Adv. Liability Part 1

Unless it is adjusted by agreement, what do the rules of ISO's Commercial Lines Manual establish as the basic limit for the damage to premises rented to you under the Commercial General Liability Coverage Form? Choose one answer. A. $100,000 B. $250,000 C. $500,000 D. $1,000,000

A. $100,000

One of the special coverage forms available in ISO's commercial general liability program is the Liquor Liability Coverage Form. Which one of the following statements best explains the reasons that an insured might want to add the Liquor Liability Coverage Form? Choose one answer. A. A manufacturer of distilled spirits might use the Liquor Liability Coverage Form to insure its products liability exposure. B. A liquor retailer might use the Liquor Liability Coverage Form to insure its exposure to employer's liability for injuries in the course of a robbery. C. A restaurant might use the Liquor Liability Coverage Form to insure its loss exposure for bodily injuries caused by its bouncers ejecting unruly patrons. D. A nightclub might use the Liquor Liability Coverage Form to insure its business interruption exposure.

A. A manufacturer of distilled spirits might use the Liquor Liability Coverage Form to insure its products liability exposure. Correct. A manufacturer of distilled spirits might use the Liquor Liability Coverage Form to insure its products liability exposure.

An organization may incur losses from legal liabilities in a number of different ways. Which one of the following actions would best be described as an intentional tort? Choose one answer. A. A newspaper mistakenly identifies the driver in an alcohol-related hit and run accident as John Doe, a prominent local attorney. B. A tenant enters into an agreement with the landlord to pay for any damages to the leased premises, and a fire subsequently breaks out. C. An auto manufacturer detects a flaw in the design of its steering wheel and issues a recall to correct the problem. D. After escaping from his unlocked kennel, a vicious attack dog subsequently mauls a small child.

A. A newspaper mistakenly identifies the driver in an alcohol-related hit and run accident as John Doe, a prominent local attorney.

Some state no-fault laws preserve the tort system but require insurers to offer personal injury protection (PIP) insurance that provides specified first-party benefits. This is referred to as Choose one answer. A. An add-on no-fault law. B. A modified no-fault law. C. A strict-liability no-fault law. D. A verbal threshold.

A. An add-on no-fault law. Correct. A no-fault law that preserves the tort system but requires insurers to offer PIP insurance is referred to as an add-on no-fault law.

Statutory liability is one of the major bases for imposing legal liability on an organization. Which one of the following statements concerning statutory liability is most correct? Choose one answer. A. An employer's liability for occupational injuries and illnesses is based on statutory liability. B. Most of the claims covered by liability insurance arise in conjunction with liability imposed by statutes and ordinances. C. Statutory liability is a form of contract liability where one party breaches a promise or warranty made to another party. D. Statutory liability arises when an organization intentionally violates a state or federal law.

A. An employer's liability for occupational injuries and illnesses is based on statutory liability.

Under the ISO Commercial Lines Manual, the Nuclear Energy Liability Exclusion Endorsement must be added to which one the following types of policies? Choose one answer. A. Any policy containing a commercial liability coverage part B. Only those commercial liability policies of organizations that produce nuclear power C. Only those commercial liability policies of organizations that use or produce any type of nuclear substances D. Only those commercial liability policies of contractors who perform work on nuclear reactors

A. Any policy containing a commercial liability coverage part

The Alpha Corporation recently explored several new business opportunities. One of these opportunities involved the use of dangerous chemicals that had the potential to seriously injure employees. Despite the potential for profit, the corporation decided not to undertake this opportunity because of the liability exposure. This action is an example of Choose one answer. A. Avoidance. B. Loss prevention. C. Loss reduction. D. Separation.

A. Avoidance. Correct. The action of never undertaking an activity is an example of avoidance.

Andy, an employee of Bulldozer Inc., was assigned to dig a trench along the side of a building owned by ABC Inc. so that new fiber optic cables could be installed. Bob Smith, the design engineer at ABC, approached John to review the specifications for the trench. Andy was distracted for a moment and the backhoe he was operating struck the side of the building, shattering several large panes of glass. Charlie, an elderly retiree who happened to be passing by at the time, was injured slightly from flying glass, as were both Andy and Bob. Both Bulldozer and ABC have a standard Commercial General Liability (CGL) Coverage Form, although the policies are issued by different insurers. With respect to Coverage C - Medical Payments, which one of the following statements is accurate? Choose one answer. A. Bulldozer's CGL would provide Medical Payments coverage for Charlie, but both Andy and Bob would be excluded from coverage under both policies. B. ABC's CGL would provide Medical Payments coverage for Andy, Bob and Charlie because the accident occurred on ABC's premises. C. Bulldozer's CGL would provide Medical Payments coverage to Andy, Bob and Charlie because Bulldozer was at fault. D. ABC's CGL would provide Medical Payments coverage for Andy and Charlie, but not for Bob.

A. Bulldozer's CGL would provide Medical Payments coverage for Charlie, but both Andy and Bob would be excluded from coverage under both policies. Correct. Bulldozer's CGL would provide Medical Payments coverage for Charlie, but both Andy and Bob are excluded because this would be a workers compensation loss.

The hundreds of endorsements that are available to modify the Insurance Services Office (ISO) Commercial General Liability (CGL) Coverage Form can be grouped into categories. Which one of the following categories of ISO endorsements includes endorsements for providing extended reporting periods for the claims-made version of the CGL coverage form? Choose one answer. A. Claims-Made Endorsements (CG 27 __ ) B. Endorsements for Amending Limits (CG 25 __ ) C. Exclusion Endorsements (CG 21 __ ) D. Additional Coverage Endorsements (CG 04 __ )

A. Claims-Made Endorsements (CG 27 __ )

Coverage B of the Commercial General Liability Coverage Form provides coverage for personal and advertising injury liability. Which one of the following statements about Coverage B is true? Choose one answer. A. Defense costs are covered in addition to the stated policy limits. B. The definition of personal and advertising injury is limited to bodily injury. C. The coverage must be added to the policy by endorsement. D. The specified limit of coverage is an addition to the general aggregate policy limit.

A. Defense costs are covered in addition to the stated policy limits.

The Butler Corporation provides one of its executives with a company car. The executive does not own any vehicles of his own and would like to have coverage for himself and his wife if either of them rent or borrow vehicles from others. Butler can provide such coverage by adding which one of the following endorsements to its Business Auto Coverage Form? Choose one answer. A. Drive Other Car—Broadened Coverage for Named Individuals B. Individual Named Insured C. Employee Hired Autos D. Employees as Insureds

A. Drive Other Car—Broadened Coverage for Named Individuals

Some ISO liability coverage forms provide only claims-made versions. Which one of the following forms is of this type? Choose one answer. A. Electronic Data Liability Coverage Form (CG 00 65) B. Commercial General Liability Coverage Form (CG 00 02) C. Liquor Liability Coverage Form (CG 00 34) D. Products/Completed Operations Liability Coverage Form (CG 00 38)

A. Electronic Data Liability Coverage Form (CG 00 65) Incorrect. The ISO Electronic Data Liability Coverage Form provides only a claims made version. The Commercial General Liability Coverage Form, Liquor Liability Coverage Form, and Products/Completed Operations Liability Coverage Form provide both occurrence and claims-made versions.

A project owner has a Commercial General Liability (CGL) Coverage Form that has an occurrence trigger. The project owner also requires each independent contractor that works on the project to purchase an Owners and Contractors Protective Liability Coverage Form. Which one of the following statements describes an effect of such a requirement? Choose one answer. A. It transfers the cost of insuring exposures already covered under the CGL Coverage Form to the contractor. B. It adds the contractor as an additional insured to the CGL Coverage Form. C. It converts the project owners' CGL Coverage Form to claims-made coverage. D. It eliminates the need for the project owner to carry workers compensation insurance.

