Updated Sep-2025 M05 Exam Practice Test Questions
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NEW QUESTION # 27
For this question more than 1 option is correct. You must select ail the correct options to gain the mark.
In what circumstances does the Fires Prevention (Metropolis) Act 1774 require insurance companies to ensure that claims monies are used to rebuild or reinstate buildings destroyed or damaged by fire?
- A. Upon the request of any person(s) interested in the buildings.
- B. When fraud or arson by the insured is suspected.
- C. Where the building was destroyed by an explosion.
- D. Where there is underinsurance.
Answer: A,B
NEW QUESTION # 28
What is the primary purpose of the Duty of Disclosure in an insurance contract?
- A. To allow the policyholder to choose the terms of coverage
- B. To ensure the insurer is able to assess the risk involved in underwriting the policy
- C. To ensure that both parties understand the terms of the contract
- D. To protect the insurer from financial instability
Answer: B
Explanation:
The Duty of Disclosure ensures that the insured provides all relevant information about the risk they are insuring. This allows the insurer to assess the risk accurately and set appropriate premiums.
NEW QUESTION # 29
A nurse working shifts is regularly disturbed by her neighbour givig brass instrument lessons in Ihe evenings.
She is tired and losing concentration at work but is NOT at risk of losing her job. What remedy can be provided by equity as an alternative source of law to common law?
- A. An injunction.
- B. Punitive damages.
- C. General damages.
- D. Specific performance
Answer: A
Explanation:
In this case, the nurse is facing a disturbance from her neighbor, which is affecting her concentration and well- being. Aninjunctionis an equitable remedy that could be used to stop the neighbor from causing the disturbance, either temporarily (atemporary injunction) or permanently (apermanent injunction). This is often used to prevent ongoing nuisance or harm, like in this situation where the noise is impacting the nurse's ability to work.
Specific performance (A) would typically apply to compelling someone to fulfill a contractual obligation, not for stopping a nuisance. Punitive damages (B) and general damages (C) are not equitable remedies but are more common in common law for compensating harm or punishment.
NEW QUESTION # 30
What is the role of the Financial Ombudsman Service (FOS) in insurance disputes?
- A. It regulates the pricing of insurance products
- B. It issues licenses to insurance companies
- C. It provides legal advice to insurers
- D. It helps consumers resolve complaints with their insurers
Answer: D
Explanation:
The Financial Ombudsman Service (FOS) is an independent body that helps consumers resolve disputes with financial services, including insurance companies. It provides a neutral mechanism for dispute resolution.
NEW QUESTION # 31
A manufacturer was under contract to pay a supplier El .000 on receipt of the delivery of raw materials.
However, the supplier failed to deliver and the manufacturer had to purchase identical materials from another supplier for £1,200. What amount of damages is the manufacturer legally entitled to claim from the supplier who failed to deliver?
- A. £1,200
- B. £2,200
- C. £1,000
- D. £200
Answer: D
NEW QUESTION # 32
In the context of an insurance claim, what does the principle of subrogation refer to?
- A. The insurer's right to pursue a third party responsible for the loss
- B. The insured's obligation to provide all relevant documents to the insurer
- C. The insured's right to receive compensation up to the value of their loss
- D. The insurer's right to reduce the claim payout
Answer: A
Explanation:
Subrogationis the principle that allows the insurer to step into the shoes of the insured and pursue any third party responsible for causing the loss. This helps the insurer recover the claim amount paid out to the insured.
NEW QUESTION # 33
If a proposer has failed to fully answer a question on a proposal form, the insurer is deemed to have waived its rights to this information because it
- A. has statistics on similar risks.
- B. did not request further information.
- C. should be able to underwrite the risk based on the information already provided.
- D. does not have the right to ask the proposer for more information.
Answer: B
NEW QUESTION # 34
For this question more than 1 option is correct. You must select all the correct options to gain the mark. What are the main sources of new English Law?
- A. Official law reports.
- B. Case law.
- C. Legislation.
- D. International treaties.
Answer: B,C
NEW QUESTION # 35
For this question more than 1 option is correct. You must select all the correct options to gain the mark. What are the characteristics of an express term in reaching or recording an agreement?
- A. It may be implied by conduct.
- B. It may be oral or in writing.
- C. It must be evidenced in documentary form.
- D. It will usually override any implied term which conflicts with it.
Answer: B,D
NEW QUESTION # 36
What is the role of a condition precedent in an insurance policy?
- A. It ensures that the insurer will cover all risks associated with a policy
- B. It outlines exclusions from coverage
- C. It is a requirement that must be met before the insurer is liable for a claim
- D. It defines the scope of coverage for the policyholder
Answer: C
Explanation:
A condition precedent refers to a requirement that must be met before an insurer is obligated to pay a claim.
Failure to meet this condition can result in the insurer not being liable.
