Texas Public Insurance Adjuster Exam Review

Flashcards covering the 165-line standard fire policy, homeowners insurance (HO-2, HO-3, HO-5), commercial property, Texas claim handling laws, and ethics for public insurance adjusters.

What is the exact wording for the insuring agreement in the 165-line standard fire policy?

The insurer will indemnify the insured for loss of or damage to property covered herein caused by fire or lightning.

Under the 165-line standard fire policy, what does the Coverage A limit of liability refer to?

The amount stated on the policy declarations for the insured building.

What is the consequence of any concealment, misrepresentation, or fraud touching the standard fire policy?

The entire policy is void from its inception.

When must an insurable interest exist for an insured to recover for a loss under the standard fire policy?

At the time of loss.

What are the steps in the appraisal process according to the standard fire policy conditions?

Insured and insurer each appoint an appraiser; the appointed appraisers select an umpire; an umpire makes a binding decision if appraisers disagree.

How is a loss allocated under the pro-rata liability clause when multiple concurrent fire policies exist?

Each insurer pays a portion of the loss equal to its policy limit divided by the combined limits.

Under the vacancy provision of a standard fire policy, coverage is suspended if the building is vacant for more than how many days?

$60$ days.

How is a fire caused by a lightning strike classified under the definitions of a standard fire policy?

Hostile fire.

On what peril basis is dwelling coverage written under an HO-3 policy?

Open peril basis.

Which specific peril is standardly excluded from the personal property section of an HO-3 policy?

Flood.

What is the standard HO-3 special limit of liability for the theft of jewelry, watches, and furs?

$$1,500$$

In an HO-2 policy, Coverage D (Loss of Use) is typically limited to what percentage of Coverage A?

$$30\%$$

What is the standard waiting period for seismic shocks to be treated as a single earthquake event under an earthquake endorsement?

$72$ hours.

Which index is used by the inflation guard endorsement to adjust dwelling coverage limits?

Consumer Price Index (CPI)

What coverage is standard in an HO-3 but missing from a standard DP-3 policy without endorsement?

Personal liability protection.

What is the limit for off-premises personal property protection on an HO-3 policy?

$10\%$ of the total Coverage C limit (or $1,000$, whichever is greater).

What is the primary requirement for a dwelling to qualify for the personal property replacement cost endorsement?

The structure must be the primary, owner-occupied residence of the insured.

What types of damage are covered under the water backup and sump overflow endorsement?

Physical damage caused by water/sewage backing up through drains, sewers, or overflowing from a sump pump system.

In a total fire loss, how does an ordinance or law endorsement with a specific limit operate?

The stated limit serves as an absolute cap on payments for increased construction costs driven by local ordinance compliance.

How is a loss settled for a painting specifically scheduled for $5,000$ on a homeowner's policy?

The insurer pays the exact scheduled amount ($5,000$) regardless of market value.

What is the formula for calculating Actual Cash Value (ACV)?

$$\text{Replacement Cost} - \text{Depreciation}$$

If a policy has a $100,000$ Coverage A limit, a $1\%$ deductible, and a $5,000$ loss, how much will the insurer pay?

$4,000$ (calculated as $5,000 - (100,000 \times 0.01))$

Which of the following is NOT a mandatory 'Duty After a Loss' for the insured?

Hiring a public adjuster to submit the proof of loss.

Which perils are excluded by standard property forms after a property has been vacant for more than $60$ consecutive days?

Vandalism, malicious mischief, and glass breakage.

What is the term for the principle where broadened coverage automatically applies to existing policies without additional premium?

Liberalization.

What type of disputes is the 'Appraisal' clause designed to resolve?

Disputes over the dollar amount of the loss.

Which provision prevents the insured from leaving damaged property to the insurer to claim a total loss?

The Abandonment Clause.

What is the process called when an insurer pursues a negligent third party to recover funds paid to an insured?

Subrogation.

Without endorsements, what is the maximum an insurer is obligated to pay for a Coverage A loss?

The policy limit stated on the Declarations page.

What is a 'short-rate' cancellation?

A cancellation where the insurer retains a higher percentage of the premium than the elapsed time dictates, often due to the insured canceling early.

What is the standard automatic percentage for Coverage B (Other Structures) on an HO-3 policy?