A. It transfers the cost of insuring exposures already covered under the CGL Coverage Form to the contractor.

Which one of the following statements about considerations that need to be evaluated in the development of risk control techniques is true? Choose one answer. A. Legal requirements must be considered in developing all risk control techniques. B. Risk control techniques should be developed independent of the risk aversion of an organization's senior management. C. As long as losses will be adequately controlled, there is little need to be concerned with the cost of a risk control technique. D. Risk control techniques are of little value to the public's perception of an organization.

A. Legal requirements must be considered in developing all risk control techniques.

Which one of the following statements about the limits of coverage under the Commercial General Liability Coverage Form is true? Choose one answer. A. Payments made for medical expenses under Part C apply to the policy's general aggregate limit. B. Under rules of the ISO Commercial Lines Manual, the Part C medical expense limit must be $25,000 or more. C. Under rules of the ISO Commercial Lines Manual, the personal and advertising injury liability limit can be no more than 50 percent of a policy's each occurrence limit. D. The products-completed operations aggregate limit and the general aggregate limit are subject to a third aggregate policy limit that applies to all claims paid under the policy.

A. Payments made for medical expenses under Part C apply to the policy's general aggregate limit. Correct. The general aggregate limit includes any payments made for Part C medical expenses.

Sarah was looking for new furniture for her home and visited a local woodworker's studio. While she was admiring a bookcase, it accidently fell over and injured her leg. From the commercial liability standpoint of the woodworker, this is an example of Choose one answer. A. Premises and operations liability. B. Employers liability. C. Products liability. D. Completed operations liability.

A. Premises and operations liability. Correct. The premises and operations liability exposure includes bodily injury caused by an accident that occurs on an organization's premises.

Which one of the following statements about the Rental Reimbursement endorsement designed for use with the Business Auto Coverage Form is true? Choose one answer. A. Reimbursement may extend beyond the policy expiration date. B. The endorsement provides reimbursement only if the cause of loss is theft. C. Rental reimbursement begins to pay seventy-two hours after the covered loss occurs. D. The daily amount of reimbursement is specified in the endorsement as a maximum of $50 per day.

A. Reimbursement may extend beyond the policy expiration date.

The term "you" is used throughout the Commercial General Liability Coverage Form. "You" is defined to include Choose one answer. A. The named insured shown in the declarations. B. The named insured shown in the declarations and any employees of the named insured. C. The named insured and any officers or directors of the named insured's organization. D. All persons or entities who have any type of liability protection under the policy.

A. The named insured shown in the declarations.

An ISO claims-made policy may contain a retroactive date. If such a date is present, it can be found in what part of the policy? Choose one answer. A. The policy declarations B. The policy insuring agreement C. The supplemental payments section of the policy D. An endorsement added to the policy

A. The policy declarations Correct. The retroactive date is shown in the policy declarations.

XYZ Corporation has used several different insurance companies for its commercial general liability (CGL) coverage over the years. During 20X1, Able Insurance Company provided coverage, but XYZ switched to Baker Insurance Company in 20X2 and 20X3. In 20X4, XYZ switched again to Chicago Insurance Company and has maintained coverage with Chicago ever since. Each of the CGL policies was the standard ISO occurrence-based form. XYZ manufactures lawn chairs. During 20X5, a suit was filed against XYZ, alleging that one of its lawn chairs, manufactured in 20X1, was defective when it collapsed in late 20X3, injuring a child. Given this information, which one of the following statements about insurance coverage for this claim under the standard CGL is most accurate? Choose one answer. A. The policy issued by Baker Insurance Company in 20X3 would respond to the claim because that is when the injury occurred. B. The policy issued by Able Insurance Company in 20X1 would respond to the claim because that is when the alleged defective chair was manufactured. C. The policy issued by Chicago Insurance Company in 20X5 would respond because that is when the suit was filed. D. All three of the insurance policies would respond to the claim, and any damages that were awarded would be shared equally between the three insurers.

A. The policy issued by Baker Insurance Company in 20X3 would respond to the claim because that is when the injury occurred.

Part A of the Commercial General Liability Coverage Form has an exclusion for electronic data. What is the purpose of this exclusion? Choose one answer. A. To reinforce the policy definition of property damage that electronic data are not tangible property B. To eliminate coverage for damage arising from the intentional misuse of electronic data by employees C. To narrow the definition of electronic data to certain specific types of media D. To specify that liability arising from use of electronic data is limited to personal injury

A. To reinforce the policy definition of property damage that electronic data are not tangible property Correct. The exclusion for electronic data reinforces the policy definition that electronic data is not considered tangible property.

Which one of the following provisions is included in the coverage agreement of the Business Auto Coverage Form? Choose one answer. A. Unlike defense costs, covered pollution costs or expenses reduce the applicable limits of coverage. B. Covered defense costs include legal fees paid in conjunction with a lawsuit, but exclude fees paid in conjunction with other civil proceedings such as voluntary arbitration. C. Pollution coverage for the cleanup of spilled cargo has a separate limit that is equal to 10 percent of the bodily injury liability limit. D. Pollution costs and defense costs are both included in the policy's limits of coverage.

A. Unlike defense costs, covered pollution costs or expenses reduce the applicable limits of coverage.

Although a broader coverage territory may apply in some cases, the coverage territory that applies to most claims in the Commercial General Liability (CGL) Coverage Form is limited to the United States (including its territories and possessions) and which of the following? Choose one answer. A. Puerto Rico and Canada B. Puerto Rico and Mexico C. Canada and Mexico D. Canada and countries in the European Union

Although a broader coverage territory may apply in some cases, the coverage territory that applies to most claims in the Commercial General Liability (CGL) Coverage Form is limited to the United States (including its territories and possessions) and which of the following? Choose one answer. A. Puerto Rico and Canada B. Puerto Rico and Mexico C. Canada and Mexico D. Canada and countries in the European Union

The Grey Corporation has a Commercial General Liability Coverage Form with the following limits: Each Occurrence $1,000,000 Damage to rented premises $100,000 each occurrence Medical expense $5,000 any one person Personal and advertising injury $1,000,000 any one person or organization General aggregate limit $2,000,000 Product/completed operations aggregate limit $2,000,000 Assuming the policy is written on an occurrence basis, how much of the general aggregate limit, if any, remains if the following claims have been paid under the policy? a premises/operations liability claim of $600,000 a products liability claim of $1,200,000 $3,000 of medical expenses to a customer injured on the premises. a personal and advertising injury liability claim of $300,000 Choose one answer. A. $200,000 B. $1,097,000 C. $1,397,000 D. The aggregate limit has been exhausted because the total claims exceed $2,000,000.

B. $1,097,000 Incorrect. The general aggregate is reduced by any amounts paid under Coverages A, B, and C, except for those that arise out of products/completed operations. Therefore, the general aggregate limit is reduced by $600,000 + $3,000 + $300,000 = $903,000. This leaves $1,097,000 of the general aggregate limit remaining.

he Supplementary Payments section of the Commercial General Liability Coverage Form includes the cost of bail bonds required because of accidents or traffic violations arising out of the use of any vehicle to which the bodily injury liability coverage applies. The limit for this supplementary coverage is Choose one answer. A. $100. B. $250. C. $1,000. D. $2,500.

B. $250. Incorrect. The policy will pay up to $250 for the cost of such bail bonds.

Which one of the following statements about workers compensation and employers liability loss exposures is most correct? Choose one answer. A. When an employee such as a farm worker or day laborer is exempted from coverage under a workers compensation statute, the employee must also give up the right to make tort claims against their employer. B. Although intended to be an exclusive remedy for occupational injuries, there are a number of exceptions that allow a covered employee to make a tort claim against an employer for a work-related injury. C. Because of the statutory provisions of state workers compensation laws, employers cannot assume liability for the worker injuries by contract, such as under a hold-harmless agreement with a subcontractor. D. While workers compensation laws are meant to protect workers, employers are also protected against lawsuits stemming from certain types of torts, including damages for injuries caused intentionally by the employer.

B. Although intended to be an exclusive remedy for occupational injuries, there are a number of exceptions that allow a covered employee to make a tort claim against an employer for a work-related injury.

