Commercial Auto, Garage and Aviation Practice Test (Part 2 of 2)

Correct answer: D. It is excluded as theft or conversion caused by the dealer's own employee

Garagekeepers Comprehensive normally includes theft, but the coverage excludes loss due to theft or conversion caused in any way by the named insured, its employees or its stockholders. A theft by the dealer's own employee falls squarely within that exclusion. Other garagekeepers exclusions include liability assumed under contract, defective parts or materials, and faulty work the insured performed.

Reference: ISO CA 00 25 10 13, Section I.E.4, Garagekeepers Exclusions

Correct answer: C. Nothing, because flood is not a garagekeepers specified cause of loss

Garagekeepers Specified Causes Of Loss Coverage is narrow: fire, lightning or explosion; theft; or mischief or vandalism. Flood is not listed, so the loss is not covered even though the direct primary option removes the need to prove liability. The physical damage Specified Causes Of Loss Coverage on the dealer's own autos is broader and does include flood, windstorm, hail and earthquake.

Reference: ISO CA 00 25 10 13, Section I.E.1.a(2) and Section I.F.1.a(2)

Correct answer: B. $23,200

Garagekeepers pays up to the limit shown for each location, after reducing the loss by the applicable deductibles. Total damage is 6 times $4,200, or $25,200. Six $500 deductibles would equal $3,000, but the declarations cap the deductible for all loss in any one event at $2,000. So $25,200 minus $2,000 equals $23,200, well within the $150,000 location limit, and the direct primary option makes the dealer's liability irrelevant.

Reference: ISO CA 00 25 10 13, Section I.E.5, Limit Of Insurance And Deductibles; CA DS 26 10 13, Item Five

Correct answer: A. It is excluded under the false pretense exclusion

The dealer's physical damage coverage excludes loss caused by someone inducing the dealer to voluntarily part with an auto by trick, scheme or false pretenses, and loss from acquiring an auto from a seller without legal title. Handing over a car for a counterfeit check is voluntary parting by trick, so it is not a covered theft. Garagekeepers does not apply because the car belongs to the dealer, not a customer.

Reference: ISO CA 00 25 10 13, Section I.F.3.c, False Pretense

Correct answer: D. $48,000

On a reporting basis, if the actual value at the loss location on the date of the last report exceeded what was reported, the insurer pays only a percentage: reported value divided by actual value. $400,000 divided by $500,000 is 80 percent, and 80 percent of $60,000 is $48,000. A separate rule caps payment at 75 percent of the location limit when the first report is delinquent, but that rule does not apply here.

Reference: ISO CA 00 25 10 13, Section I.F.4.d(2), Quarterly Or Monthly Reporting Premium Basis

Correct answer: C. Symbol 69

Symbol 69 covers trailers the motor carrier does not own while in its possession under a written trailer or equipment interchange agreement in which it assumes liability for loss to them; it pairs with Trailer Interchange Coverage. Symbol 70 is the reverse: trailers the carrier owns or hires while in someone else's possession under a written interchange agreement. Symbol 61 means any auto, and Symbol 68 means hired autos only.

Reference: ISO CA 00 20 10 13, Motor Carrier Coverage Form, Section I.A, Symbols 61 to 71 and 79

Correct answer: B. $750,000

Federal financial responsibility rules set a $750,000 minimum for for-hire carriers of nonhazardous property in interstate or foreign commerce using vehicles with a gross vehicle weight rating of 10,001 pounds or more. Higher minimums apply to hazardous cargo: $1,000,000 for oil and many hazardous materials, and $5,000,000 for certain hazardous substances hauled in bulk. Insurers commonly provide proof of coverage with an MCS-90 endorsement.

