COMMERCIAL INSURANCE FINAL INS 123

Sue is injured at work and is able to work at a modified job for 30 days until she recovers fully. What type of workers compensation disability does Sue have?

. Temporary partial disability

Describe the two most common aircraft hull coverages.

1) All risks - ground and flight: Covers most causes of loss in flight or on the ground at the time of loss. 2) All risks - not in motion: Covers the plane when it is on the ground and not moving under its own power, including being towed, but not while taxiing.

Briefly describe the three principal physical damage coverage's available under Section III of the Business Auto Coverage Form.

1) Collision coverage - Loss to a covered auto caused by collision with another object or by overturn 2) Comprehensive coverage - Loss to a covered auto by any peril except collision or overturn or a specifially excluded peril 3) Specified causes of loss coverage (an alternative to comprehensive) - Loss to a covered auto caused by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, or the sinking, burning, collision, or derailment of a conveyance transporting the insured vehicle.

Julia flew from her company's corporate headquarters in New York to Mexico City and rented a car to visit one of her company's suppliers. After her visit and dinner, the car Julia was driving hit and injured a pedestrian while she was en route to her hotel. Julia was found to be intoxicated and charged with the injuries to the pedestrian. Explain how Julia's company's business auto policy and their foreign supplemental and excess auto will respond to this loss.

1) The business auto policy will cover losses only within the United States and its territories and possessions, Puerto Rico, and Canada. Therefore, no coverage applies. 2) Foreign supplemental and excess auto policies are nonstandard forms. Assuming that coverage is extended by this policy to Mexico and to nonowned vehicles, this policy will respond to this loss.

Due to damage caused by a severe windstorm, Paul had to close his office supply store, "Clips" for six weeks. Before the windstorm, Paul had estimated his revenues and expenses for the next year as follows: Revenues: $975,000 Expenses: $857,500 Because of the windstorm, though, Paul's actual revenues and expenses for the year were as follows: Revenues: $860,000 Expenses: $785,000 Disregarding any insurance that Paul might have, what is the amount of Paul's business income loss as a result of the windstorm damage? (show all calculations) pg

97500-857500 = 117500 860000-785000= 75,000 117500-75000= 42500

Under commercial crime coverage, the definition of messenger includes all of the following persons while they have care and custody of property outside the insured's premises, EXCEPT: pg 5.15

A courier service hired by the insured

What is the guarantee provided by a court bond?

A court bond guarantees (for example) that the judgment in a lawsuit will be paid after an unsuccessful appeal.

Jackson Builders has a 100,000 square foot commercial office building under construction. Explain whether its unendorsed Builders Risk Coverage Form would cover each of the following losses. If not, explain why: a) Collapse of the steel frame and precast concrete structure in the midst of the construction process. b) Theft of roofing materials valued at $5,000, located next to the structure during the construction process. c) Theft of $3,000 worth of air conditioning compressors situated next to the building that occurred four months after the completion of construction.

A) It's cover B) Will not be covered. It needs to have additional coverage extension C) Will not be covered. the completion of the building had been long done plus if it was meant for the building it needed to be installed at the time of the completion.

If the premium applicable to a particular workers compensation insured is increased or decreased for a future period based on that insured's loss experience for a period in the recent past, the policy uses

An experience rating plan.

Describe the extended reporting period aspect of claims-made coverage

An extended reporting period is a time period following the termination date of a claims-made policy during which claims may be reported for injuries that occurred after the retroactive date and before the policy expiration date. If such claims are first made within the extended reporting period, they will be covered under the expired claims-made policy

The separation of insured condition of the Commercial General Liability policy can benefit an insured when

An insured can still be covered even when another insured is subject to denial of coverage.

An experience rating plan.

An intentional act that is caused by the insured.

Carla Carlson is sitting down with you, her insurance agent, reviewing her property insurance options on her small business. Carla is torn between the Causes of Loss-Basic Form and the Causes of Loss-Broad Form. She asks you, "what kinds of losses does the Broad Form cover that the Basic Form does not?" Answer Carla's question by naming three of the causes of loss addressed by the Broad Form that are not covered by the Basic Form.

Any three of the following causes of loss are acceptable answers: 1) Falling objects 2) Weight of snow, ice, or sleet 3) Water damage 4) Collapse

Which of the following statements is true regading aircraft liability insurance?