The insuring agreement in Coverage A of the standard Commercial General Liability (CGL) Coverage Form includes language that addresses legal expenses for claims covered by the policy. Which one of the following statements regarding the insurer's legal defense obligations is most accurate? Choose one answer. A. An insurer's duty to defend ends when the combined cost of legal expenses and damages reaches the applicable policy limits. B. An insurer's obligation to defend ends when the applicable limits of insurance have been exhausted. C. Legal expenses paid to outside, independent counsel end when the limits of insurance are exhausted, but the insurer's obligation to defend using in-house counsel continues without limit. D. There is a separate limit established for legal expenses, and once that limit is reached the insurer's duty to defend ends, even if no damages have yet been awarded.

B. An insurer's obligation to defend ends when the applicable limits of insurance have been exhausted. Correct. An insurer's obligation to defend ends when the applicable limits of insurance have been exhausted.

During busy delivery periods, the Iota Corporation hires autos for short periods of time. Iota has a contractual agreement to return the vehicles to their owners in the same condition as when hired, except for normal wear and tear. Firms like Iota normally insurer such vehicles for any damage by purchasing which one of the following? Choose one answer. A. Contractual liability insurance B. Auto physical damage on hired autos C. Bailees customer insurance for hired autos D. Auto property damage liability for use of covered autos

B. Auto physical damage on hired autos Correct. Such exposures are typically insured by purchasing auto physical damage insurance on hired autos.

An electrical contractor was hired to install a new 100-amp fuse box in the Smith's home. During installation, the contractor inadvertently left a small screwdriver in a duct space behind the panel. Three weeks later, the screwdriver caused an electrical short which led to a fire. Which one of the following loss exposures best categorizes the electrical contractor's legal liability exposure for the fire damages? Choose one answer. A. Products liability B. Completed operations liability C. Liability for operations by others D. Property damage liability

B. Completed operations liability

Which one of the following statements about Coverage B—Personal and Advertising Injury Liability of the standard Commercial General Liability (CGL) Coverage Form is most accurate? Choose one answer. A. Unlike Coverage A—Bodily Injury and Property Damage Liability and Coverage C—Medical Payments, Coverage B—Personal and Advertising Injury Liability does not contain a pollution exclusion. B. Coverage B—Personal and Advertising Injury Liability excludes coverage for damages that result from the insured making defamatory statements that the insured knows to be false. C. The definitions section of Coverage B—Personal and Advertising Injury Liability limits coverage to Bodily Injury claims only. D. Coverage B—Personal and Advertising Injury Liability excludes all coverage for e-commerce exposures, which must be insured outside of the CGL.

B. Coverage B—Personal and Advertising Injury Liability excludes coverage for damages that result from the insured making defamatory statements that the insured knows to be false.

Which one of the following statements about Coverage A of the Commercial General Liability (CGL) Coverage Form is true? Choose one answer. A. Coverage for bodily injury liability excludes damages for claims arising from sickness and disease unless such coverage is added by endorsement. B. Coverage for property damage includes the loss of use of tangible property that is not physically injured. C. The insurer may be required to pay certain bodily injury or property damage claims even if one or more exclusions applies to the claim. D. Bodily injury or property damage arising from any intentional act is excluded.

B. Coverage for property damage includes the loss of use of tangible property that is not physically injured. Incorrect. Bodily injury is excluded only if the bodily injury or property damage was intended. Intentional acts themselves are not excluded.

A business that services or repairs autos can become liable for damages to its customers' autos temporarily left in its custody. Which one of the following coverages is meant to insure a business for losses to customers' autos left in its care, custody and control? Choose one answer. A. Property damage liability B. Garagekeepers coverage C. Vicarious liability for non-owned autos coverage D. Hired or borrowed autos coverage

B. Garagekeepers coverage

One of the conditions found in the Business Auto Coverage Form addresses the bankruptcy or insolvency of the named insured. Which one of the following statements about claims settlement in the event of bankruptcy of the insured is most accurate? Choose one answer. A. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the plaintiff becomes an unsecured creditor of the insurer. B. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the insurer is still obligated to pay the loss. C. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the claim is then sent to binding arbitration for settlement. D. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the insurer is also relieved of any obligation to pay the loss.

B. If the insured is relieved through bankruptcy of an obligation to pay a liability claim, the insurer is still obligated to pay the loss.

One of the general conditions in Section IV of the Business Auto Coverage Form provides that, if the insurer revises the form to provide more coverage without additional premium charge, the policy will automatically provide the additional coverage as of the date the revision is effective in the named insured's state. This condition is referred to as Choose one answer. A. Subrogation. B. Liberalization. C. Additional insurance. D. Other insurance.

B. Liberalization.

Which one of the following supplementary payments under the Comprehensive General Liability Coverage Form is subject to a specified dollar limit? Choose one answer. A. Prejudgment interest awarded against the insured on the part of the judgment the insurer pays. B. Loss of earnings resulting from the insured being away from work at the insurer's request to assist the insurer in investigating or defending claims. C. All expenses incurred by the insurer, such as fees charged by outside defense counsel. D. All court costs taxed against the insured in a suit.

B. Loss of earnings resulting from the insured being away from work at the insurer's request to assist the insurer in investigating or defending claims. Correct. Loss of earnings is limited to $250 per day.

The Better Hardware Store recently installed new floors to minimize the chance that customers will slip and injure themselves. This risk management technique is an example of Choose one answer. A. Avoidance. B. Loss prevention. C. Loss reduction. D. Claim management.

B. Loss prevention. Correct. This is a risk control technique that reduces the frequency of a loss and is therefore an example of loss prevention.

Railroad owners commonly require contractors to purchase a Railroad Protective Liability Coverage Form. Which one of the following statements about this form is true? Choose one answer. A. The named insured includes the railroad owner as well as a designated contractor that performs work for a railroad. B. One of the coverage limits applies to physical damage to property owned by or leased or entrusted to the railroad. C. The form provides coverage for bodily injury that occurs after a contractor's work is completed. D. There is an exclusion for the railroad's obligations under the Federal Employers' Liability Act,

B. One of the coverage limits applies to physical damage to property owned by or leased or entrusted to the railroad. Correct. The form has two coverage limits, one of which applies to physical damage to property owned by or leased or entrusted to the railroad.

he ISO Commercial Lines Manual organizes the Commercial General Liability (CGL) Coverage Form endorsements into categories that describe the purpose of the endorsements. One of those endorsement categories is the Employee Benefits Liability Coverage Form (CG 04 35), which is used to Choose one answer. A. Exclude the named insured's liability for bodily injury or property damage liability arising from the employee benefits plan. B. Provide coverage for negligence in the administration of the named insured's employee benefits program. C. Provide coverage against breach of contract suits brought on by disgruntled employees over benefit cancellations. D. Exclude the named insured from vicarious liability for the acts and omissions of the firm's leased employees.

B. Provide coverage for negligence in the administration of the named insured's employee benefits program.

Which one of the following losses would be the most likely to be covered under the named insured's Business Auto Coverage Form? Choose one answer. A. A forklift owned by the named insured and operated by an employee runs into another employee's car parked in the parking lot. B. The employee driver of a streetsweeper owned by the named insured negligently runs over a pedestrian in a crosswalk on the way back to the named insured's garage. C. The operator of a bulldozer owned by the named insured negligently runs into the side of a building adjacent to a work site. D. A road grader owned by the named insured and operated by an employee of the named insured ruptures a county-owned water line while resurfacing a road.

B. The employee driver of a streetsweeper owned by the named insured negligently runs over a pedestrian in a crosswalk on the way back to the named insured's garage.

The Grey Corporation was founded three years ago and purchased an occurrence version of the Commercial General Liability Coverage Form. Each year, the corporation has changed insurers but has purchased the same type of form without any gaps in coverage. During year 1, the company completed work that resulted in an injury to a customer in year 2. However, the customer did not make a claim for damages until year 3. Which of Grey's forms will respond to this loss? Choose one answer. A. The form in force in year 1 when the work was completed B. The form in force in year 2 when the injury occurred C. The form in force in year 3 when the claim was made. D. The forms in force in years 1 and 2 in proportion to their coverage limits

B. The form in force in year 2 when the injury occurred Correct. If a form is written on an occurrence basis, it will respond to claims made for damages the occurred during the policy period. Therefore, the form that will respond is the one that was in force during year 2.

