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OK Property & Casualty practice questions

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Question 1Oklahoma Insurance Laws, Rules, and Regulations

Oklahoma's insurance statutes are codified in which title of the Oklahoma Statutes?

  1. Title 47
  2. Title 36 Correct answer.
  3. Title 68
  4. Title 12

Explanation

The Oklahoma Insurance Code is codified at Title 36 of the Oklahoma Statutes and is the primary source of insurance law in the state. Other titles cover unrelated subjects and do not contain the insurance statutes.

Question 2Oklahoma Insurance Laws, Rules, and Regulations

Who administers and enforces Oklahoma's insurance laws?

  1. The Attorney General
  2. The Corporation Commission
  3. The State Treasurer
  4. The Insurance Commissioner Correct answer.

Explanation

Oklahoma vests administration and enforcement of its insurance laws in the Insurance Commissioner, who heads the Insurance Department. The other officials have no general regulatory authority over insurers and producers.

Question 3Oklahoma Insurance Laws, Rules, and Regulations

How long is the term of office of the Oklahoma Insurance Commissioner?

  1. Two years
  2. Four years Correct answer.
  3. Three years
  4. Six years

Explanation

The Commissioner is a statewide elected official who serves a four-year term, which runs alongside other statewide executive officers. Terms of two, three, or six years do not apply to this office.

Question 4Oklahoma Insurance Laws, Rules, and Regulations

An insurer that is organized and chartered under the laws of Oklahoma is classified as:

  1. A foreign insurer
  2. An alien insurer
  3. A domestic insurer Correct answer.
  4. A surplus lines insurer

Explanation

An insurer formed under the laws of the state of Oklahoma is a domestic insurer in Oklahoma. The same company would be a foreign insurer in any other state and an alien insurer if chartered outside the United States.

Question 5Oklahoma Insurance Laws, Rules, and Regulations

A producer who collects premiums from insureds holds those funds:

  1. As a loan from the insurer
  2. As personal property of the agency
  3. As earned income on receipt
  4. In a fiduciary capacity Correct answer.

Explanation

Premiums collected on an insurer's behalf are held in trust for the insurer and must be kept separate from the producer's own funds. Using them as personal or agency money is a misuse of fiduciary funds and a licensing violation.

Question 6Oklahoma Insurance Laws, Rules, and Regulations

An agent who offers a prospect part of her commission in order to win the account is engaged in:

  1. Coercion
  2. Rebating Correct answer.
  3. Defamation
  4. Twisting

Explanation

Rebating means offering any inducement not stated in the policy, such as a share of commission, to persuade a buyer to purchase insurance. Oklahoma treats rebating as an unfair trade practice subject to penalty.

Question 7Oklahoma Insurance Laws, Rules, and Regulations

For bodily injury caused by an auto accident, Oklahoma uses which liability system?

  1. Tort (at fault) Correct answer.
  2. Add-on no-fault
  3. Pure no-fault
  4. Choice no-fault

Explanation

Oklahoma is a tort liability state, so the driver at fault can be held legally responsible for the other party's injuries and damages. No-fault systems limit lawsuits and require first-party benefits, which Oklahoma does not mandate.

Question 8Oklahoma Insurance Laws, Rules, and Regulations

Because standard homeowners policies exclude flood damage, a homeowner usually obtains flood coverage from:

  1. A state windstorm pool
  2. The insurer's catastrophe fund
  3. The National Flood Insurance Program Correct answer.
  4. The Oklahoma Insurance Department

Explanation

Flood is excluded in standard homeowners forms and is written separately, generally through the National Flood Insurance Program or a private flood market. A producer should point out this exclusion when delivering a policy.

Question 9Oklahoma Insurance Laws, Rules, and Regulations

What are the minimum auto liability limits required in Oklahoma?

  1. $20,000/$40,000/$15,000
  2. $15,000/$30,000/$10,000
  3. $25,000/$50,000/$25,000 Correct answer.
  4. $30,000/$60,000/$25,000

Explanation

Oklahoma's financial responsibility law sets minimum limits of $25,000 per person, $50,000 per accident for bodily injury, and $25,000 for property damage. Policies may carry higher limits, but they may not fall below these amounts.