$10\%$ of the Coverage A limit.

Which of the following water-related losses is a named peril under an HO-3 policy?

Sudden and accidental tearing apart or bursting of a heating or plumbing appliance.

On what basis does an HO-3 policy cover personal property (Coverage C)?

Named perils basis.

Which coverage part pays for Additional Living Expenses (ALE) if a home is uninhabitable due to a covered loss?

Coverage D (Loss of Use).

Why do insurers place internal sub-limits on items like jewelry, watches, and firearms?

To control risk concentration on highly theft-prone luxury categories.

What is the standard policy territory for a domestic property insurance form?

The United States, its possessions, Canada, and Puerto Rico.

Under a standard Texas Homeowners policy, when is interior wind/hail damage to personal property covered?

Only if the wind or hail first creates an opening in the roof or walls through direct physical force.

What is the primary advantage of an HO-5 policy over an HO-3?

It provides open perils coverage for both the dwelling and personal property.

Under Coverage B, what distinguishes an 'Other Structure' from a Coverage A structure?

It is detached or connected only by a fence, utility line, or open space.

What is the doctrine of Concurrent Causation?

If a loss is caused by two perils simultaneously and one is excluded (like flood), the entire loss is excluded.

Under BPP, where do tenant improvements and betterments (additions that cannot be removed) fall?

Your Business Personal Property.

On what basis does the Commercial 'Causes of Loss - Special Form' provide coverage?

Open perils / All-risk.

What does Business Income Coverage Form pay for during a suspension of operations?

Net income plus continuing normal operating expenses.

What is the purpose of 'Extra Expense' coverage?

To compensate for money spent to minimize or avoid a shutdown, such as renting temporary operational space.

What is the coinsurance formula?

$$\frac{\text{Did}}{\text{Should}} \times \text{Loss}$$

Which Inland Marine form protects a business's shipping inventory while transported land-side by common carriers?

Transit Coverage Form (Annual or Trip Transit).

What is protected by the Commercial Inland Marine 'Jewelers Block' form?

Retail stock including precious metals/stones and customer goods left for repair, on or off premises.

When does the 'Period of Restoration' for Business Income coverage typically begin?

$72$ hours after the time of direct physical loss.

What is the Texas Liquidated Demand / Valued Policy Law?

A law stating that for a total loss of real property by fire, the policy constitutes a demand for the full face value of the policy limit.

Which catastrophic peril is almost universally excluded from standard commercial policies and requires specialized coverage?

Flood or surface water accumulation.

Under the Texas Prompt Payment of Claims Act, how many days does a carrier have to acknowledge a claim and begin an investigation?

$15$ days ($30$ business days for eligible surplus lines insurers).

In Texas, once all documentation is received, how long does an insurer have to accept or reject a claim?

$15$ business days.

Within how many business days must a Texas insurer issue a check after notifying the insured they will pay the claim?

$5$ business days.

By how many days can the Texas Commissioner of Insurance extend claim deadlines during a catastrophic weather event?

$15$ days.

What is the maximum statutory cap for a public adjuster's fee in Texas?

$10\%$ of the final claim settlement.

Why is it prohibited for a public adjuster to act as the repair contractor on the same claim?

It constitutes a direct conflict of interest and violates ethics regarding self-dealing.

How many hours of Continuing Education (CE) must a Texas Public Adjuster complete every two years?

$24$ hours (including $2$ hours of Ethics).

Within what timeframe must a Public Adjuster notify TDI of a change of address?

$30$ days.

How long is the 'cooling-off' period for a public adjuster contract in Texas?

$3$ business days.

Which body is responsible for monitoring the insurance market and policing licensing in Texas?

Texas Department of Insurance (TDI).

Which endorsement is needed to protect against sewer or drain backup?

Water Backup and Sump Discharge Endorsement.

What does an 'Ordinance or Law' endorsement cover?

The increased cost of construction necessary to comply with modern building codes during a repair.

What is the maximum limit for building coverage under the NFIP Dwelling Form for a single-family home?

$$250,000$$

What is the legal definition of a 'Flood' under NFIP guidelines?

Inundation of $2$ or more acres of normally dry land OR $2$ or more properties (one of which is the insured's).

What is the mandatory waiting period for a new NFIP policy to become effective?