Which one of the following statements about the general aggregate limit of the Commercial General Liability (CGL) Coverage Form is most accurate? Choose one answer. A. There is a separate general aggregate limit for Bodily Injury and another one for Property Damage, and the sum of those two limits form the products-completed operations aggregate limit. B. The general aggregate limit is applied to the sum of damages from Coverage A other than products-completed operations damages, plus damages under Coverage B plus damages under Coverage C. C. The general aggregate limit is applied to Coverage A and Coverage C only, as a separate aggregate limit is applied to Coverage B. D. The general aggregate limit is typically set at half the products-completed operations aggregate limit in order to minimize total premiums.

B. The general aggregate limit is applied to the sum of damages from Coverage A other than products-completed operations damages, plus damages under Coverage B plus damages under Coverage C.

ABC Contractors was hired to clear a vacant lot and prepare it for a construction project. An employee of ABC who was operating a bulldozer stepped down from the machine to confer with the on-site engineer without turning off the engine. The bulldozer slipped into gear then drove into the side of a nearby convenience store. Two people, one of them a teenager, were injured severely. The parents of the teenager sued ABC, which was insured with a standard Commercial General Liability (CGL) Coverage Form from XYZ Insurance with limits of $1,000,000 per occurrence and $2,000,000 aggregate. Through the course of negotiations with the parents of the teenager and the subsequent trial, XYZ spent $25,000 on legal fees. A jury awarded the parents $1,250,000 for the teenager's injuries and another $500,000 in punitive damages. The judge directed that ABC also pay court costs of $5,000 and prejudgment interest of $125,000. The bodily injury to the teenager will be covered under Coverage A - Bodily Injury and Property Damage Liability, but the CGL also includes supplementary payments. In addition to the $1,000,000 of bodily injury damages payable under Coverage A, XYZ will pay Choose one answer. A. The entire amount of prejudgment interest as well as the $25,000 in legal fees. B. The prejudgment interest on the $1,000,000 of the award that it is responsible for as well as the $25,000 in legal fees and the $5,000 in court costs. C. The entire amount of prejudgment interest as well as the $25,000 in legal fees, the $5,000 in court costs, and the $500,000 of punitive damages. D. The $25,000 in legal fees and the $5,000 in court costs, but there is no coverage for the prejudgment interest or the punitive damages.

B. The prejudgment interest on the $1,000,000 of the award that it is responsible for as well as the $25,000 in legal fees and the $5,000 in court costs. Incorrect. In addition to $1,000,000 of bodily injury damages payable under Coverage A, XYZ will cover the prejudgment interest on the $1,000,000 of the award that it is responsible for as well as the $25,000 in legal fees and the $5,000 in court costs.

One of the exclusions in Part A of the Commercial General Liability Coverage Form is for expected or intended injury. However, there is one exception to this exclusion that applies to bodily injury arising from which one of the following? Choose one answer. A. An action of an employee B. The use of reasonable force to protect persons or property C. Self-inflicted injuries by a dissatisfied customer who is mentally ill D. A person testing a new product as long as the person is not paid to conduct the test

B. The use of reasonable force to protect persons or property Correct. The exception to the exclusion for expected or intended injury is for bodily injury resulting from the use of reasonable force to protect persons or property.

The Young Corporation has a commercial package policy that includes an occurrence version of the Commercial General Liability Coverage Form. There are no endorsements or deductibles that apply to the form. During the policy period, the following losses occurred: The corporation was sued by a customer, but a court ruled that the corporation was not liable. However, the insurer incurred costs of $50,000 to defend the claim. A volunteer worker suffered an injury and requested payment under the form's medical expense coverage for $750 of expenses that were not covered by his group insurance policy. The corporation was successfully sued by an employee for $60,000 in damages because of omissions in administering its retirement program and which will result in a reduction of the employee's retirement benefits. An employee, while at work, accidentally caused $2,700 of damage to the property of another employee. The employee suffering the damages sued his co-employee. Which one of the following statements correctly describes whether or not each of these claims will be paid under the policy? Choose one answer. A. The defense costs are not payable under the policy as the insured was not legally liable to the customer. B. The volunteer worker's claims for unreimbursed medical expenses is covered under the form's medical expense coverage. C. The $60,000 in damages from omissions in administering the retirement program is covered. D. The $2,700 claim against the employee is covered up to the maximum of $2,500 provided under the policy as supplementary payments.

B. The volunteer worker's claims for unreimbursed medical expenses is covered under the form's medical expense coverage. Incorrect. These damages would not be covered as they are neither bodily injury nor property damage. The corporation would need to have Employee Benefits Liability Coverage endorsed to the policy for there to be such coverage.

Baker, Inc., has a Business Auto Coverage Form that has a Symbol 1 entered for liability coverage. Robert, an employee of Baker, was involved in an accident while running in errand for the business using his own car. Both Robert and Baker are sued as a result of the accident. Which one of the following statements describes the extent of coverage, if any, under Baker's form? Choose one answer. A. There is no coverage, because symbol 2 or symbol 3 would have been needed for liability coverage. B. There is coverage for Baker only. C. There is coverage for both Baker and Robert. D. There is coverage for Baker and for Robert if the form had been endorsed to list employees as insureds.

B. There is coverage for Baker only. Incorrect. Symbol 1 includes all vehicles, and Robert's car is therefore a covered auto. There is coverage for Baker as a named insured. However, Robert is not covered. An employee of the named insured is not an insured if the covered auto is owned by the employee or a member of the employee's household.

Bodily injury was caused to customers by fumes that escaped from heating equipment belonging to the Reynolds Corporation. Which one of the following statements describes the reason there would or would not be liability coverage for these injuries under the corporation's unendorsed Commercial General Liability Coverage Form? Choose one answer. A. Coverage would be excluded because of the pollution exclusion. B. There would be coverage because the pollution exclusion has an exception that applies to bodily injury caused by fumes from heating equipment. C. Coverage would be excluded because of the impaired property exclusion D. There would be coverage because the impaired property exclusion has an exception that applies to bodily injury caused by fumes from heating equipment.

B. There would be coverage because the pollution exclusion has an exception that applies to bodily injury caused by fumes from heating equipment. Correct. Fumes from heating equipment is a type of pollution. Although there is a pollution exclusion in the form, the exclusion contains some exceptions. One of these exceptions provides coverage for bodily injury caused by smoke, fumes, vapor, or soot emanating from cooling, heating, or dehumidifying equipment.

Which one of the following statements about certificates of insurance is true? Choose one answer. A. They often amend or alter coverage afforded by the listed policies. B. They may be prepared by either an insurer or a producer. C. They are a type of policy endorsement. D. They usually confer broad rights upon the certificate holder.

B. They may be prepared by either an insurer or a producer. Correct. They may be prepared by either an insurer or a producer.

Most of the claims covered by liability insurance are based on Choose one answer. A. Contract law. B. Tort law. C. Regulatory law. D. Government statutes.

B. Tort law.

Smart Endeavors, a retail clothing store, hired ABC Contractors to install a new air conditioning system in one of its stores. ABC misrouted some wires during the installation process, which caused the wires to overheat and caused a fire. The air conditioning unit had to be rewired, which cost $1,000. Smart Endeavors' building sustained $30,000 worth of damage and $40,000 worth of inventory was damaged by smoke. Smart Endeavors was closed for two weeks and lost $10,000 in profits during that period. ABC has liability insurance under a standard Commercial General Liability (CGL) Coverage Form with $1,000,000 per occurrence limits. Which one of the following statements concerning coverage for damages under Coverage A of the CGL is most accurate? Choose one answer. A. ABC will pay $81,000 for all of the physical damage to the building and inventory, the air conditioning rewiring costs, and Smart Endeavors' lost profits. B. ABC will pay $30,000 for the damage to the building as well as $1,000 for the air conditioner rewiring and $10,000 for the lost profits, but will not pay for the smoke damage to the inventory because smoke pollution is excluded by the Pollution Liability Exclusion. C. ABC will pay $80,000 for the fire damage to the building and inventory as well as the lost profits, but the CGL excludes the cost of work that was incorrectly performed, which means the $1,000 rewiring costs are excluded. D. ABC will pay $71,000 for the damage to the physical property, but Coverage A of the CGL excludes coverage for intangible property such as lost profits.

