Free CII Insurance Law Examination (E05) Practice Questions

Sample Practice Questions

Try these 10 sample questions from the CII Insurance Law Examination (E05) practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A policyholder brings a private action against a contractor for damage to insured property. Which branch of English law principally governs this action?

   1. A.Civil lawCorrect answer: A
   2. B.Criminal law
   3. C.Constitutional law
   4. D.Administrative law

   Explanation: The source states: "Civil law deals mainly with private actions taken by individuals, organisations, companies or groups against one another for everything from disputes about business, employment, contracts, injuries and property.". The dispute seeks a private remedy for injury to property; criminal law concerns prosecution, constitutional law governmental structure, and administrative law public decision-making.

   Reference: Criminal Bar Association: The Criminal Law and what a Criminal Barrister does — Criminal and civil streams

2. 2Which element must be proved for a claimant to have a completed cause of action in negligence?

   1. A.Compensatable damageCorrect answer: A
   2. B.A prior criminal conviction
   3. C.An express contract
   4. D.A deliberate intention to injure

   Explanation: The source states: "Proof of damage is an essential element in a claim in negligence". Damage is essential. Negligence does not require a conviction, contractual relationship or deliberate intent.

   Reference: Johnston v NEI International Combustion [2007] UKHL 39 — Lord Hoffmann, paragraph 2

3. 3Which statement describes a simple contract under English law?

   1. A.It must be executed as a deed.
   2. B.It can exist without written evidence.Correct answer: B
   3. C.It is binding without agreement.
   4. D.It must be signed before witnesses.

   Explanation: The source states: "Only in certain circumstances is a document necessary and a simple contract does not need to be evidenced in writing.". A simple contract is distinguished from formal documentary requirements; it still needs the other essentials of a valid contract.

   Reference: CII Insurance, legal and regulatory study text — Chapter 3, A1, p. 3/3

4. 4An intermediary and principal mutually arrange, through repeated work and commission payments, for the intermediary to represent the principal. They never make an express appointment. How is this agency created?

   1. A.By implied consentCorrect answer: A
   2. B.By ratification of an unauthorised transaction
   3. C.By necessity in an emergency
   4. D.By apparent authority from a representation to a customer

   Explanation: The source states: "An agency may therefore be created by consent in either an express or an implied way.". Their mutual conduct establishes implied consent. The facts describe no unauthorised transaction later adopted, emergency, or holding out to a third party.

   Reference: CII Insurance, legal and regulatory study text — Chapter 3, F2A, p. 3/9

5. 5An insurer and proposer exchange binding promises to provide cover and pay the premium. Must the premium already have been paid for those promises to be consideration?

   1. A.Yes, only cash already received is consideration.
   2. B.Yes, both promises require advance performance.
   3. C.No, promises of future performance can supply consideration.Correct answer: C
   4. D.No, insurance contracts require no consideration.

   Explanation: The source states: "Parties can exchange promises to perform certain acts in the future or promise to do something in return for the act of another.". A binding promise to pay can be consideration, rather than only completed payment. This does not dispense with consideration or override an express premium-payment condition.

   Reference: CII Insurance, legal and regulatory study text — Chapter 3, C, p. 3/5

6. 6A marine insurance warranty may include an undertaking about future conduct. Which example fits the statutory promissory-warranty concept?

   1. A.An assured's estimate of the likely future repair bill
   2. B.A broker's recommendation to install a sprinkler system
   3. C.An insurer's forecast of next year's underwriting conditions
   4. D.An assured's undertaking that a specified act will be doneCorrect answer: D

   Explanation: The source states: "a warranty by which the assured undertakes that some particular thing shall or shall not be done". The insured undertaking is promissory. A cost estimate, broker recommendation or insurer forecast does not itself impose an insured undertaking to do the specified act.

   Reference: Marine Insurance Act 1906 (revised) — Section 33(1)

7. 7The section 1 conditions of the Third Parties (Rights against Insurers) Act 2010 are met for an insolvent insured's covered liability. To whom do the relevant policy rights transfer?

   1. A.The insured's shareholders as a class
   2. B.The insurer's reinsurer
   3. C.The person to whom the insured liability was incurredCorrect answer: C
   4. D.The broker who placed the policy

   Explanation: The source states: "The rights of the relevant person under the contract against the insurer in respect of the liability are transferred to and vest in the person to whom the liability is or was incurred". The injured third party receives the relevant rights, rather than shareholders, reinsurer or placing broker. The stem expressly establishes the Act's qualifying conditions.

   Reference: Third Parties (Rights against Insurers) Act 2010 — Section 1(2)

8. 8What is the objective of strict indemnity in insurance?

   1. A.To refund every premium after a loss
   2. B.To pay the sum insured for every claim
   3. C.To guarantee a profit following damage
   4. D.To restore the insured's pre-loss financial positionCorrect answer: D

   Explanation: The source states: "Indemnity is financial compensation sufficient to place the insured in the same financial position after a loss as they enjoyed immediately before the loss occurred.". Strict indemnity compensates the loss without profit. Premium refunds and automatic sum-insured payment are different propositions.

   Reference: CII Insurance, legal and regulatory study text — Chapter 7, A, p. 7/2

9. 9What does an insurer ordinarily acquire by subrogation after indemnifying a covered loss?

   1. A.The insured's rights of recovery against the responsible third partyCorrect answer: A
   2. B.An independent recovery right greater than the insured possessed
   3. C.Ownership of the remaining damaged property as salvage
   4. D.A contribution right against other insurers of the same loss

   Explanation: The source states: "Subrogation can be defined as the right of an insurer, following payment of a claim, to take over the insured’s rights to recover payment from a third party responsible for the loss.". Subrogation derives the insured's recovery rights. It does not give greater independent rights, transfer damaged property as salvage, or create contribution against other insurers.

   Reference: CII Insurance, legal and regulatory study text — Chapter 8, C1, p. 8/7

10. 10Which feature characterises a typical criminal trial in England and Wales?

    1. A.An insured demands payment of a debt.
    2. B.The Crown prosecutes prohibited conduct.Correct answer: B
    3. C.A claimant seeks contractual damages.
    4. D.A beneficiary enforces a private trust.

    Explanation: The source states: "Typically, a criminal trial will involve the state (or Crown) prosecuting individuals or groups for specific, prohibited behaviours, and where the penalties can include community orders or even imprisonment.". Prosecution of prohibited conduct is criminal. Debt recovery, contractual damages and trust enforcement are private civil actions.

    Reference: Criminal Bar Association: The Criminal Law and what a Criminal Barrister does — Criminal and civil streams