Question 10Oklahoma Insurance Laws, Rules, and Regulations

Oklahoma requires an insurer to include uninsured motorist coverage on an auto policy unless the insured:

  1. Buys collision coverage
  2. Rejects it in writing Correct answer.
  3. Files an SR-22 form
  4. Pays the premium in full

Explanation

Uninsured motorist coverage must be offered and included in every auto liability policy unless the named insured signs a written rejection. A signed rejection keeps the coverage off the policy until the insured requests it in writing.

Question 11Oklahoma Insurance Laws, Rules, and Regulations

Oklahoma resident producers must complete how many continuing education hours per two-year license term, including how many ethics hours?

  1. 16 hours, including 2 ethics hours
  2. 30 hours, including 4 ethics hours
  3. 24 hours, including 3 ethics hours Correct answer.
  4. 12 hours, including 1 ethics hour

Explanation

Oklahoma requires 24 credit hours of continuing education every two years, at least 3 of which must be in ethics. Licensees must track credits and keep completion records to demonstrate compliance.

Question 12Oklahoma Insurance Laws, Rules, and Regulations

An Oklahoma resident producer license is renewed:

  1. Every three years
  2. Every two years Correct answer.
  3. Annually
  4. Every five years

Explanation

Oklahoma issues producer licenses on a two-year cycle, with renewal tied to the licensee's continuing education compliance. The Department notifies the licensee, but the responsibility for timely renewal rests with the producer.

Question 13Oklahoma Insurance Laws, Rules, and Regulations

A licensed producer who changes mailing address must notify the Oklahoma Insurance Department of the change within:

  1. 60 days
  2. 10 days
  3. 30 days Correct answer.
  4. 90 days

Explanation

Producers must keep the Department informed of current contact information and must report an address change within 30 days. Notices sent to the address of record are considered received, so failure to update can lead to missed deadlines.

Question 14Oklahoma Insurance Laws, Rules, and Regulations

A producer's license is suspended by another state's insurance regulator. The producer must report that action to the Oklahoma Commissioner within:

  1. 30 days Correct answer.
  2. 10 days
  3. 45 days
  4. 60 days

Explanation

Oklahoma requires a producer to report administrative actions taken against the license by another jurisdiction within 30 days of the final disposition. Similar reporting applies to criminal prosecutions and to appointments terminated for cause.

Question 15Oklahoma Insurance Laws, Rules, and Regulations

Before a producer may submit business to an insurer as its agent, the insurer must:

  1. Obtain a bond from the producer
  2. Publicly post the producer's name
  3. File an appointment with the Department Correct answer.
  4. Issue the producer a certificate of authority

Explanation

An insurer authorizes a producer to act for it by filing an appointment with the Insurance Department. A producer may not act for an insurer that has not appointed the producer of record.

Question 16Oklahoma Insurance Laws, Rules, and Regulations

Telling a policyholder that her current insurer is financially ruined, when that is untrue, in order to get her to replace the policy is:

  1. Rebating
  2. An unfair claim practice
  3. Twisting Correct answer.
  4. Coercion

Explanation

Twisting is a misrepresentation or incomplete comparison that induces a policyholder to lapse, surrender, or replace existing coverage. It is an unfair trade practice even when the replacement policy is otherwise suitable.

Question 17Oklahoma Insurance Laws, Rules, and Regulations

A producer may share commissions from an Oklahoma insurance sale with:

  1. An unlicensed out-of-state broker
  2. A licensed appointed producer Correct answer.
  3. A friend who referred the client
  4. An unlicensed office assistant

Explanation

Commissions may be split only with another properly licensed producer who is lawfully able to receive them. Paying any part of a commission to an unlicensed person is an unlawful payment for soliciting insurance.

Question 18Oklahoma Insurance Laws, Rules, and Regulations

An insurer receives the first notice of loss on a claim. Under Oklahoma unfair claim settlement practices rules, the insurer is expected to:

  1. Obtain a notarized proof of loss before acting
  2. Pay the full claim within five business days
  3. Assign defense counsel within 24 hours
  4. Acknowledge and investigate promptly Correct answer.

Explanation

Oklahoma's unfair claim practices rules require insurers to acknowledge communications about a claim and to begin a reasonable investigation promptly. Failing to act in good faith on a reasonably clear claim is the kind of conduct the rules target.

