III IC-99 common mistakes
III IC-99 · Understand the traps and how to avoid them.
Treating the coinsurance clause as a flat penalty and calculating the claim payout as the loss multiplied by the coinsurance percentage, rather than applying the formula (limit carried ÷ required limit) × loss, capped at the policy limit and subject to the deductible.
Candidates memorize '80% coinsurance' as a rate and skip the ratio step, especially when the carried limit already equals or exceeds the required limit and the correct answer is simply the loss minus deductible.
What to do instead
Before computing, write the required limit (coinsurance % × property value at loss), compare it to the carried limit, and only apply the ratio when the carried limit is lower. Practice three variants per problem: adequate limit, partial limit, and limit exceeded by the loss, so the cap and deductible order becomes automatic.
Confusing occurrence-basis and claims-made liability triggers, and misapplying the retroactive date and extended reporting period when deciding whether a claim is covered.
The two triggers use different date logic, and candidates default to 'the policy in force when the injury happened' regardless of the form, then forget that a claims-made policy with a retroactive date excludes prior acts.
What to do instead
Build a one-page decision tree: for occurrence, ask whether the injury or damage occurred during the policy period; for claims-made, ask whether the claim was made during the policy period, whether the act occurred on or after the retroactive date, and whether an ERP extends the reporting window. Run every scenario through the tree in writing before selecting an answer.
Assuming every policyholder is an insured for every coverage, ignoring named insured versus additional insured versus omnibus 'who is an insured' wording, and missing that some insureds have narrower coverage (for example, employees acting outside their duties, or additional insureds limited to vicarious liability).
Candidates read 'insured' as a single status and focus on the named insured on the declarations page, overlooking the form's insured-status section and endorsement modifications.
What to do instead
For each scenario, list every person or entity involved and classify them against the 'who is an insured' provision and any endorsements. Memorize the common narrowing patterns (additional insured status limited to liability arising out of the named insured's operations; employees covered only within scope of employment) and test each party against them.
Mixing up the duties of the insurer and the insured after a loss, particularly the insured's duty to give prompt notice, cooperate, submit a proof of loss, and mitigate damages, and treating a breach of a condition as automatically voiding coverage rather than analyzing prejudice and the policy's condition wording.
The claims-handling material is studied as a list of steps without assigning each step to a party, and candidates import a 'breach means no coverage' instinct that is too absolute.
What to do instead
Make a two-column table (insured duties, insurer duties) and add a third column for the consequence of noncompliance. Note that late notice defenses often depend on prejudice to the insurer and on state rules, so answer choices that categorically deny coverage are usually wrong unless the policy clearly conditions coverage.
Confusing the insuring agreement, exclusions, and conditions when identifying where a loss falls out, and citing an exclusion when the loss was never within the insuring agreement in the first place.
Candidates look for a reason to deny coverage and grab the first exclusion that sounds relevant, instead of first asking whether the peril or activity is covered at all.
What to do instead
Follow a fixed sequence for every coverage question: (1) is the peril or activity within the insuring agreement, (2) is there an exclusion, (3) does an exception to the exclusion restore coverage, (4) do conditions or limits reduce the payment. Write the step number next to the reason in your scratch notes.
Treating surplus lines and unauthorized insurers as identical to admitted insurers, and missing the diligent-search requirement, the lack of guaranty fund protection, and the different regulatory treatment of surplus lines brokers.
Licensing, admitted versus non-admitted status, and surplus lines eligibility are taught in the same regulatory unit, so candidates collapse them into one concept and overlook the procedural conditions that make a surplus lines placement lawful.
What to do instead
Create a comparison table for admitted, surplus lines, and unauthorized insurers covering: rate and form filing, guaranty fund eligibility, diligent search or declination requirement, broker licensing, and premium tax. Review the state's surplus lines eligibility list concept and the documented-search requirement before answering any placement question.
Confusing the agent's authority sources (express, implied, apparent) and attributing an act to the wrong one, or assuming an agent can bind coverage the insurer never authorized.
Apparent authority is judged from the perspective of a reasonable third party, while express and implied authority flow from the insurer's actual grant, and candidates apply the wrong viewpoint when evaluating a disputed act.
What to do instead
For each scenario, ask who created the impression and what the client reasonably believed. Label the authority as express (written in the agency agreement), implied (reasonably necessary to carry out express authority), or apparent (insurer's manifestations led the client to believe authority existed). Remember the insurer is generally bound by apparent authority it created, even if the agent exceeded actual authority.
Handling fiduciary responsibilities superficially, such as failing to distinguish premium trust obligations from commissions owed, or missing that commingling fiduciary funds and misrepresenting policy terms are separate violations with separate consequences.
Ethics questions read as 'common sense' items, so candidates pick the most obviously moral answer rather than the one matching the specific fiduciary or market-conduct rule being tested.
What to do instead
Study the fiduciary duties as concrete rules: premiums held in trust, timely remittance, no commingling of fiduciary funds, accurate records, and disclosure of compensation. For each ethics question, identify the specific duty or prohibited act named in the stem and match it to the rule rather than choosing the broadly 'good' answer.
Misreading the declarations page and endorsements as background instead of as controlling terms, and missing that an endorsement modifies the base form so the endorsement governs on conflict.
Candidates focus on the long policy form and skim the declarations and endorsement schedule, then apply the base-form limit or exclusion that the endorsement has already changed.
What to do instead
For every scenario, extract limits, deductibles, covered property or persons, and the forms schedule from the declarations first, then check the endorsement list before applying the base form. Remember the order of precedence: endorsement over printed form, and specific over general.
Confusing personal lines and commercial lines coverage triggers, such as applying homeowners liability or property limits to a business exposure, or using a commercial package form's coverage for a personal auto claim, without checking eligibility and the intended-use exclusions.
The same perils and liability concepts appear in both personal and commercial lines, so candidates answer from general principle and skip the eligibility and business-pursuits provisions that decide which form applies.
What to do instead
For each scenario, first classify the exposure as personal or commercial and state which form is designed for it. Then check the business-pursuits or business-property exclusions, eligibility rules, and any endorsement that extends coverage. Build a side-by-side comparison of homeowners versus commercial property and personal auto versus commercial auto triggers.