Bad Faith and Open Policy Quiz PDF

#### **Question 1** What is the primary purpose of purchasing an insurance policy, as noted in Egan v. Mutual of Omaha Ins. Co.?\ A. To gain a commercial advantage\ B. To seek maximum financial gain\ C. To obtain protection against calamity\ D. To guarantee settlement of all claims**\ Correct Answe...

#### **Question 1** What is the primary purpose of purchasing an insurance policy, as noted in Egan v. Mutual of Omaha Ins. Co.?\ A. To gain a commercial advantage\ B. To seek maximum financial gain\ C. To obtain protection against calamity\ D. To guarantee settlement of all claims**\ Correct Answer: C. To obtain protection against calamity** #### **Question 2** What does every contract in California include by default?\ A. Policy limits\ B. An implied covenant of good faith and fair dealing\ C. Punitive damages\ D. Consequential economic losses\ **Correct Answer: B. An implied covenant of good faith and fair dealing** #### **Question 3** What are plaintiffs entitled to recover if an insurer commits bad faith?\ A. Benefits due under the policy, emotional distress damages, and punitive damages\ B. Compensatory damages only\ C. Policy limits only\ D. Attorney's fees and interest only\ **Correct Answer: A. Benefits due under the policy, emotional distress damages, and punitive damages** #### **Question 4** Which of the following best differentiates negligence-based actions from bad faith actions? A. Negligence involves third-party claims, while bad faith involves first-party claims. B. Negligence requires proof of fraud, while bad faith does not. C. Bad faith claims seek only compensatory damages, while negligence claims include punitive damages. D. Bad faith actions do not involve insurers, while negligence actions do. **Correct Answer: A. Negligence involves third-party claims, while bad faith involves first-party claims.** #### **Question 5** What must a plaintiff provide to create circumstances that trigger the duty to settle?\ A. Evidence of negligence by the insured\ B. Proof that liability is unclear\ C. A reasonable demand to settle within policy limits\ D. An unreasonable settlement demand above policy limits\ **Correct Answer: C. A reasonable demand to settle within policy limits** #### **Question 6** When is a settlement demand considered reasonable under California Civil Procedure Section 999.1?\ A. When liability is unclear but the demand is made.\ B. When the potential judgment exceeds the demand amount.\ C. When the insurer refuses without explanation.\ D. When damages are lower than policy limits.\ **Correct Answer: B. When the potential judgment exceeds the demand amount.** #### **Question 7** What is the maximum payout an insurer is obligated to make under an insurance policy?\ A. The damages proven in court\ B. The policy limit amount\ C. The settlement demand amount\ D. The insurer's reserve amount\ **Correct Answer: B. The policy limit amount** #### **Question 8** According to Rappaport-Scott v. InterInsurance Exch., what is an insurer liable for if it fails to accept a reasonable settlement?\ A. Policy limits only\ B. Full judgment against the insured, even beyond policy limits\ C. Only the damages directly caused by the insured\ D. Punitive damages only\ **Correct Answer: B. Full judgment against the insured, even beyond policy limits** #### **Question 9** In which scenario is a policy limit demand likely to be considered unreasonable?\ A. Liability is reasonably clear.\ B. Judgment is expected to exceed the demand.\ C. The demand is made without adequate supporting evidence.\ D. The demand is within the policy limits.\ **Correct Answer: C. The demand is made without adequate supporting evidence.** #### **Question 10** Which of the following is NOT a criterion for a reasonable policy limit demand?\ A. Liability is reasonably clear.\ B. Demand is made at a time of uncertain liability.\ C. Judgment is likely to exceed the demand amount.\ D. A clear opportunity to settle within policy limits exists.\ **Correct Answer: B. Demand is made at a time of uncertain liability.**