Question 19Oklahoma Insurance Laws, Rules, and Regulations

What must an insurer obtain from the Oklahoma Insurance Commissioner before transacting insurance in this state?

  1. A surplus lines license
  2. A surety bond
  3. A certificate of authority Correct answer.
  4. A producer appointment

Explanation

An insurer must hold a certificate of authority from the Commissioner to be an authorized insurer in Oklahoma. Transacting business without one makes the insurer unauthorized and subjects it and its producers to penalties.

Question 20Oklahoma Insurance Laws, Rules, and Regulations

A business entity applying for an Oklahoma producer license must:

  1. Employ only resident producers
  2. Maintain a trust account
  3. Be incorporated in Oklahoma
  4. Designate a licensed responsible producer Correct answer.

Explanation

A business entity license requires the entity to name a designated responsible licensed producer who is accountable for the entity's insurance activities. Each individual who solicits or sells on the entity's behalf must also be licensed.

Question 21Oklahoma Insurance Laws, Rules, and Regulations

After a licensed producer dies, a temporary license may be issued so the business can continue operations for up to:

  1. 30 days
  2. 180 days Correct answer.
  3. One year
  4. 90 days

Explanation

Oklahoma allows a temporary license for a limited period, up to 180 days, to allow a deceased or disabled producer's business to be wound down or sold. The temporary licensee must still be qualified and is appointed by the insurer.

Question 22Oklahoma Insurance Laws, Rules, and Regulations

The Oklahoma Property and Casualty Insurance Guaranty Association exists to:

  1. Reimburse producers for unpaid commissions
  2. Guarantee insurer profits in catastrophe years
  3. Pay claims against unauthorized insurers
  4. Pay covered claims of insolvent member insurers Correct answer.

Explanation

The guaranty association protects policyholders of insolvent member property and casualty insurers by paying covered claims, within statutory limits and subject to a deductible. It is funded by assessments on member insurers, not by state tax dollars.

Question 23Oklahoma Insurance Laws, Rules, and Regulations

A producer wants to place a commercial risk with a nonadmitted insurer. Before doing so, Oklahoma requires the producer to:

  1. File the policy with the county clerk of the county
  2. Notify the insured's mortgage lender in writing
  3. Obtain prior approval from the guaranty association
  4. Show a diligent search of authorized insurers Correct answer.

Explanation

Surplus lines placement requires a documented diligent effort to place the risk with authorized insurers before using an eligible nonadmitted insurer. The coverage must also meet Oklahoma eligibility and premium tax requirements.

Question 24Oklahoma Insurance Laws, Rules, and Regulations

In Oklahoma, knowingly making a false statement on an insurance claim with intent to defraud the insurer is:

  1. Handled only by the insurer internally
  2. A civil violation between the parties
  3. A misdemeanor punishable by fine only
  4. A felony under state law Correct answer.

Explanation

Oklahoma criminalizes insurance fraud, and a fraudulent claim made with intent to defraud is treated as a felony. Suspected fraud is referred to the Insurance Department's fraud unit for investigation and possible prosecution.

Question 25Oklahoma Insurance Laws, Rules, and Regulations

Under Oklahoma law, the cost of a market conduct examination of an insurer's books and records is paid by:

  1. The examined insurer Correct answer.
  2. The guaranty association
  3. The state general fund
  4. The Insurance Department

Explanation

The insurer being examined bears the reasonable cost of the examination, including examiner time and expenses, as is standard under state insurance codes. This keeps the cost of regulation off the state treasury and off competing insurers.

Question 26Oklahoma Insurance Laws, Rules, and Regulations

Oklahoma's Insurance Commissioner is best described as:

  1. A commissioner selected by the state's admitted insurers
  2. A statewide elected official serving a four-year term Correct answer.
  3. An official elected by the Legislature to a six-year term
  4. A governor-appointed cabinet officer who serves at the governor's pleasure

Explanation

The Commissioner of Insurance is a statewide elected executive officer who serves a four-year term and heads the Oklahoma Insurance Department, the agency that administers and enforces the Insurance Code. The Commissioner's authority comes from the voters rather than from the governor, the Legislature, or the industry.

Question 27Oklahoma Insurance Laws, Rules, and Regulations

Which statement about a nonresident producer license in Oklahoma is correct?