C. ABC will pay $80,000 for the fire damage to the building and inventory as well as the lost profits, but the CGL excludes the cost of work that was incorrectly performed, which means the $1,000 rewiring costs are excluded.

The Commercial General Liability Coverage Form contains an exclusion that pertains to the providing or failure to provide professional healthcare services? This exclusion applies to which category of persons who would otherwise be an insured under the policy? Choose one answer. A. A named insured who is a healthcare professional B. A named insured who is not a healthcare professional C. An employee who is a healthcare professional D. An employee who is not a healthcare professional

C. An employee who is a healthcare professional Correct. The exclusion applies only to the professional liability of employees who are healthcare professionals.

Which one of the following statements about Coverage C—Medical Payments of the Commercial General Liability Coverage Form is true? Choose one answer. A. The coverage pays only if the insured is legally liable. B. Coverage is worldwide if an injury results from the insured's product or completed operations. C. Claims are paid only for medical expenses reported to the insurer within one year after the date of an accident. D. The basic coverage limit in the ISO Commercial Lines Manual is $25,000 per person.

C. Claims are paid only for medical expenses reported to the insurer within one year after the date of an accident. Correct. Claims must be reported to the insurer within one year of the date of an accident in order for there to be coverage.

ohn purchased a new lawnmower two years ago. After significant use, the lawnmower needed servicing. A repairman sharpened the blade, but he failed to reattached it properly to the lawnmower. When John was using the lawnmower, the blade flew off and seriously injured John's daughter. From the standpoint of a commercial liability loss for the repair shop, this is an example of Choose one answer. A. Products liability. B. Premises and operations liability. C. Completed operations liability. D. Liability for operations by others.

C. Completed operations liability. Correct. Completed operations liability is the legal responsibility of a contractor, repairer, or other entity for bodily injury or property damage arising out of completed work.

Which one of the following statements about the general conditions under Section IV of the Business Auto Coverage Form is true? Choose one answer. A. Bankruptcy of an insured relieves the insurer of any obligations under the form to that insured. B. The premium shown in the declarations is the minimum amount the named insured will pay during the policy period. C. Coverage for trailers follows the autos to which they are attached. D. The coverage territory is worldwide for autos rented with a driver.

C. Coverage for trailers follows the autos to which they are attached.

business has a Business Auto Coverage Form with an Employees as Insureds endorsement. This endorsement does which one of the following? Choose one answer. A. Supplements the business coverage for employees with coverages similar to those in a Personal Auto Policy B. Covers named employees who are provided with company cars if they rent or borrow vehicles from others C. Covers employees while driving their own cars on the named insured's behalf D. Covers employees while operating autos rented in the employees' names while on the named insured's business

C. Covers employees while driving their own cars on the named insured's behalf

Which one of the followings statements concerning commercial liability risk control practices is most accurate? Choose one answer. A. Because liability losses are so hard to forecast ahead of time, the favored loss control techniques are based on loss reduction rather than loss prevention. B. Cost effectiveness is not a consideration in developing liability loss control measures because the potential for losses far outweighs any current expenditures for loss control costs. C. Employees should be given a sense of ownership in the liability risk control program because human behavior is the cause for the vast majority of accidents. D. Effective claims management is the most effective loss prevention technique when dealing with liability loss exposures.

C. Employees should be given a sense of ownership in the liability risk control program because human behavior is the cause for the vast majority of accidents.

Eric recently purchased a new gas grill directly from a small manufacturer in his hometown. The first time Eric used the grill, it exploded. Not only was the grill destroyed, but Eric was injured and his home damaged. The manufacturer had a Commercial General Liability Coverage Form with no endorsements. Which one of the following statements describes how the manufacturer's policy will respond to this loss? Choose one answer. A. None of the losses are covered, because they resulted from damage to the insured's product. B. Only the injuries to Eric are covered, and the other losses are excluded by the form. C. Eric's injuries and the damage to his house are covered, but the damaged to the grill is excluded by the form. D. All the losses are covered, because there are exceptions to any exclusions that might apply.

C. Eric's injuries and the damage to his house are covered, but the damaged to the grill is excluded by the form. Correct. The form has an exclusion for damage to the insured's product because of its defect. However, the resulting damage is covered.

Which one of the following statements about controlling liability losses is true? Choose one answer. A. The focus of loss control is independent of an organization's operations. B. Only organizations that manufacture products have a products liability exposure. C. For many organizations, workers compensation loss exposures represent their highest-cost liability. D. Categories of liability arising from new communication technology are identical to the types of liability exposures that have traditionally existed.

C. For many organizations, workers compensation loss exposures represent their highest-cost liability.

In the Commercial General Liability (CGL) Coverage Form, any person or organization can be listed as a named insured, but depending on the organizational form, other individuals may also be considered insureds with respect to their duties within the organization. Which one of the following statements concerning named insureds under the CGL is most accurate? Choose one answer. A. If the named insured is a trust, the trust itself is automatically considered an insured, but the individual trustees are specifically excluded. B. If the named insured is a limited liability company, the managers of the limited liability company are automatically considered as insureds, but the owner/members of the limited liability company are specifically excluded. C. If the sole owner of a business is designated by name on the declarations page as the named insured, then both the named insured and the named insured's spouse are insureds within the scope of operating the business. D. If the named insured is a corporation, the chief executive office and the members of the board of directors are automatically considered to be insureds, but all other officers, employees and stockholders are specifically excluded.

C. If the sole owner of a business is designated by name on the declarations page as the named insured, then both the named insured and the named insured's spouse are insureds within the scope of operating the business.

One of the available coverages under the Business Auto Coverage Form is specified causes of loss coverage. Which one of the following statements about this coverage is true? Choose one answer. A. It restricts collision coverage to specified types of accidents. B. It expands collision coverage to pay for certain losses that would otherwise be excluded. C. It is an alternative to comprehensive coverage that is less expensive but provides more limited coverage. D. It adds flood and earthquake to the perils insured against under comprehensive coverage.

C. It is an alternative to comprehensive coverage that is less expensive but provides more limited coverage. Correct. It is a somewhat less expensive alternative to comprehensive coverage. It covers losses from specified perils rather than all perils except those specifically excluded.

Which one of the following statements about the Owners and Contractors Protective Liability Coverage Form is true? Choose one answer. A. It provides coverage that is secondary to any other insurance available to the named insured. B. It has a claims-made trigger. C. It is purchased by a contractor but lists a project owner as the named insured. D. It provides coverage for completed operations for up to two years after a project is finished.

C. It is purchased by a contractor but lists a project owner as the named insured.

The Snow Corporation has an expired ISO claims-made Commercial General Liability Coverage Form that has an extended reporting period in effect as well as a retroactive date. The form will cover claims first made during this extended period as long as the insured event occurred during which one of the following periods? Choose one answer. A. During the policy period only B. On or after the retroactive date and prior to the policy's effective date C. On or after the retroactive date and before the policy's expiration D. On or after the retroactive date and up to and including the date the claim is made

C. On or after the retroactive date and before the policy's expiration Correct. The extended reporting period covers claims made if the insured event occurred on or after the retroactive date and before policy expiration.

The purpose of the Contractual Liability—Railroads endorsement (CG 2417) to the Commercial General Liability Coverage Form is to Choose one answer. A. Comply with the Railroad Workers Liability Act if the insured is engaged in interstate commerce. B. Eliminate liability coverage that is provided elsewhere under policies that apply to the transportation of goods by railroad. C. Provide coverage for liability assumed in an easement or license agreement in connection with operations within fifty feet of a railroad. D. Provide coverage for liability arising out of railroad accidents on the insured's premises

C. Provide coverage for liability assumed in an easement or license agreement in connection with operations within fifty feet of a railroad.

