Free MLIS Practice Questions

Question 1

A privately held manufacturer lawfully pays a director's defense costs in a shareholder derivative action. The approved settlement requires the director to pay money to the corporation, and the governing law prohibits the corporation from indemnifying that settlement. The D&O policy includes Sides A, B, and C; both amounts qualify as covered Loss, and no exclusion applies. How should the defense reimbursement and settlement payment be assigned?

Accepted Answer

Side B reimburses the defense; Side A pays the settlement.

Answer

Side A reimburses the defense; Side B pays the settlement.

Answer

Side B reimburses the defense; Side C pays the settlement.

Answer

Side C reimburses the defense; Side A pays the settlement.

Question 2

Following a retailer's data breach, a forensic firm invoices the retailer for investigating its systems, a notification vendor invoices it for mailing breach notices, and customers sue for damages from disclosure of their information. The chief financial officer classifies all three as third-party losses because each payment would go to an outsider. Before considering any policy's coverage terms, how should these exposures be classified?

Accepted Answer

The vendor invoices are first-party expenses; the customer suit presents third-party liability.

Answer

Forensics is a first-party expense; the notification invoices and customer damages are third-party liabilities.

Answer

Notification is first-party; the forensic invoices and customer suit are third-party.

Answer

All three are third-party losses because their payees are outside the retailer.

Question 3

At a Title VII-covered employer, HR approved a written warning for repeated, documented performance failures before receiving an employee's protected discrimination complaint. An independent reviewer confirms that the evidence is reliable and the same standard has been applied to comparable employees. The complaint arrives before the warning is delivered; it changes neither the verified performance facts nor the proposed penalty. Under federal anti-retaliation law, what follows from the timing?

Accepted Answer

The warning may proceed on its independently verified, nonretaliatory grounds.

Answer

The warning must be suspended until the employer resolves the discrimination complaint.

Answer

Approval before the complaint prevents the warning from being challenged as retaliation.

Answer

The warning becomes retaliatory if the employee's discrimination complaint is later substantiated.

Question 4

A chief financial officer is separating her corporate and administrative responsibilities from her fiduciary responsibilities for an ERISA-covered 401(k) plan. Which assignment places her in a fiduciary role because of the authority exercised, rather than her job title?

Accepted Answer

Selecting and monitoring the investment options offered to plan participants.

Answer

Deciding whether to amend the plan to reduce the employer's future matching contributions.

Answer

Calculating participant benefits by fixed rules, without discretion.

Answer

Mailing unaltered benefit statements prepared by the recordkeeper.

Question 5

Purchasers with standing to bring a Section 11 action sue an issuer and an underwriter over a material misstatement in a registration statement. The disputed passage is outside the portions prepared or certified by an expert. Both defendants argue that a careful pre-offering investigation gave them reasonable grounds to believe the statement was true. What distinction matters to that due-diligence defense?

Accepted Answer

The underwriter may establish due diligence; the issuer has no such defense.

Answer

Both may use the defense if their investigations were reasonable.

Answer

Only the issuer may use the defense; the underwriter may not.

Answer

Neither needs the defense unless the buyers prove fraudulent intent.

Question 6

Ransomware is actively encrypting shared drives and spreading across an office network. Disconnecting the affected network will not disrupt safety-critical equipment. The cyber policy permits emergency containment before consent, with prompt insurer notice, but requires prior approval for other response-vendor expenses. The incident manager has not yet obtained insurer consent. The immediate priority is to:

Accepted Answer

Isolate the network, activate the internal response team, and promptly notify the insurer.

Answer

Leave the systems connected so the insurer's forensic vendor can observe the attack in progress.

Answer

Begin rebuilding affected drives from backups before completing containment of the infection.

Answer

Suspend incident-response work until written insurer consent confirms which expenses are covered.

Question 7

Selection records for one job show that 72 of 240 female applicants and 180 of 360 male applicants passed the same pre-employment test. These are the only two groups in the comparison. Applying the Uniform Guidelines' four-fifths screening rule, which calculation and interpretation belong in the employer's review?

Accepted Answer

60%; the disparity warrants evaluation but does not, by itself, establish unlawful discrimination.

Answer

40%; comparing the numbers who passed establishes the selection-rate disparity used by the Guidelines.

Answer

60%; falling below four-fifths proves unlawful discrimination without further examination of the test.

Answer

20%; the difference between the selection rates is the impact ratio used by the Guidelines.

Question 8

A written demand alleging management misconduct reaches an insured on December 18, 2025. Its calendar-year 2025 D&O policy defines a written demand as a Claim and allows claims first made in 2025 to be reported through January 30, 2026. The policy renews on January 1, 2026; the insurer receives notice on January 8. A related lawsuit follows in March. The policy treats related demands and proceedings as one Claim first made on the earliest demand date. Other coverage conditions are satisfied. To which policy period does this wording assign the Claim?

Accepted Answer

2025, because the demand was made then and notice satisfied its permitted reporting window.

Answer

2026, because the insurer received the first claim notice after the renewal date.

Answer

2026, because the lawsuit is the first judicial proceeding and therefore starts a new claim.

Answer

Neither, because a claim must always be both made and reported within the same calendar year.

Question 9

At renewal, a finance director proposes dropping fiduciary liability insurance because the retirement plan already has an ERISA fidelity bond of the required amount. The exposure under discussion is a participant lawsuit alleging that the committee negligently failed to review excessive investment fees; no fraud or dishonesty is alleged. What is the central flaw in treating the bond as a replacement?

Accepted Answer

The bond protects the plan against dishonesty, not fiduciaries against negligent breaches of duty.

Answer

The bond covers investment-related damages, but only fiduciary insurance covers the associated defense costs.

Answer

The bond protects participants; fiduciary insurance protects only the employer.

Answer

They cover the same risks, but the bond pays before fiduciary insurance.

Question 10

A Delaware board approves a new product line after reviewing cash-flow forecasts, challenging the market assumptions, and consulting an appropriately selected adviser. The directors are disinterested and act in good faith, honestly believing the investment serves the corporation. An unexpected recession causes a substantial loss. A shareholder argues that the loss itself proves a breach of the duty of care. The strongest response is that:

Accepted Answer

An informed, good-faith investment decision is not a fiduciary breach merely because it proves unprofitable.

Answer

The directors must establish that the investment was economically correct once a material loss has occurred.

Answer

The adviser assumed the board's fiduciary duties when the directors relied on its investment recommendation.

Answer

The board first needed shareholder approval of the product line to claim business-judgment protection.

Free MLIS Practice Questions

Domain 1: Cyber and Privacy Liability Exposures and How to Insure Them

Question 1

Question 2

Domain 2: EPL: Understanding the Exposures and Insurance Coverage

Question 3

Question 4

Domain 3: Fiduciary Liability: What You Need to Know About Exposures and Insurance

Question 5

Question 6

Domain 4: How to Insure D&O Liabilities

Question 7

Question 8

Domain 5: Understanding D&O Exposures

Question 9

Question 10

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