Bodily injury coverage for injury to passengers might not be necessary.

ITA Lumber Company owns several large pieces of mobile equipment used in its lumbering operations. What type of Inland Marine coverage form would be used to insure ITA's equipment?

Contractors equipment

The medical expense limit in the commercial general liability policy is the most the insurer will pay for

Coverage C medical expense resulting from bodily injury to one person.

Briefly describe the three coverages provided by the Ordinance or Law Coverage Endorsement. pg

Coverage for the value of the undamaged portion of the building that must be demolished. Coverage for the cost to demolish the undamaged portion of a building and remove its debris when demolition is required by the building code. Coverage for the increased cost to repair or rebuild the property resulting from enforcement of a building, zoning, or land use law.

The Ordinance of Law Coverage Endorsement to the Building and Personal Property Coverage Form provides all of the following coverage's, EXCEPT; pg 3.25

Coverages for any damages won in a lawsuit by a plaintiff in the building demolition.

Owners and Contractors Protective liability coverage

Covers the property owner for damages arising from the contractor's operations.

Identify the perils, other than crop loss resulting from hail, frequently covered by crop hail insurance.

Crop hail insurance is frequently extended to cover perils such as fire, windstorm accompanying hail, damage caused by livestock, and vehicles. Such policies might also cover harvested crops against named perils while being transported to the first place of storage

The each occurrence limit in the commercial general liability policy is the most an insurer will pay for the sum of which one of the following arising out of a single occurrence?

Damages for bodily injury and property damage under Coverage A and medical expenses under Coverage C.

Under the building and personal property coverage form, which of the following is additional coverage?

Debris removal

The Delicious Restaurant has a crime insurance policy with a $10,000 policy limit. Thieves broke into Delicious and stole liquor valued at $14,500. After paying the policy limit of $10,000 to Delicious, the insurer recovered $11,000 of the stolen property. Ignore any deductibles that might apply. What dollar amount of covered property would go to Delicious Restaurant and to the insurer? pg

Delicious would receive $4,500 and the insurer $6,500.

The business income from dependent properties forms cover the insured's loss of income resulting from

Direct damage to property at locations other than the insured's locations.

The business income from dependent properties forms cover the insured's loss of income resulting from pg 4.23

Direct damage to property at locations other than the insured's locations.

In a general liability policy, the claims-made trigger requires that the claims be made

During the policy period or an extended reporting period.

Insurance covering an employer against liability claims alleging improper advice in the administration of a group health program is

Employee benefits liability insurance.

Explain why the distinction between an employee and an independent contractor is important in workers compensation insurance. Your answer should include a definition of the italicized terms.

Employers are NOT liable for workers compensation benefits to injured independent contractors. They ARE liable for employees. A definition of each should be shown. Because entitlement to benefits under a workers compensation law depends on whether a person qualifies as an employee according to the law. An employee is a person hired to perform services for another under the direction and control of the other party, called the employer. An independent contractor is a person hired to perform services without being subject to the hirer's directions and control regarding work details. The distinction between employees and independent contractors is not always clear, Unlike employees, independent contractors are not subject to direction and control regarding the details of the work. They agree to perform a task meeting the specifications stipulated in the contract but are free to use their own judgement and methods in performing the task. Employment status is a question of fact, not of law. If doubt arises concerning whether an individual is an employee or an independent contractor, a court or an administrative body decides the issue on the basis of the facts.

Carla Carlson is sitting down with you, her insurance agent, reviewing her property insurance options on her small business. Carla is torn between the Causes of Loss-Basic Form and the Causes of Loss-Broad Form. She asks you, "what kinds of losses does the Broad Form cover that the Basic Form does not?" Answer Carla's question by naming three of the causes of loss addressed by the Broad Form that are not covered by the Basic Form. pg 3.4

FALLING OBJECTS WEIGHT OF SNOW, ICE, OR SLEET WATER DAMAGE

To meet the needs of firms with foreign loss exposures, some insurers offer a variety of specialized coverage including all of the following, EXCEPT:

Foreign pollution liability.