Liability imposed by certain statutes, such as workers compensation laws, is an example of Choose one answer. A. Contractual liability. B. Tort liability. C. Strict liability. D. Hold-harmless liability.

C. Strict liability. Correct. Strict liability is the term used to describe liability imposed by certain statutes, such as workers compensation laws.

Which one of the following statements concerning the exclusions commonly found in Coverage A of the ISO Commercial General Liability (CGL) Coverage Form is most accurate? Choose one answer. A. The Contractual Liability exclusion for assumed liability only applies to liability assumed by the named insured, but does not apply to any of the named insured's employees. B. The Expected or Intended Injury exclusion only applies if the intended injury occurs on the premises of the named insured. C. The Liquor Liability exclusion only applies if the insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages. D. Although there is a Pollution Exclusion in the basic CGL policy, the pollution exclusion only applies to the intentional release of pollutants, so there would be coverage for an accidental discharge by the insured.

C. The Liquor Liability exclusion only applies if the insured is in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.

Symbol 6 is often used for the uninsured motorists (UM) coverage of the Business Auto Coverage Form. This means which one of the following? Choose one answer. A. The UM coverage automatically applies to all autos insured for liability coverage under the policy. B. The UM coverage applies only to autos that are not also covered for personal injury protection. C. The UM coverage is provided only for autos that are required by law to have UM coverage. D. The UM coverage is provided as an alternative to medical payments coverage.

C. The UM coverage is provided only for autos that are required by law to have UM coverage.

Coverage B—Personal and Advertising Injury Liability of the Commercial General Liability Coverage Form provides limited coverage for certain e-commerce exposures. Which one of the following statements about this coverage is true? Choose one answer. A. It is designed primarily for persons that provide Internet-related services to others. B. There is an exclusion for liability arising from advertisements. C. The coverage territory is worldwide for injury that occurs through the Internet. D. Coverage is limited primarily to situations involving electronic chatrooms or bulletin boards.

C. The coverage territory is worldwide for injury that occurs through the Internet.

Which one of the following statements about the Business Auto Coverage Form is true? Choose one answer. A. The form's declarations tend to be much briefer than those found in most other coverage forms. B. A coverage chosen by the named insured must apply to all covered autos. C. The form can be included in a commercial package policy or issued as a monoline policy. D. The auto coverage symbols relate to the retail value of covered autos.

C. The form can be included in a commercial package policy or issued as a monoline policy.

Which one of the following statements best describes the basic requirement for triggering coverage under the ISO claims-made Commercial General Liability (CGL) Coverage Form? Choose one answer. A. The loss must occur after the retroactive date but before the policy period, and the claim must be made during the extended reporting period. B. The loss must occur during the extended reporting period and the claim must be made before the retroactive date. C. The loss must occur after the retroactive date and the claim must be made during the policy period or during the extended reporting period. D. The loss must occur before the retroactive date and the claim must be made during the policy period.

C. The loss must occur after the retroactive date and the claim must be made during the policy period or during the extended reporting period.

Which one of the following statements about liability loss control is true? Choose one answer. A. Off-premises liability hazards are easier to control than on-premises hazards. B. A contractor's exposure for completed operations usually ends within two or three months after the completion of work. C. The ownership of property mandates responsibility to others, possibly including trespassers. D. Post-accident claim management is unnecessary for workers compensation injuries because of the no-fault benefits provided to employees.

C. The ownership of property mandates responsibility to others, possibly including trespassers.

Which one of the following statements about the context for controlling liability losses is true? Choose one answer. A. Statutory law is limited to laws and regulations of state governments. B. The use of commercial liability risk control is limited to nonstatutory liability. C. The rights owed to others are shaped by court cases over time. D. The degree of duties created by common law requires an identical level of care for all classes of persons and entities.

C. The rights owed to others are shaped by court cases over time. Incorrect. The degree of duties varies with, for example, a lower level of care owed to a trespasser rather than to a customer.

Which one of the following statements about the Supplementary Payments section of the Commercial General Liability Coverage Form is true? Choose one answer. A. Any payments made by the insured reduce the policy's limit of insurance. B. The insurer is obligated to provide certain types of bonds. C. The supplementary payments are payable as the result of the insurer defending a suit, even if no claim is paid. D. Payments for court cost are limited to 50 percent of a court's actual assessment as a method of encouraging the insured to help minimize such costs.

C. The supplementary payments are payable as the result of the insurer defending a suit, even if no claim is paid.

The Alpha Corporation formed a new subsidiary, which is also a corporation. Alpha's Commercial General Liability Coverage Form provides coverage for such a new corporation for a limited period of time. Which one of the following statements describes how long Alpha has automatic coverage for the new subsidiary. Choose one answer. A. There is coverage for thirty days, even if the policy expires before that time. B. There is coverage for sixty days or to the end of the policy period, whichever is the longest. C. There is coverage for ninety days or to the end of the policy period, whichever comes first. D. There is coverage for 120 days as long as the insurer receives a letter of intent to add coverage.

C. There is coverage for ninety days or to the end of the policy period, whichever comes first.

The Wier Corporation has a Commercial General Liability Coverage Form. Which one of the following statements correctly describes the extent, if any, to which stockholders of the corporation are insureds for liability coverage under the policy? Choose one answer. A. The are specifically excluded from coverage. B. They are excluded from coverage if the are also classified as employees of the corporation. C. They are insureds, but only with respect to their liability as stockholders. D. They are co-insureds for any actions brought against the corporation.

C. They are insureds, but only with respect to their liability as stockholders.

Coverage A of the Commercial General Liability Coverage Form contains numerous exclusions. However, there are exceptions to some of the exclusions. Which one of the following exclusions has NO exceptions? Choose one answer. A. Pollution liability B. Liquor liability C. Workers compensation D. Employers liability

C. Workers compensation Correct. The exclusions pertaining to workers compensation, war, personal and advertising injury, electronic data, and the distribution of material in violation of statute are the ones that contain no exceptions.

With respect to legal liability based on contracts, which one of the following statements about a warranty is true? Choose one answer. A. It is a promise made by a person or entity to buy a product or service. B. The legal liability from a breach of a warranty is generally uninsurable. C. The basis for damages from the breach of a warranty is based on criminal law. D. A warranty may be either expressly stated or implied by law.

D. A warranty may be either expressly stated or implied by law.

The ISO Business Auto Coverage Form uses symbols to identify which autos are covered under the policy. Which one of the following would be covered under Symbol 9 - Non-Owned Autos Only? Choose one answer. A. Autos specifically identified and described in the policy for which a premium is shown. B. Autos rented or leased and used as temporary substitutes for covered autos used in the named insured's business. C. Autos owned by the named insured that are other than private passenger autos. D. Autos owned by the named insured's employees while being used in the named insured's business.

D. Autos owned by the named insured's employees while being used in the named insured's business.

Under the common-law system, the body of law is derived mostly from Choose one answer. A. Statutes. B. State constitutions. C. The United States Constitution. D. Court decisions.

D. Court decisions. Correct. The common-law system is a legal system in which the body of law is derived more from court decisions as opposed to statutes and constitutions.

When the named insured under a Business Auto Coverage Form is a sole proprietor, the policy can be amended by endorsement to provide the same liability coverage to the named insured and family members that he or she could obtain under a Personal Auto Policy by using the Choose one answer. A. Business Auto Named Driver (CA 99 32) endorsement. B. Employees as Insureds (CA 99 33) endorsement. C. Drive Other Car -- Broadened Coverage for Named Individuals (CA 99 10) endorsement. D. Individual Named Insured (CA 99 17) endorsement.