  1. The producer must open an office within Oklahoma to hold the license.
  2. The producer must reside in a state that shares a border with Oklahoma.
  3. The producer must pass Oklahoma's licensing examination before being licensed.
  4. The producer may qualify based on a valid home state license in good standing. Correct answer.

Explanation

Oklahoma issues nonresident producer licenses on a reciprocal basis to individuals who hold a comparable license in their home state and remain in good standing there. No Oklahoma examination or in-state office is imposed on a qualifying nonresident.

Question 28Oklahoma Insurance Laws, Rules, and Regulations

A producer collects a premium from a client and deposits the money into her personal checking account, intending to forward it to the insurer at the end of the month. Under Oklahoma law, this conduct is:

  1. Acceptable, provided the producer earns and keeps the interest on the funds
  2. Prohibited, because premiums held by a producer are trust funds Correct answer.
  3. Prohibited, but only if the insurer can show an actual loss
  4. Acceptable, because collected premiums become the producer's property

Explanation

Premiums an Oklahoma producer collects are held in a fiduciary capacity for the insurer or the insured and must be kept separate from the producer's own money. Commingling or misappropriating those funds is a license-violation ground even if the money is later forwarded.

Question 29Oklahoma Insurance Laws, Rules, and Regulations

A lender tells a mortgage applicant that the loan will be approved only if the applicant buys homeowners insurance through an agency owned by the lender. Under Oklahoma insurance law, this practice is:

  1. Permitted, if the coverage purchased meets the lender's requirements
  2. Prohibited as an unlawful tie-in sale Correct answer.
  3. Permitted, because a lender may protect its collateral interest
  4. Permitted, if the lender discloses its ownership of the agency

Explanation

Oklahoma prohibits coercion and tie-in arrangements that condition a loan on the borrower buying insurance through a particular agent or insurer. The lender may require adequate coverage to protect its collateral, but the borrower keeps the right to choose the insurer and agent.

Question 30Oklahoma Insurance Laws, Rules, and Regulations

An Oklahoma resident producer permanently moves to Texas and becomes licensed as a Texas resident producer. What must happen for her to continue selling insurance in Oklahoma?

  1. She may sell in Oklahoma only through a resident Oklahoma producer.
  2. She must keep her Oklahoma resident license and renew it every two years.
  3. She may keep selling in Oklahoma under a nonresident license. Correct answer.
  4. She must give up all licenses and wait two years before reapplying.

Explanation

A resident license is available only to a person who actually resides in Oklahoma, so the resident license must be terminated when the producer establishes residency in another state. The producer may then continue to solicit Oklahoma business under a nonresident license issued on the basis of the new home state license.

Question 31General Insurance Principles and Concepts

Which of the following is an example of a pure risk?

  1. Launching a restaurant in a competitive market
  2. Betting on a horse race
  3. Being found legally liable for an auto accident Correct answer.
  4. Investing savings in a newly offered stock

Explanation

A pure risk involves only the chance of loss or no loss, with no possibility of gain. Legal liability arising from an auto accident fits that definition because the driver can only stay the same or lose. Speculative risks, by contrast, carry the possibility of profit as well as loss.

Question 32General Insurance Principles and Concepts

In property insurance, insurable interest must exist at which point in time?

  1. Continuously from application through the policy period
  2. Only when the application is signed
  3. Within 30 days after the loss occurs
  4. At the time of the loss Correct answer.

Explanation

For property coverage, insurable interest is tested at the moment of loss, because the principle of indemnity requires that the insured actually suffer a financial loss. A person who has already sold the property has no recoverable interest even if named on the policy.

Question 33General Insurance Principles and Concepts

The principle of indemnity means that a covered loss should restore the insured to which position?

  1. A position better than the pre-loss one
  2. The coverage level held by similar insureds
  3. The same financial position as before Correct answer.
  4. The full policy limit in every case

Explanation

Indemnity places the insured back in roughly the same financial position occupied immediately before the loss, no better and no worse. This principle is why actual cash value, deductibles, and limits exist, and why an insured cannot profit from a loss.

Question 34General Insurance Principles and Concepts

An insured deliberately burns down a covered building in order to collect the insurance money. This conduct is an example of which type of hazard?