Under the building and personal property coverage form, the insurer will not pay for a loss caused by vandalism if the building where the loss occurs

Has been vacant for more than 60 consecutive days

All of the following are true about DIC (Difference in Conditions) insurance, EXCEPT:

It covers costs for third-party lawsuits.

All of the following are true about the collision liability clause of a hull insurance policy EXCEPT: PG 7.22

It covers liability for bodily injury to crew and passengers.

Explain the key differences between professional liability insurance and CGL policies.

Professional liability commonly use a claims-made trigger; most CGL policies use an occurrence trigger. Professional liability policies might require the insured's consent to settle; the CGL gives the insurer sole discretion. Professional liability policies allow insured to select counsel; CGL carrier selects. Deductible are common in professional liability but rare in CGL policies

All of the following are examples of a physician's professional liability exposure, EXCEPT:

Providing improper advice about health care.

The injury or damage for which a claim is made under a claims-made commercial general liability policy must have occurred on or after the policy's

Retroactive date

Give four examples of wrongful acts that are usually covered under employment practices liability insurance.

Sexual harassment, wrongful termination, unlawful discrimination, and wrongful failure to promote.

Under the Equipment Breakdown Protection Coverage Form, if an insurer's representative finds an insured object to be in dangerous condition, the representative can immediately pg 6.15

Suspend coverage against loss from an accident to the object.

Explain when the self-insured retention (SIR) applies to claims payable by umbrella liability insurance.

The SIR applies only when a claim covered by an umbrella policy is not also covered, at least in part, by a primary policy. The umbrella policy will pay the part of the claim exceeding the insured's retention and will generally cover defense costs in full.

If an insurer adopts any revision that broadens coverage without an additional premium charge under a commercial property coverage part, all of the following are true, EXCEPT:

The broadened coverage applies only if the broadening amendment is adopted during the policy period or within 45 days before the policy effective date.

If an insurer adopts any revision that broadens coverage without an additional premium charge under a commercial property coverage part, all of the following are true, EXCEPT: pg 3.30

The broadened coverage is provided automatically to all outstanding policies. b. The insurer need not issue a policy endorsement for the broadened coverage. c. The broadened coverage applies only if the broadening amendment is adopted during the policy period or within 45 days before the policy effective date. d. The broadened coverage is effective for all outstanding policies 45 days after the insurer adopts the broadened coverage

Under common policy conditions of a commercial insurance policy, all of the following are true about changes in a policy, EXCEPT:

The insurer must obtain specific permission from all insureds to make the change

Under a Value Reporting form, what happens if the insured has not made any reports at the time of loss and one or more reports should have been made?

The insurer will assess a penalty as indicated on the Value Reporting form.

Under a Value Reporting form, what happens if the insured has not made any reports at the time of loss and one or more reports should have been made? pg 2.29

The insurer will not pay any amount until the insured submits all reports that it had been obligated to submit to the insurer. b. Failure to submit reports on time results in cancellation after 14 days; losses occuring after that time would not be covered. c. The insurer will pay one-half the amount of the applicable limit of insurance. d. The insurer will assess a penalty as indicated on the Value Reporting form.

For business income coverage, the period of restoration is the period of time that begins 72 hours after

The time of direct physical loss or damage.

For business income coverage, the period of restoration is the period of time that begins 72 hours after pg. 4.8

The time of direct physical loss or damage.

What is the purpose of a second-injury fund?

These funds are meant to encourage employers to hire partially impaired workers and to help partially impaired workers to obtain gainful employment.

All of the following statements about umbrella liability insurance are true, EXCEPT:

Umbrella liability insurance provides narrower coverage than the underlying policies.

Physical damage coverage under the motor carrier coverage form excludes coverage for loss to a covered auto

While in someone else's possession under a trailer interchange agreement.