$30$ days.

How does scheduling an item on a homeowners policy affect its coverage?

It removes theft sub-limits, provides agreed value coverage, and often eliminates the deductible.

When is a commercial building legally considered 'vacant' under ISO conditions?

Unless at least $31\%$ of its total square footage is actively leased or utilized.

What is the automatic seasonal increase for personal property in a Businessowners Policy (BOP)?

$$25\%$$

What does 'Pro-Rata Liability' mean in a claim settlement involving multiple policies?

Each insurer pays a proportionate share based on its percentage of the total combined policy limits.

What is the function of an 'Inflation Guard' endorsement?

It automatically updates coverage limits throughout the year to keep pace with localized building material inflation.

Under the Texas DTPA, what is the maximum award for an intentional violation by an insurance professional?

Up to treble (triple) the actual economic damages.

What constitutes an 'Unfair Claim Settlement Practice' regarding investigation?

Failing to conduct a reasonable investigation before refusing to pay a claim.

To whom does a Public Adjuster owe a fiduciary duty?

The insured/policyholder who contracted their services.

In Texas, what is the minimum notice period for cancellation of a homeowners policy for non-payment of premium?

$10$ days.

What is the notice requirement for mid-term cancellation for reasons other than non-payment in Texas?

$30$ days.

What must be included in all advertisements by a Texas Public Adjuster?

Their legal name and license number as registered with TDI.

What is the consequence of a public adjuster splitting commissions with an unlicensed individual?

It is a severe administrative violation leading to license suspension or revocation.

Under Texas law, what is 'bad-faith' coercion in claim settlement?

Intentionally delaying a settlement check to force an insured into accepting a lower payout.

What power does the Texas Insurance Commissioner have over unlicensed individuals practicing public adjusting?

The power to issue a Cease and Desist Order and impose administrative fines up to $25,000$ per violation.

What two primary coverages are combined in a standard Businessowners Policy (BOP)?

Property and Commercial Liability.

What types of businesses are eligible for a BOP?

Low-hazard, small-to-medium operations like local dry cleaners or boutique retail shops.

What does a 'Contractors Equipment Floater' cover?

Mobile machinery, tools, and heavy equipment used at various job sites.

What is protected by an 'Installation Floater'?

Building materials or high-value machinery (like HVAC units) before/during installation until the job is completed.

In Ocean Marine, what is 'Jettison'?

The voluntary, intentional throwing of cargo overboard to save the ship and crew during an emergency.

How are Business Income and Extra Expense coverages typically paid under a BOP?

On an 'Actual Loss Sustained' basis for up to $12$ months without a fixed dollar limit.

What does the 'Running Down Clause' in Ocean Marine insurance cover?

Legal liability costs incurred when the insured ship collides with another vessel.

What is the 'Commercial Articles Coverage Form' specifically designed for?

Professional photographic equipment and musical instruments used for business.

Under a BOP, by how much is a payout reduced for a windstorm if the building is vacant for more than $60$ days?

$$15\%$$

What is the Ocean Marine term for intentional illegal acts by a ship's crew against the owner's interests, like stealing cargo?

Barratry.

What is the minimum age to obtain an insurance license in Texas?

$18$ years old.

How many days does an adjuster have to respond to a formal inquiry from TDI?

$21$ calendar days.

What is the criminal classification of unlicensed public adjusting in Texas?

Class A Misdemeanor.

How long does a public adjuster have to report a felony conviction to TDI?

$30$ days.

What are public adjusters strictly barred from using to solicit clients?

'Storm chasers' or steering agents who use deceptive or high-pressure tactics.

How long can a lapsed public adjuster license be renewed with only a late fee penalty?

Up to $90$ days after expiration.

What is the primary statutory purpose of TDI licensing regulations?

To protect the public by certifying the competence, honesty, and financial responsibility of insurance professionals.

What is the maximum administrative fine for violating a cease-and-desist order in Texas?

$25,000$ per violation.

What is 'Twisting' under Texas insurance statutes?

Making false/misleading comparisons to manipulate a consumer into dropping an existing policy for a new one to their detriment.

Can a Texas Public Adjuster represent both the policyholder and the carrier on the same claim?

No, it is an absolute dual agency conflict of interest and is strictly prohibited.