NEW QUESTION # 37
Julie has agreed to feed lan's cat whilst he is away on holiday in a remote location. When the cat becomes seriously ill. Julie is unable to contact Ian, so she takes the cat to the vet and also pays the vet's bill. In these circumstances. Julie is best described as:
- A. an agent by estoppel
- B. an express agent
- C. an implied agent
- D. an agent by necessity
Answer: C
NEW QUESTION # 38
In the context of an insurance claim, what does the principle of subrogation refer to?
- A. The insurer's right to pursue a third party responsible for the loss
- B. The insured's obligation to provide all relevant documents to the insurer
- C. The insured's right to receive compensation up to the value of their loss
- D. The insurer's right to reduce the claim payout
Answer: A
Explanation:
Subrogationis the principle that allows the insurer to step into the shoes of the insured and pursue any third party responsible for causing the loss. This helps the insurer recover the claim amount paid out to the insured.
NEW QUESTION # 39
Under the provisions of the Contracts (Rights of Third Parties) Act 1999, the right to enforce a contractual term arises if a third party.
- A. proves that the parties to the contract intended to limit his rights.
- B. is one of a general class of persons identified in the contract as benefitting from the contract.
- C. is the agent who arranged the contract.
- D. appoints an agent to carry out the contract provisions.
Answer: B
NEW QUESTION # 40
Who is entitled to the surplus if a subrogation recovery from a negligent third party is greater than the amount the insurer has paid to the insured?
- A. The State
- B. The insurer only.
- C. The insured only.
- D. It is shared between the insurer and the insured.
Answer: C
NEW QUESTION # 41
What is the legal effect of a warranty in an insurance contract?
- A. A warranty allows the insurer to increase premiums.
- B. A warranty must be fulfilled by the insurer.
- C. A warranty is a condition precedent to liability.
- D. A warranty makes the contract voidable by the insured.
Answer: C
Explanation:
A warranty is a condition precedent to liability.
NEW QUESTION # 42
What is the maximum contingency fee percentage under a damages-based agreement that can be charged by a solicitor for personal injury cases and employment tribunal cases respectively?
- A. 25% for personal injury cases and 35% for employment tribunal cases.
- B. 35% for personal injury cases and 25% for employment tribunal cases.
- C. 35% for both cases.
- D. 50% for both cases.
Answer: A
NEW QUESTION # 43
In what circumstances is abandonment automatic under a marine hull insurance policy?
- A. The constructive total loss of the vessel.
- B. The actual total loss of the vessel.
- C. The insured has performed an action of abandonment.
- D. The insured has sent a formal notice of abandonment.
Answer: B
NEW QUESTION # 44
In the tort of negligence, a primary victim of nervous shock is a class of person who suffers psychiatric injury
- A. through fear for his own safety in an accident.
- B. through fear for the safety of another person involved in an accident which he witnessed.
- C. as a result of grief or sorrow for the loss of a person with whom he had a close relationship.
- D. as a result of stress or harassment at work.
Answer: A
NEW QUESTION # 45
Bill owned a painting which was insured under a policy containing a first refusal clause. The painting was stolen and Bill's claim was settled, but several months later the painting was recovered by the police. As a consequence, what is Bill's position under his insurance policy?
- A. Bill may exercise an option to buy the painting back.
- B. Bill may keep the claim settlement and also keep the painting.
- C. Bill must return the claim settlement in exchange for the painting.
- D. Bill must buy the painting back.
Answer: A
NEW QUESTION # 46
A married couple have equal shares in a property and are insured under a buildings insurance policy. What is the likely position in law of a breach of good faith by one party, which was unknown to the other party?
- A. Cover would be maintained in full for the innocent party as the cover is likely to be a joint policy
- B. Cover would be maintained in full for the innocent party as the cover is likely to be a composite policy.
- C. Cover for both parties would be invalidated as the cover is likely to be a composite policy.
- D. Cover for both parties would be invalidated as the cover is likely to be a joint policy.
Answer: D
NEW QUESTION # 47
Which of the following is a feature of an insurance contract under the principle of "utmost good faith"?
- A. The insured must disclose all material facts relevant to the risk.
- B. The insurer must pay all claims, regardless of the terms of the policy.
- C. Both parties must agree on the premium amount in advance.
- D. The insurer must be transparent about the terms of the policy.
Answer: A
Explanation:
Under the principle of utmost good faith (also known as "uberrimae fidei"), the insured must disclose all material facts to the insurer that could affect the insurer's decision to provide coverage or the terms of the policy.
NEW QUESTION # 48
What are the main reasons why the law requires insurable interest to exist?
- A. Discourage underinsurance and ensure premium adequacy.
- B. Discourage betterment and ensure premium adequacy.
- C. Reduce physical hazard and discourage gambling.
- D. Reduce moral hazard and discourage gambling.
Answer: D
NEW QUESTION # 49
For this question more than 1 option is correct. You must select fill the correct options to gain the mark. In what circumstances would an agency agreement be automatically terminated?
- A. Death of the agent.
- B. Disclosure of the name of the principal.
- C. Bankruptcy of the principal.
- D. Bankruptcy of the agent.
Answer: A,C
NEW QUESTION # 50
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