,000,000, or any amount the client prefers, ignores that excess-only limit. Partial availability in the admitted market does not bar export of the shortfall, because the statute expressly provides for exporting it.

Answer: B. Title insurance, which the Insurance Code defines in a separate section

KRS 304.5-050 defines property insurance broadly. It reaches insurance on real or personal property, and on any interest in that property, against loss or damage from any hazard, plus loss that follows as a consequence of that damage. The section then states that title insurance, defined in KRS 304.5-090, is not property insurance. Consequential loss, personal property and partial interests in real property all fall inside the definition, so none of them is excluded. The definition also carves out noncontractual legal liability for property loss, which is not among the choices.

Answer: B. Prohibited, because employment may not be offered to a prospect as an inducement

Kentucky's illegal inducement statute prohibits an insurer, an insurance producer, or any other person from offering or promising employment to an insured or prospective insured as an inducement to insurance. A paid position offered in exchange for placing coverage is exactly that. The prohibition is not limited to insurers, because producers and other persons are named alongside them. Employment is listed in the section together with securities and advisory board contracts, so the section is not confined to those two. The section sets no dollar threshold comparing the value of the inducement with the premium.

Answer: A. Only if each payment is made whether or not the referred buyer purchases coverage

KRS 304.9-425(4) provides that a referral by an unlicensed person to a licensed agent, without discussion of specific policy terms and conditions, is not a service as an agent. Subsection (5) then allows an agent to pay compensation to an unlicensed individual for referring a consumer, but only if the payment is made regardless of whether coverage is sold. Tying payment to a completed sale, or scaling it to the premium on the sale, makes it depend on the policy being sold, which subsection (5) does not permit. A flat ban on any payment misreads subsection (5), which expressly permits a referral payment that does not depend on a sale.

Answer: D. To enforce the Insurance Code's provisions and penalties against the agent

KRS 304.9-440(6) states that the commissioner keeps the authority to enforce the chapter's provisions and penalties against anyone under investigation for, or charged with, a violation, even if the license was surrendered or has lapsed by operation of law. Converting moneys received in the course of insurance business is itself a listed ground for discipline under subsection (1)(d). Because the authority survives the lapse, it is not ended by the lapse, not limited to future applications, and not conditioned on a reinstatement request.

Answer: C. A private insurer's homeowners policy on a dwelling

The scope section of Subtitle 36 applies the subtitle to all kinds of direct insurance except the kinds it lists. Those exceptions include title insurance, ocean marine insurance, and insurance of warranties or service contracts, so each of those policies falls outside the subtitle. A homeowners policy written by a private insurer is not among the listed exceptions, so it falls within the subtitle's scope.