Boogie Boarders, Inc., was insured for $100,000 under a Business Income Coverage Form with a 50 percent coinsurance clause. When Hurricane Bubba hit Boogie Boarders' town and damaged its building, Boogie Boarders was forced to close its store for two months before it could reopen for business. Unfortunately for Boogie Boarders, the damage came at the height of the vacation season, a peak time for its business. If the hurricane damage had not occurred, Boogie's net income and operating expenses for the twelve months following the policy inception date would have totaled $300,000. For the two months that the store was closed, Boogie's business income loss (net income lost plus continuing operating expenses) was $90,000. a) What dollar amount will Boogie Boarders recover from its insurer for this business income loss? Show your calculations. b) If Boogie Boarders had not sustained actual physical damage from the hurricane but was forced to close for two weeks by local authorities who feared injuries could occur because the neighboring buildings were so badly damaged by the hurricane, would Boogie have been able to collect any of its business loss? Explain your answer. c) Following the hurricane loss, Boogie Boarders' owner was unhappy with the coinsurance clause in its business income policy. Recommend two optional coverage's that Boogie could purchase to avoid a coinsurance penalty in the future. Briefly describe the endorsement you recommend. 1. Monthly limit of Indemnity coverage option -is and option that deletes the coinsurance clause while limiting the amount recoverable during any month of business interruption to a stipulated fraction of the insurance amount. 2. The business income agreed value coverage option - is an option that suspends the coinsurance clause as long as the insured carries an amount of business income insurance that is equal to the value agree on the by the policyholder and the insurer. pg

a) $300,000 x .50 = $150,000 (insurance required) $90,000 = business income loss $100,000 x $90,000 = $60,000 amount paid $150,000 b) Yes. Because the loss was caused from civil authority and the cause of loss was from a windstorm (a covered peril). The policy provides up to three weeks of business income loss after the first 72 hours. c) Options include: 1) Maximum period of indemnity coverage option - limits loss payment to the amount of loss sustained during the 120 days following the loss (or the policy limit). 2) Monthly limit of indemnity coverage option - limits loss payment for any period of 30 days to a fraction of the limit chosen by the insured. 3) Agreed value coverage option - based on a worksheet furnished by the insured each year, the amount of insurance is agreed upon in advance by the insured and thew insurer.

The Brownwell Company has an umbrella liability policy with a limit of $1,000,000 and an SIR of $10,000. It also carries a business auto policy with a limit of $500,000. What dollar amount will Brownwell's umbrella insurer be obligated to pay for each of the following claims? Explain your answers. a) One of Brownwell's employees has caused an accident that is covered under both Brownwell's auto and umbrella policies, and the injured party has been awarded $700,000 in damages from Brownwell. b) One of Brownwell's employees committed a personal injury offense that was not covered by any of Brownwell's primary liability policies but was covered by Brownwell's umbrella policy. Brownwell was held liable for $160,000 in damages because of the personal injury.

a) Brownwell's umbrella policy will pay $200,000. After the business auto pays its limit of $500,000, the umbrella policy will pay the amount of the claim in excess of $500,000. Because primary coverage applies, the SIR is not applicable in this claim. b) Brownwell's umbrella policy will pay $150,000. In this case, the SIR is deducted from the amount of the claim because the claim was not covered by any of Brownwell's primary policies.

What types of loss are covered by protection and indemnity (P&I) insurance? Name 4

a) Damage to bridges, piers, wharves, and other structures along waterways b) Injury to passengers, crew, and other persons on the ship c) Injury to persons on other ships d) Damage to cargo of others aboard the insured vessel

Jack owns and operates restaurants in several different locations; however, he is not sure of the insurable value at each location. Describe Jack's duties in this situation if he had: a) Specific insurance b) Blanket insurance Selected Answer: a) Specific insurance - To schedule a specific amount of insurance in the declarations for each building and a specific amount of insurance for personal property at each location. b) Blanket insurance - require that the insured file a statement of values that separately shows the insurable value for the building and contents at each location.

a) If Jack had specific insurance, he would either have to purchase a higher amount of insurance to provide a cushion against error in estimating insurable values or risk an uninsured loss. b) If Jack had blanket insurance, assuming the restaurant locations are not likely to be damaged by the same occurrence (such as a hurricane that devistates a wide area), the minimum amount of insurance needed to comply with coinsurance would be sufficient to protect Jack's properties fully.

Explain the following conditions in the Commercial Property Conditions: a) Liberalization b) Transfer of rights of recovery against others

a) If the insurance company adopts a provision that would broaden the coverage under the commercial property coverage part and does not charge an additional premium, the broader coverage is extended automatically to outstanding policies. b) The insurance company can recover the amount paid for a covered loss from any party causing the loss or otherwise legally liable for the loss. If the insured takes any action eliminating the insurer's right of recovery, the insurer may not be required to pay the loss.

