Free North Carolina Casualty practice questions

Answer: A. A surety bond in the principal sum of at least one hundred thousand dollars, posted with the Secretary of State, issued by a surety company licensed in this State and subject to that office's approval.

Article 1 treats a warranty on fixtures to real property as insurance, with two carve-outs. One covers a warranty given by the builder or the seller of the property itself. The other covers the kind described here, which promises repair or replacement of the covered items for defective parts and mechanical failure or ordinary wear and tear while excluding recognizable perils such as fire, flood and wind that are unrelated to a defect and do not come from wear and tear. For that second carve-out the Article makes issuing the warranty unlawful unless a bond of at least one hundred thousand dollars has been lodged with the Secretary of State, written by a surety company licensed here and subject to that office's approval. Anyone holding such a warranty may sue the warrantor and the bond together for a breach of it.

Answer: A. A notice that meets all of the Act's content requirements was already given to that policyholder at some point in the 24 months before this renewal date.

For a renewal the Act sets the renewal date as the outside limit for the notice, and then supplies two escapes from it. One is that the personal information was gathered only from the policyholder or from public records. The other is that a conforming notice has already gone to that policyholder within the previous 24 months. On these facts the insurer is gathering from a third-party source, so the first escape is closed to it and the 24-month escape is the only one left. The premium figure is beside the point: the notice duty in this section is triggered by the renewal and by where the information comes from, not by what the renewal costs. An authorization form is a separate instrument governed by its own section and does not stand in for the notice.

Answer: B. Yes, because she was required to be licensed at the time of each of those sales and in fact did hold a license then.

G.S. 58-33-82(c) permits renewal and other deferred commissions to go to a person for selling, soliciting or negotiating insurance here, provided Article 33 required that person to be licensed when the business was written and the person held the license then. The test the subsection sets is therefore the license held when the sale was made, not the one held when the money changes hands. Subsection (a) is what makes the distinction matter, because it bars payment where the person was required to be licensed and was not, and subsection (c) lifts deferred and renewal commissions out of that bar on the stated condition. The subsection fixes no run-off period measured from the lapse and calls for no approval from the Commissioner.

Answer: C. Three counts, each a Class H felony, since each claim is under $100,000

G.S. 58-2-161(b) makes it unlawful, with intent to injure, defraud or deceive an insurer, to present a statement supporting a claim while knowing it contains false or misleading information on a material point, and an invoice is one of the statements the section defines. The section treats each claim as a separate count. Subsection (c) grades the offense by the amount of the claim: under $100,000 is a Class H felony, and $100,000 or more is a Class C felony. Each of the contractor's claims is below $100,000, so each of the three counts is a Class H felony. Adding the claims together to reach the Class C level ignores that the grade turns on the amount of the claim, and treating them as a single count ignores the separate-count rule.

Answer: A. The insured is deemed to have complied with the proof-of-loss requirement, because the insurer did not furnish a blank within 15 days after receiving notice.

Article 3 puts the burden of supplying the paperwork on the company that demands it. When a policy requires written proof of loss after notice has been given, the company or its representative must furnish a blank for that purpose, and if no blank arrives within 15 days of the notice the claimant is deemed to have complied with the policy's proof-of-loss requirement. The relief is specific and limited in two ways worth noticing. The claimant still has to submit written proof covering the occurrence, character and extent of the loss, and still has to do it within the time the policy fixes for proofs of loss, so the clock is not suspended. And being deemed to have complied with a condition says nothing about whether the loss is covered or what it is worth.

Answer: D. Before or at the same time as the billing for the additional premium, by mailing her a notice that states the basis for the loss.

The timing is the point of this provision: the notice comes before the billing for the additional premium or simultaneously with it, never after, and it is mailed to the named insured under rules the Commissioner adopts. What it must contain is the basis for the surcharge or the loss of the discount. A second, separate entitlement follows on request: if the named insured asks in writing, the insurer must promptly mail a statement of the amount of increased premium attributable to the surcharge or the lost discount, which is why the answer promising a statement of the amount is a real duty attached to the wrong trigger and the wrong time. The statement of the basis is privileged, and the statute shields the insurer, its representatives and anyone who supplied the underlying information from a defamation or invasion-of-privacy action over it, unless the statement or the furnishing was made with malice or in bad faith.

Answer: B. The conduct must be committed or performed with such frequency as to indicate a general business practice.

The unfair claim settlement practices subdivision is built differently from the rest of the article. It lists fourteen kinds of conduct, failing to affirm or deny coverage within a reasonable time after proof-of-loss statements are complete among them, but it condemns them only when they are committed or performed "with such frequency as to indicate a general business practice". A single lapse therefore does not make out a violation of this subdivision, however unsatisfactory it was for the claimant. The subdivision also contains its own limit on who may complain of it: the statute provides that no violation of the subsection of itself creates a cause of action in favor of any person other than the Commissioner. Neither a prior cease and desist order nor proof of monetary damage is part of the test the subdivision sets.

Answer: B. He is strictly liable for the unpaid claim, and that liability is joint and several with anyone else who violated the section.

The section makes a person who violates it strictly liable for losses or unpaid claims where an unauthorized insurer fails to pay, in whole or in part, a claim within the coverage of a policy issued in breach of the Article, and it makes that liability joint and several where more than one person violated the section. Strict liability is what disposes of the knowledge-based option: the insured does not have to prove what the agent foresaw about the insurer's ability to pay. The reading that waits for a criminal conviction fails on an express provision of the same section, which allows a civil action whether or not a criminal action is brought and whether or not a conviction is obtained for the same act. The Article states that this liability is in addition to other penalties or remedies provided by law.

Answer: B. Twenty-four credits during each biennial compliance period, of which three must come from an ethics course.

The licensee requirements rule sets one number and one subject requirement. The requirement is attached to a list of licenses, casualty among them, alongside life, accident and health or sickness, property, personal lines and adjuster. A licensee on that list has to earn 24 insurance continuing education credits in every biennial compliance period, and has to take an ethics course or courses worth three of those credits in each such period. The period is the measure that makes the number intelligible: the definitions rule in the same section fixes a biennial compliance period as the 24-month span during which a licensee has to comply, so 24 credits is a two-year obligation rather than an annual one.

Answer: C. The jury has submitted to it the other felony so proved, and the defendant cannot afterwards be prosecuted for embezzlement upon the same facts.

The first proviso in the section deals with exactly this mismatch between what was charged and what the evidence showed. Where a trial on a false pretenses indictment produces proof that the taking was really a larceny or an embezzlement, the statute directs that the other felony so proved goes to the jury. It then shuts the door on a second prosecution: a person tried under the section cannot afterwards be prosecuted for larceny or embezzlement on those same facts. The indictment is therefore not wasted and the trial is not begun again, and a later embezzlement charge on the same facts is barred rather than invited.