Reference: 49 CFR 387.9, Financial responsibility, minimum levels (Table 1); 49 CFR 387.7(d)

Correct answer: A. Replacing a transmission after an internal part fails

Mechanical breakdown coverage pays when a covered part fails or stops working as intended, such as an internal transmission failure. It typically does not cover accident damage, which belongs to collision coverage, or normal wear and tear such as worn brake pads. Routine maintenance like oil changes is usually the owner's cost, although a few contracts include it. Auto physical damage forms, by contrast, exclude mechanical breakdown.

Reference: FTC, Auto Warranties and Auto Service Contracts; Fla. Stat. 634.011 (motor vehicle service agreement definition)

Correct answer: D. The provider may deny it, since skipped maintenance can void coverage

Service contracts and mechanical breakdown policies commonly require the owner to follow the manufacturer's recommendations for routine maintenance, such as oil changes. Failing to do so can void the contract and end coverage, so owners should keep maintenance receipts. They should also check whether the provider must approve repairs or towing before work begins.

Reference: FTC, Auto Warranties and Auto Service Contracts (maintenance and pre-approval requirements)

Correct answer: B. $200

A per-visit deductible applies once each time the vehicle is serviced or repaired, no matter how many covered parts are fixed during that visit. Two visits mean two deductibles, or $200. A per-repair deductible applied to each item would have produced $300. Coverage also runs for a stated term, usually a number of months or miles, so failures after the term or mileage limit expires are not covered.

Reference: FTC, Auto Warranties and Auto Service Contracts (deductibles, months or miles term)

Correct answer: C. Hail damage while the airplane is tied down on the ramp

Ground risk hull not in motion covers the aircraft only while it is on the ground and not moving, for losses such as fire, theft, vandalism, windstorm, hail, flood or hangar collapse. Taxiing is ground risk in motion, while takeoff, flight and landing require in-flight hull coverage, which protects the aircraft in all phases, including while parked. In-flight coverage costs more because most aircraft damage happens while the aircraft is moving.

Reference: Aviation insurance overview: ground risk hull not in motion, in motion, and in-flight hull

Correct answer: A. Public liability, covering injury and damage to others outside the aircraft

Aircraft public liability, also called third party liability, pays for harm the aircraft causes to others, such as houses, cars, crops, airport facilities and barns. Passenger liability separately protects people riding in the aircraft and is often sold with a per-seat limit. A combined single limit merges public and passenger liability into one limit per accident. Hull coverages pay for damage to the insured aircraft itself, not to others.

Reference: Aviation insurance overview: public liability, passenger liability, combined single limit

Correct answer: D. The insurer may deny the claim for breach of the pilot clause

Aircraft policies contain approved pilot warranties: the aircraft is covered in flight only when flown by named pilots, or pilots meeting the open pilot warranty's experience requirements, who hold the required certificates. Flying with an expired medical certificate violates both the regulations and the pilot clause, giving the insurer grounds to deny coverage. Being listed by name does not excuse failing the certificate conditions.

Reference: AOPA, FAR Violations and Insurance Exclusions (2022); AOPA, Does My Own Aircraft Insurance Cover Me? (2022)

Correct answer: B. $260,000

A per-passenger sublimit caps what is paid for each person aboard, even when the occurrence limit is higher. The first passenger is capped at $100,000, the second receives the full $60,000, and the third is capped at $100,000, for $260,000. A smooth limit, with no per-passenger sublimit, would have made the whole $1,000,000 available and paid all $490,000. Owners who regularly carry passengers often buy smooth limits.

Reference: AOPA, What's the Benefit of a Smooth Limit? (2022)

Correct answer: C. The owner's insurer may pay the loss and then pursue Luis through subrogation

Being listed as an approved (named) pilot on a flight school's or owner's policy is not the same as being a named insured, so it does not eliminate a renter's need for coverage. After paying for the damaged aircraft, the owner's insurer may seek recovery from the renter through subrogation, and the owner's limits may be inadequate. Renter's (non-owned aircraft) policies provide liability coverage and can add physical damage coverage for the rented aircraft and the owner's loss of use.

Reference: AOPA, Renter Insurance (2014)