CALA Insurance Policy and Regulations 2 — Questions and Answers
Question 1: Under a standard personal auto policy, what does the 'other than collision' (OTC) coverage typically exclude?
- Flood damage (Correct answer)
- Theft of the vehicle
- Collision with an animal
- Vandalism
Correct answer: Flood damage
Flood damage is actually covered under OTC/comprehensive coverage, not excluded — this is a common misconception; OTC excludes losses caused by collision.
Question 2: Which state regulation requires insurers to offer uninsured motorist (UM) coverage to all personal auto policyholders?
- Most states require UM to be offered, though policyholders may reject it in writing (Correct answer)
- Only no-fault states require UM coverage
- UM coverage is entirely optional with no state mandate
- Federal law uniformly requires UM coverage in all states
Correct answer: Most states require UM to be offered, though policyholders may reject it in writing
The majority of states mandate that insurers offer UM coverage, but allow policyholders to reject it through a signed written waiver.
Question 3: What is the purpose of an 'other insurance' clause in an auto liability policy?
- To void coverage when another policy exists
- To coordinate benefits and prevent duplicate recovery when multiple policies apply (Correct answer)
- To require the insured to exhaust other coverage first
- To limit the insurer's total payout to the policy premium paid
Correct answer: To coordinate benefits and prevent duplicate recovery when multiple policies apply
The 'other insurance' clause coordinates benefits among multiple applicable policies to prevent the insured from collecting more than the actual loss.
Question 4: A CALA adjuster reviews a policy with a '$500 deductible per occurrence' for collision coverage. The insured has two separate collisions in the same policy period. How many deductibles apply?
- One deductible for the entire policy period
- Two deductibles — one per occurrence (Correct answer)
- No deductible if the insured has a clean record
- The deductible only applies to the larger of the two losses
Correct answer: Two deductibles — one per occurrence
A 'per occurrence' deductible applies separately to each distinct loss event, so two separate collisions each trigger their own deductible.
Question 5: Under the PAP (Personal Auto Policy), which of the following persons is typically considered an 'insured' for liability coverage?
- A neighbor who borrows the vehicle without permission
- A family member residing in the household (Correct answer)
- A mechanic test-driving the vehicle for repairs
- A person using the vehicle for commercial delivery
Correct answer: A family member residing in the household
Under the PAP, resident family members are automatically covered as insureds for liability, whereas permissive use, unauthorized use, and commercial exclusions may apply in other scenarios.
Question 6: What is the primary purpose of a 'named driver exclusion' endorsement on an auto policy?
- To exclude coverage for the vehicle itself
- To remove a specific high-risk driver from coverage while keeping the policy in force (Correct answer)
- To increase the premium for all listed drivers
- To limit liability coverage to the policy minimum
Correct answer: To remove a specific high-risk driver from coverage while keeping the policy in force
A named driver exclusion endorsement eliminates coverage for a specific individual, allowing the insurer to avoid risk posed by that driver while the rest of the policy remains active.
Question 7: Which of the following best describes 'subrogation' as it applies to auto insurance claims?
- The insured's right to sue their own insurer for bad faith
- The insurer's right to recover paid claim amounts from a liable third party (Correct answer)
- The process of canceling a policy after a major loss
- A method of splitting liability between two insurers
Correct answer: The insurer's right to recover paid claim amounts from a liable third party
Subrogation transfers the insured's right of recovery to the insurer after a claim is paid, allowing the insurer to pursue the at-fault third party.
CALA Insurance Policy and Regulations 2
Under a standard personal auto policy, what does the 'other than collision' (OTC) coverage typically exclude?