D. Individual Named Insured (CA 99 17) endorsement.

Which one of the following statements about the general aggregate limit under a Commercial General Liability (CGL) Coverage Form is true? Choose one answer. A. It provides additional benefits for a claim if the occurrence limit is exceeded. B. It includes any defense costs paid under the policy. C. It is reduced by the amount of any claims paid for completed operations. D. It is reduced by an claims paid for medical payments under Coverage C.

D. It is reduced by an claims paid for medical payments under Coverage C. Correct. The aggregate limit is reduced by any claims paid under Coverage A (except for products and completed operations claims), Coverage B, and Coverage C.

Which one of the following statements about legal liability is true? Choose one answer. A. An organization can experience a liability loss under an insurance policy only if the organization is found legally liable. B. Most insurers refuse to settle claims prior to court proceedings that find an insured legally liable. C. Legal liability that is imposed by criminal laws is commonly covered by insurance. D. Legal liability that is imposed by civil laws can be based on contracts and statutes.

D. Legal liability that is imposed by civil laws can be based on contracts and statutes. Correct. Legally liability that is imposed by civil laws can be based on contracts and statutes as well as on tort law.

Employers nonownership liability arises out of which one of the following? Choose one answer. A. Bailee liability for damage to a customer's property B. Liability because autos are leased rather than owned C. Liability for borrowed autos that are used in the employer's business D. Liability arising out of employees' operation of their own autos in the employer's business

D. Liability arising out of employees' operation of their own autos in the employer's business

An endorsement that eliminates the liquor liability exclusion and provides coverage for organizations in the business of selling or serving alcoholic beverages is an example of which type of endorsement? Choose one answer. A. Endorsement for amending limits B. Additional coverage endorsement C. Classification endorsement D. Miscellaneous coverage amendment endorsement

D. Miscellaneous coverage amendment endorsement

ABC Trucking has decided to become more proactive in managing its motor vehicle liability through aggressive loss control. Which one of the following techniques would be most useful in preventing auto-related liability losses? Choose one answer. A. Requiring all customers to sign hold-harmless agreements absolving ABC of any liability for damages. B. Using outside contractors rather than ABC employees to handle the truck driving duties. C. Retrofitting vehicles with airbags to better protect the drivers. D. Pre-screening driver applicants with written tests, physical examinations, and drug screening before they are hired.

D. Pre-screening driver applicants with written tests, physical examinations, and drug screening before they are hired. Correct. Pre-screening driver applicants with written tests, physical examinations, and drug screening before hiring will reduce the number of accidents.

In addition to a general aggregate limit, the Commercial General Liability Coverage Form often contains a second aggregate limit that applies to Choose one answer. A. Property damage. B. Foreign operations. C. Part B medical expense payments. D. Products and completed operations.

D. Products and completed operations. Correct. The second aggregate limit applies to products and completed operations.

The Albert Corporation wishes to provide liability coverage for owned and nonowned autos, but not for hired autos. Under Albert's Business Auto Coverage Form, which symbol or symbols should be used for liability coverage? Choose one answer. A. Symbol 1 B. Symbol 2 C. Symbols 1 and 8 D. Symbols 2 and 9

D. Symbols 2 and 9 Correct. Symbol 2 provides coverage for owned autos, and Symbol 9 provides coverage for nonowned autos.

The Supplementary Payments section of the Comprehensive General Liability (CGL) Coverage Form contains provisions concerning the insurer's duty to defend indemnitees of the insured, but only if specific conditions are met. Which one of the following is one of these conditions? Choose one answer. A. The indemnitee rather than the insured must be named in the suit. B. The insured cannot have assumed a contractual relationship to defend the indemnitee under an insured contract. C. The indemnitee agrees not to perform any duties in the defense that are similar to the duties that any other insured would have to perform. D. The indemnitee and the insureD must ask the insurer to conduct and control the defense.

D. The indemnitee and the insureD must ask the insurer to conduct and control the defense.

GoodBurgers, a manufacturer of pre-cooked frozen hamburger patties, has a standard Commercial General Liability (CGL) Coverage Form issued by ABC Insurance. During processing, an intoxicated worker dropped a wrench into the meat grinder which then spit metal shavings into a batch of patties. Quality control failed to detect the tainted shipment, and several customers were injured when they ate the burgers. An internal investigation led to the firing of the at-fault worker, but Goodburgers incurred significant costs when they were forced to recall thousands of cases of their products. Which one of the following statements concerning coverage for these losses under Coverage A-Bodily Injury and Property Damage Liability of the standard CGL is most accurate? Choose one answer. A. Because the incident was alcohol-related, the Liquor Liability Exclusion in Coverage A would exclude coverage for this claim. B. Although excluded from Coverage A, the costs of the recall would be covered under Coverage B - Personal and Advertising Injury. C. The damage caused by the tainted meat products would be excluded under the Damage to Your Work exclusion in the CGL policy, but the cost of the recall would be covered. D. The injuries to the product consumers would be covered, but the cost of the product recall cost would be excluded.

D. The injuries to the product consumers would be covered, but the cost of the product recall cost would be excluded.

After a retroactive date has been established for a claims-made policy, the ISO Commercial Lines Manual rules limit the ability of the insurer to advance the retroactive date. Which one of the following situations would be grounds for advancing the retroactive date? Choose one answer. A. The policy is renewed. B. The policy's extended reporting period is breached. C. A claim is made. D. The insured changes insurers.

D. The insured changes insurers.

Many of the same risk control concepts apply to both commercial general liability exposures and workers compensation and employers liability exposures, but there are some differences. Which one of the following statements about those differences is most correct? Choose one answer. A. The doctrine of exclusive remedy is increasingly being applied to commercial liability exposures, which is reducing the effectiveness of loss control efforts are leading to greater emphasis on risk transfer techniques. B. The relatively high level of product safety standards in the U.S. has created a greater level of exposure to statutory liability for manufacturers, which has in turn reduced the statutory liability exposure for retailers. C. Organizations devote, on average, eighty percent of their loss control efforts towards eliminating or reducing premises liability exposures, which is the number one commercial liability loss exposure. D. The personal relationship and shared goals between an employer and employee is more likely to help reduce loss costs in workers compensation claims than in general liability loss situations.

D. The personal relationship and shared goals between an employer and employee is more likely to help reduce loss costs in workers compensation claims than in general liability loss situations. Correct. The personal relationship and shared goals between an employer and employee is more likely to help reduce loss costs in workers compensation claims than in general liability loss situations.

Which one of the following statements concerning the Damage to Your Product and Damage to Your Work exclusions in Coverage A of the Commercial General Liability Coverage Form is most correct? Choose one answer. A. These exclusions only apply to products or work that are in the care, custody and control of the named insured at the premises location listed in the declarations page. B. There are two exceptions to this exclusion which are meant to provide limited property damage coverage for minor claims that would fall below the deductible of the named insured's property insurance policy. C. The exclusions only apply to work or products that were damaged by subcontractors or outside parties who are expected to have their own insurance coverage, but the exclusions do not apply to damage done by the named insured. D. These exclusions only apply to damage to the work or product itself, but do not apply to any subsequent damage or injury that was caused by the product.

D. These exclusions only apply to damage to the work or product itself, but do not apply to any subsequent damage or injury that was caused by the product. Correct. These exclusions only apply to damage to the work or product itself, but do not apply to any subsequent damage or injury that was caused by the product.

Section II -- Who Is an Insured identifies the persons and organizations that qualify as insureds under the Commercial General Liability (CGL) Coverage Form. Which one of the following statements regarding who is considered an insured is most accurate? Choose one answer. A. Although employees of a corporation that is listed as a named insured are automatically considered to be insureds under the CGL, executive officers are not and must be insured under a Directors and Officers Liability policy. B. The Definitions section of the CGL specifically defines employees to include temporary workers and excludes leased workers. C. Paid employees of the named insured are considered insureds as long as they performing duties related to the conduct of the named insureds business, but volunteer workers and family members who work without pay are not. D. When a CGL policy covers one or more individuals as named insureds, any person or organization having proper temporary custody of the named insured's property following the named insured's death is an insured.