  1. A legal hazard
  2. A morale hazard
  3. A physical hazard
  4. A moral hazard Correct answer.

Explanation

A moral hazard is a dishonest act or intent that deliberately creates or exaggerates a loss, such as arson or faking an injury. Morale hazard, by contrast, is mere carelessness arising from the knowledge that insurance exists.

Question 35General Insurance Principles and Concepts

In an insurance contract, the insured provides which consideration?

  1. The insurer's promise to pay covered losses
  2. The promise to report claims promptly
  3. Completion of the application alone
  4. Payment of the premium Correct answer.

Explanation

Consideration is the value each party brings to the contract. The insured's consideration is the premium plus the promise to comply with policy conditions, while the insurer's consideration is its promise to pay covered claims.

Question 36General Insurance Principles and Concepts

An insurance policy is described as an aleatory contract because of which characteristic?

  1. Both parties exchange promises of equal value
  2. It is drafted by one party and offered on a take-it-or-leave-it basis
  3. The amounts exchanged by the parties may be unequal Correct answer.
  4. It is enforceable only by the insured

Explanation

Aleatory means the dollars exchanged depend on an uncertain event, so a small premium may return a large claim payment or nothing at all. This differs from a commutative contract, in which the parties exchange roughly equal values.

Question 37General Insurance Principles and Concepts

A producer is expressly authorized in the agency agreement to sell homeowners policies. Because that authority normally carries with it the power to collect the initial premium and issue a receipt, the producer is acting under which type of authority?

  1. Implied authority Correct answer.
  2. Apparent authority
  3. Fiduciary authority
  4. Express authority

Explanation

Implied authority is authority not spelled out in the agreement but reasonably necessary to carry out the powers that are granted. Collecting premium and giving a receipt are customary acts that accompany the express power to sell the policy.

Question 38General Insurance Principles and Concepts

An applicant for homeowners insurance falsely states that the roof was replaced last year when it is actually worn and leaking. If the insurer relied on that statement in issuing the policy, the insurer may do which of the following?

  1. Convert the policy into a valued contract
  2. Waive its right to contest the contract at any later date
  3. Rescind the contract for material misstatement Correct answer.
  4. Reduce the premium charged retroactively

Explanation

A misrepresentation of a material fact, made knowingly and relied upon by the insurer, gives the insurer grounds to rescind the policy as though it never existed. Materiality is judged by whether the truthful answer would have affected the insurer's decision to issue or rate the policy.

Question 39General Insurance Principles and Concepts

After paying an insured's claim, an insurer exercises its right of subrogation in order to do which of the following?

  1. Reduce the policy limits after a paid claim
  2. Collect unpaid premium from the insured
  3. Cancel the policy without giving notice
  4. Seek recovery from the at-fault third party Correct answer.

Explanation

Subrogation lets the insurer stand in the insured's shoes and pursue the party who caused the loss, up to the amount it paid. This supports indemnity by preventing the insured from collecting twice and by shifting the cost to the responsible party.

Question 40General Insurance Principles and Concepts

The law of large numbers helps an insurer do which of the following?

  1. Eliminate the need for reinsurance on large risks
  2. Predict losses more accurately as similar exposures increase Correct answer.
  3. Set rates that are identical for every policyholder
  4. Guarantee that no single loss ever exceeds the premium collected

Explanation

As an insurer pools a larger number of similar independent exposure units, actual loss experience tends to converge on the expected result. This greater predictability is what allows insurers to set rates and hold adequate reserves with confidence.

Question 41General Insurance Principles and Concepts

Which of the following best describes adverse selection?

  1. The loss of preferred customers to a competing insurer
  2. The tendency of higher-risk people to buy insurance Correct answer.
  3. The tendency of insurers to decline applicants in protected classes
  4. A decline in policies sold during an economic downturn

Explanation

Adverse selection occurs when applicants with greater-than-average loss potential are more likely to seek or retain coverage, which can push the pooled rate above what good risks will accept. Underwriting and rating exist largely to control this tendency.

Question 42General Insurance Principles and Concepts

A building has a replacement value of $500,000 and is insured for $300,000 under a policy containing an 80% coinsurance clause. A covered loss of $100,000 occurs. Ignoring any deductible, how much will the insurer pay?

  1. $100,000
  2. $60,000
  3. $75,000 Correct answer.
  4. $80,000

Explanation

The coinsurance requirement is 80% of $500,000, or $400,000. Because the insured carried $300,000, the payment is limited to $300,000 divided by $400,000, or 75%, of the $100,000 loss, which equals $75,000.

