CA Property & Casualty common mistakes
CA Property & Casualty · Understand the traps and how to avoid them.
Answers 'estoppel' when the stem describes an insurer voluntarily giving up a known right (such as accepting a late premium and continuing coverage), and 'waiver' when the stem describes the insured having relied on the insurer's conduct to their detriment.
Both terms describe an insurer losing the ability to enforce a policy right, and they are usually defined back-to-back in one paragraph of study material. Because the definitions sound identical, candidates match on the word 'gave up' rather than on whether detrimental reliance is present.
What to do instead
Run every stem through one filter: did the insurer intentionally relinquish the right (waiver), or did the insured reasonably and detrimentally rely on the insurer's conduct so the insurer is barred from asserting the right (estoppel)? Memorize the trigger phrases: 'voluntarily surrendered or abandoned' = waiver; 'relied to their detriment / cannot now deny' = estoppel. If no reliance is described, it cannot be estoppel.
Classifies an agent's power to do something customary for that kind of agency but never spelled out in the agency agreement as 'apparent authority' instead of 'implied authority'.
Express, implied, and apparent authority are memorized as a three-item list, and implied and apparent both mean 'not written down'. Exam stems often involve a third party, which pushes candidates toward 'apparent' even when the third party's belief is never discussed.
What to do instead
Attach each type to its source. Express = written or spoken grant in the agency contract. Implied = derived from the duties expressly granted (the acts necessary to carry them out). Apparent = created by the principal's words or conduct that led a third party to reasonably believe authority existed. If the stem never establishes a third party's reasonable belief based on the principal's conduct, it is not apparent authority.
Requires insurable interest to exist at the time of loss on a life insurance question, or only at the time of application on a property question.
The general rule 'insurable interest is required' gets memorized without the timing split. Life and property stems are written in similar language, so the timing distinction never gets triggered during the exam.
What to do instead
Memorize the pair as one line: life insurance requires insurable interest at application/policy issue (the beneficiary does not need insurable interest at the insured's death); property insurance requires insurable interest at the time of loss. If a stem involves a property sale or a destroyed building, ask who held the interest on the date of loss, not who applied.
Multiplies the loss by the coinsurance percentage (for example, taking 80% of an $80,000 loss) instead of comparing the amount of insurance carried to the amount required.
The percentage is printed prominently in the policy, and the correct method is a three-step calculation. Under time pressure candidates grab the only number they remember and skip the 'did I meet the requirement' step entirely.
What to do instead
Write out three lines every time: (1) required insurance = coinsurance percentage × value at time of loss; (2) divide insurance carried by the required amount, capping the ratio at 1.0; (3) multiply that ratio by the covered loss, then subtract the deductible. If insurance carried equals or exceeds the required amount, the full covered loss is paid with no penalty; if the required amount exceeds the policy limit, use the limit in step one.
Applies a commercial coinsurance penalty to a homeowners loss, or pays full replacement cost on a dwelling loss without checking whether the dwelling limit met the 80% replacement-cost threshold.
The commercial coinsurance clause and the homeowners replacement-cost condition both use an 80% figure, so the two get merged in memory, and candidates assume any policy mentioning 80% penalizes partial losses the same way.
What to do instead
Keep the distinction explicit: commercial property policies contain a true coinsurance clause that penalizes partial losses when the limit is too low; homeowners forms contain no coinsurance clause, but the replacement-cost condition requires the dwelling limit to be at least 80% of full replacement cost for full replacement-cost settlement. Also remember homeowners pays actual cash value first and the recoverable depreciation after repairs are completed and documented.
On a claims-made liability policy, decides coverage using the date the injury or damage occurred, or ignores the retroactive date because the claim was reported during the policy period.
Most general liability policies in circulation are occurrence forms, so occurrence-date thinking becomes the default. The retroactive date appears only on the declarations page and is easy to skim past.
What to do instead
For claims-made coverage, require both answers to be yes: the claim was first made or reported during the policy period (or the extended reporting period), and the occurrence took place on or after the retroactive date shown in the declarations. If no retroactive date is shown, coverage does not reach back before the policy's inception.
Assumes an injured claimant who is more than 50% at fault recovers nothing, or assumes every defendant is jointly liable for the entire judgment.
Contributory negligence and joint-and-several liability are taught in many general business and legal courses, and that prior learning overrides the California-specific rules unless they are deliberately practiced.
What to do instead
State the California rule before answering: pure comparative fault, so a claimant recovers damages reduced by their own percentage of fault no matter how high it is, even 90%. On multiple defendants, California abolished joint and several liability for non-economic damages, while defendants can still be jointly liable for economic damages. A stem where a majority-at-fault plaintiff still collects is correct under California law.
Selects 'sharing part of the commission with the applicant' or 'paying the applicant's first premium' as an acceptable way to win the account, or assumes it is legal as long as the same offer is made to every applicant.
Discounting and incentives are normal in other industries, and the 'must be offered to all equally' idea feels like a fairness rule that would cure the problem. The filed-rate exception is also misread as covering producer commissions.
What to do instead
In California a producer may not rebate any part of the commission, and may not give anything of value not specified in the policy as an inducement to buy. The narrow exceptions are insurer-paid or insurer-approved advertising and a premium reduction under filed rates. Anything paid out of the producer's own pocket, or any unequal inducement, is an illegal rebate and a license hazard.
Mixes up the claims-handling clocks, for example stating the insurer must accept or deny a claim within 30 days, or must pay within 40 days of the settlement agreement.
The Fair Claims Settlement Practices Regulations contain several separate clocks (acknowledge, accept or deny, pay) that are studied as one block, so the numbers blur together and get reassigned to the wrong step.
What to do instead
Lock the sequence: 15 days to acknowledge receipt of a claim and to respond to claimant communications; 40 days after receipt of proof of claim to accept or deny the claim; 30 days after the settlement agreement is reached to pay the claim. Recite it as 15 - 40 - 30 in that order every time before answering a timelines question.
Tells a client that earthquake damage is included in a standard homeowners policy, or sends a declined homeowner to the FAIR Plan as a first-resort market for any coverage need.
Earthquake coverage is bundled into homeowners policies in some states and into standard study summaries, and the FAIR Plan and the California Earthquake Authority are both filed under 'high-risk programs' without their specific triggers being separated.
What to do instead
Two anchors: California homeowners and renters policies must offer earthquake coverage as a separate endorsement or a companion CEA policy, and the offer must be documented, but the coverage is never automatic. The FAIR Plan is the property market of last resort for basic fire and extended coverage, used only after the voluntary market declines the risk; earthquake is placed through the CEA or a standalone endorsement, not by assuming it rides along.