D. When a CGL policy covers one or more individuals as named insureds, any person or organization having proper temporary custody of the named insured's property following the named insured's death is an insured.

The Stone Corporation has a Business Auto Coverage Form that provides liability coverage for any auto. Stone is sued after one of its employees is involved in accident while driving a truck borrowed from another business. That firm also has a Business Auto Coverage Form that provides liability coverage for Stone. Both forms have $1,000,000 coverage limits and are written by the same insurer. How will this loss be settled by the two forms? Choose one answer. A. Stone's coverage is primary; the other firm's coverage is secondary; and there is a total coverage limit of $1,000,000. B. Stone's coverage is primary; the other firm's coverage is secondary; and there is a total coverage limit of $2,000,000. C. The other firm's coverage is primary; Stones coverage is secondary; and there is a total coverage limit of $1,000,000. D. The other firm's coverage is primary; Stone's coverage is secondary; and there is a total coverage limit of $2,000,000.

Incorrect. For a covered auto not owned by the named insured, the coverage carried by the owner is primary. Therefore. the other firm's coverage is primary, and Stone's is excess. When an accident is covered by two or more policies issued by the same insurer, the maximum amount the insurer is required to pay is the highest limit carried under any one policy C. The other firm's coverage is primary; Stones coverage is secondary; and there is a total coverage limit of $1,000,000.

CIK Corporation has a Commercial General Liability Coverage Form that contains no endorsements. John is a real estate agent who acts as the corporation's real estate manager, but he is not an employee of CIK. When he was performing his duties in Puerto Rico, John accidently caused injury to an independent contractor who was remodeling a building that CIK was intending to lease. Explain whether there is coverage for John if he is sued by the injured contractor. Choose one answer. A. There is no coverage because the accident occurred outside the continental United States. B. There is no coverage for John because he is not an employee of CIK. C. There is no coverage because CIK had yet to take possession of the building. D. John is covered because he is an insured, and there is nothing to exclude coverage.

Incorrect. Real estate managers are considered insureds under the Commercial General Liability Coverage Form ,and Puerto Rico is within the policy's coverage area. In addition, there are no exclusions that would deny coverage. D. John is covered because he is an insured, and there is nothing to exclude coverage.

Which one of the following statements about the foundation of a risk control program is true? Choose one answer. A. Employees should be given only a small sense of ownership in the program as they are responsible for fewer than 20 percent of accidents. B. Risk control should play a subservient role to organizational areas such as marketing and finance. C. Even though an organization has a risk control program, it may not be successful at actually controlling risk. D. Management support is seldom vital to the success of a program as long as the program is well-designed.

Incorrect. Risk control should be a dimension equal to other organizational areas such as marketing and finance. C. Even though an organization has a risk control program, it may not be successful at actually controlling risk.

An organization's liability loss control activities can usually be classified as either loss prevention activities or loss reduction activities. Which one of the following is best described as a loss reduction activity? Choose one answer. A. Installation of back-up alarms on delivery vehicles B. Mandatory safety glasses and hard hats in construction areas C. Installation of smoke detectors in warehouses D. Purchase of high limits of liability insurance

Incorrect. Safety glasses are meant to prevent injuries; smoke detectors are meant to reduce fire-related loss costs C. Installation of smoke detectors in warehouses

The Snow Corporation rented a portion of a building where customers brought equipment for repair. Because of carelessness by one of Snow's employees, a fire started. There was $90,000 damage to the rented premises and $18,000 damage to the property of customers. The fire also spread to an adjacent structure occupied by another business and caused an additional $25,000 damage. Snow has an unendorsed Commercial General Liability Coverage Form. Assuming there is no deductible and Snow's limits are sufficient to pay any covered liability losses, what is the amount that Snow's form will pay for property damage? Choose one answer. A. $25,000 B. $108,000 C. $115,000 D. $133,000

Incorrect. The $25,000 loss to the adjacent property is covered. The form contains an exclusion for damage to property that occurs while the insured has possession of it or is working on it. This would seem to rule out coverage for the other two losses. However, another section of the form provides fire legal liability coverage for damages to a rented premises. Therefore, the form would pay an additional $90,000 for a total of $115,000. C. $115,000

ABC Emporium is a malt shop and novelty store with a large teenaged clientele. Fred, an employee at ABC, noticed a teenage patron acting suspiciously. Suspecting shoplifting, Fred followed the teen out the front door down the street. When the teen noticed Fred following her, she bolted towards a parked car, whereupon Fred tackled her from behind, knocking her to the pavement. Unfortunately, the teenager that Fred tackled had not shoplifted anything and was merely startled by Fred's bizarre antics. Her parents, both attorneys, immediately filed a lawsuit against ABC seeking $550,000 in damages. The lawsuit asked for $2,000 for direct medical expenses from the emergency room visit following the incident and another $48,000 for counseling for the teenager, who was traumatized by the incident; and $500,000 for the pain and suffering of the parents who were exposed to ridicule in their community because of the shoplifting allegations that lead to their daughter's injuries. ABC has a standard Commercial General Liability (CGL) Coverage Form with the following limits: Each occurrence $1,000,000 Damage to rented premises (each occurrence) $100,000 Medical expense (any one person) $5,000 Personal and advertising injury (any one person or organization) $1,000,000 General aggregate limit $2,000,000 Products/completed operations aggregate limit $2,000,000 Which one of the following statements about coverage under the standard CGL is most accurate? Choose one answer. A. The only insurance coverage applicable would be Coverage A - Bodily Injury, but it only provides insurance coverage for premises liability and these injuries occurred off of ABC's premises. B. Coverage C - Medical Payments would respond to the $2,000 of first aid treatment expenses, but the other damages would have to be litigated in court. C. The $2,000 emergency room expenses would fall under Coverage C - Medical Payments; the $48,000 for counseling would fall under Coverage A - Bodily Injury and Property Damage Liability; and there would be no coverage for the $500,000 of alleged pain and suffering. D. The entire $550,000 of alleged damages would meet the definition of bodily injury that is used in the insuring agreement for Coverage B - Personal and Advertising Liability, and there are sufficient limits to cover all of the damages if ABC is found liable.

Incorrect. The entire $550,000 would fall within the Coverage B - Personal and Advertising Liability. D. The entire $550,000 of alleged damages would meet the definition of bodily injury that is used in the insuring agreement for Coverage B - Personal and Advertising Liability, and there are sufficient limits to cover all of the damages if ABC is found liable.

As part of Coverage A of the Commercial General Liability Coverage Form an insurer agrees to defend the insured against suits seeking damages covered under the policy. Which one of the following statements about this obligation of an insurer is true? Choose one answer. A. A suit is defined to include formal lawsuits only. B. The insurer must receive the insured's permission to settle a suit. C. The cost to defend suits is payable even if the payment of damages may be excluded elsewhere in the policy. D. The wrong that lead to the suit may have been committed by another person for whose conduct the insured is vicariously liable.

Incorrect. The policy covers only those types of obligations that are within the scope of the insuring agreement and are not excluded elsewhere in the policy. D. The wrong that lead to the suit may have been committed by another person for whose conduct the insured is vicariously liable.

Which one of the following is excluded in Coverage B—Personal and Advertising Injury Liability of the Commercial General Liability Coverage Form? Choose one answer. A. The use of another's advertising idea in one's advertisement B. Wrong description of prices C. Wrongful eviction by a landlord D. Libel of a person

Incorrect. The use of another's advertising ideas, wrongful eviction, and libel of a person are among the offenses insured by Coverage B. B. Wrong description of prices

From the standpoint of commercial liability insurance for a business, which one of the following statements about premises and operations liability exposures is true? Choose one answer. A. They are usually based on strict liability regardless of the negligence of a business. B. They often arise out of the ownership, maintenance, or use of automobiles. C. They may vary under common law, because a business may owe different duties of care to others on the business premises. D. They arise from the possibility of bodily injury only and do not include situations involving property damage.

Incorrect. They may arise from strict liability but are usually based on negligence. C. They may vary under common law, because a business may owe different duties of care to others on the business premises.