Question 43General Insurance Principles and Concepts

A roof with a replacement cost of $20,000 has depreciated 40%. Using actual cash value, how much will the insurer pay for a total loss of the roof?

  1. $20,000
  2. $16,000
  3. $8,000
  4. $12,000 Correct answer.

Explanation

Actual cash value equals replacement cost minus depreciation. Here depreciation is 40% of $20,000, or $8,000, so the ACV payment is $12,000.

Question 44General Insurance Principles and Concepts

A binder issued by a producer provides which of the following?

  1. A guarantee that the insurer will never cancel the policy
  2. A permanent record of the policy's terms
  3. Proof that the premium has been paid in full
  4. Temporary evidence of coverage until the policy is issued Correct answer.

Explanation

A binder is temporary evidence that coverage is in force, usually pending issuance of the policy or completion of underwriting. It is subject to the same terms and conditions that will appear in the policy.

Question 45General Insurance Principles and Concepts

An insurance policy is a contract of adhesion, which means that in a dispute over wording the courts will generally do which of the following?

  1. Resolve ambiguities in favor of the insured Correct answer.
  2. Permit the insurer to change the terms at any time without notice
  3. Allow the insured to rewrite unclear provisions
  4. Assume both parties negotiated the terms as equals

Explanation

Because the insurer drafts the policy and the insured must accept or reject it as written, ambiguities are construed against the drafter and in favor of the insured. This rule does not apply where policy language is clear and unambiguous.

Question 46General Insurance Principles and Concepts

An underwriter receives an application disclosing a condition that violates a policy provision, and the insurer nevertheless issues the policy without objection. The insurer may later be barred from denying coverage under which doctrine?

  1. Coinsurance
  2. Subrogation
  3. Consideration
  4. Estoppel Correct answer.

Explanation

When an insurer knowingly relinquishes a known right, that is a waiver; estoppel prevents the insurer from later asserting that right when the other party has relied on the insurer's conduct to their detriment. Together the doctrines protect insureds from unfair reversals.

Question 47General Insurance Principles and Concepts

Which statement about facultative reinsurance is correct?

  1. It is required by law for every admitted insurer
  2. It automatically covers every risk that meets the treaty terms
  3. It transfers all of the cedent's obligations to the insured
  4. It reinsures a single risk that the reinsurer evaluates individually Correct answer.

Explanation

Facultative reinsurance is arranged risk by risk, with the reinsurer free to accept or decline each submission and to set its own terms. It is used for unusual or large exposures that fall outside treaty arrangements.

Question 48General Insurance Principles and Concepts

Which statement about nonadmitted (surplus lines) insurers is correct?

  1. Their policyholders are protected by the state guaranty association
  2. They may write any risk without any licensed producer being involved
  3. They are not subject to the state's rate and form filing rules Correct answer.
  4. They must be admitted in at least one state before writing any risk

Explanation

Nonadmitted insurers have not received a certificate of authority in the state, so they are not bound by its admitted-market rate and form filing requirements. Their business is typically placed through specially licensed surplus lines producers after the risk is declined by the admitted market.

Question 49General Insurance Principles and Concepts

A claims-made liability policy with a retroactive date covers which of the following?

  1. Only claims reported after the policy has already expired
  2. Claims first made during the policy period for acts on or after the retroactive date Correct answer.
  3. Acts occurring during the policy period no matter when the claim is later reported
  4. Any claim made at any time once the first premium has been paid

Explanation

A claims-made policy responds to claims first asserted during the policy period, provided the act giving rise to the claim occurred on or after the retroactive date. Acts before the retroactive date are excluded even if the claim is first made during the policy period.

Question 50General Insurance Principles and Concepts

In property insurance, the proximate cause of a loss is best described as which of the following?

  1. The dominant cause that sets the other events in motion Correct answer.
  2. The first event that can be identified before the loss
  3. The event that accounts for the largest dollar amount of damage
  4. The last event occurring just before the damage is discovered

Explanation

Proximate cause is the active, efficient cause that sets the chain of events leading to the loss in motion without which the loss would not have occurred. Determining proximate cause matters when a covered peril and an excluded peril combine in one loss.