Explain the following conditions in the Commercial Property Conditions: a) Liberalization pg 3.30 - it provides insureds with the broadened coverage automatically and immediately upon adopt, even if they are not aware of the broadening amendment. b) Transfer of rights of recovery against others pg 9.14

a) If the insurance company adopts a provision that would broaden the coverage under the commercial property coverage part and does not charge an additional premium, the broader coverage is extended automatically to outstanding policies. b) The insurance company can recover the amount paid for a covered loss from any party causing the loss or otherwise legally liable for the loss. If the insured takes any action eliminating the insurer's right of recovery, the insurer may not be required to pay the loss.

When must a loss event occur in order to be covered under each of the following? a) Loss sustained crime form pg 5.4 b) Discovery crime form pg 5.4

a) Loss sustained crime form - covers losses discovered during the policy period even though they may have occurred before the policy period. b) Discovery crime form - covers losses actually sustained during the policy period and discovered no later than one year after policy expiration. Correct answer a) A loss event must occur at some time during the policy period. (Subject to specific rules, a loss sustained form will also cover some losses that occurred under prior policies. b) A loss event must occur at any time before the policy expires, even if that is before the policy inception date. (If a discovery form is subject to a retroactive date, the loss event must occur on or after the retroactive date)

One of your customers, Jethro, has opened up his own consulting company named "Jethro's Double-Ought Spies." Jethro has a Businessowners Policy (BOP). A diversified but small business, Jethro dabbles in more than just private detective work, because he has always felt a hankering for other professions as well. He has asked you, as his insurance agent, to fine tune his coverages by procuring insurance with the specifications that follow. For each item below, explain whether you as the agent will be able to meet these specifications through a BOP. If not, explain your answer, because Jethro will definitely want an explanation. a) Professional liability coverage for Jethro's physical therapist, Jed. b) Crime coverage in case Jethro's assistant tries to steal cash or checks from th company's funds. c) Automobile coverage on Jethro's van, "Wolf Wagon." d) General aggregate limits equal to four times the size of the per occurrence limit

a) No. BOP's are not designed to provide professional liability. b) Yes. Employee dishonesty coverage is available. c) No. Hired and Non-owned autos are available only. Autos are typically excluded. d) No. BOP's have a general aggregate equal to two times the per occurrence limit.

Manufacturing Company is insured under two CGL policies. The each occurrence limit under policy A is $500,000. Under policy B, the each occurrence limit is $1,000,000. Manufacturing Company was held to be legally liable for $300,000 in damages arising from one occurrence. a) What dollar amount would be payable under each policy if loss payment is based on contribution by limits? Show your calculations. b) What dollar amount would be payable under each policy if loss payment is based on contribution by equal shares?

a) Policy A : $500,000 x $300,000 = $100,000 $ 1,500,000 Policy B : $1,000,000 x $300,000 = $200,000 $1,500,000 b) Policy A pays $150,000 and Policy B pays $150,000

Jack owns and operates restaurants in several different locations; however, he is not sure of the insurable value at each location. Describe Jack's duties in this situation if he had: pg

a) Specific insurance pg 2.30 - To schedule a specific amount of insurance in the declarations for each building and a specific amount of insurance for personal property at each location. b) Blanket insurance pg 2.31 - require that the insured file a statement of values that separately shows the insurable value for the building and contents at each location.

Gulliver Transport Company is insured under a Business Auto Coverage Form that provides liability coverages for "any auto" with a single limit of $500,000 and comprehensive and collision coverage for "owned autos only" with a $2,500 deductible for each coverage. What dollar amount, if any, will be paid under Gulliver's business auto form for each of the following losses? a) A truck valued at $60,000 was stolen from the parking area at Gulliver's headquarters. The truck was never recovered. b) Two of Gulliver's trucks collided with each other on the highway: 1) Each truck suffered $7,000 in damage. 2) One of the drivers was injured and incurred medical expenses of $2,300

a) Stolen truck - $60,000 - $2,500 = $57,500. b) 1) $14,000 less $5,000 (two $2,500 deductibles) = $9,000. 2) $0 - this is covered under workers compensation.

An office building with an actual cash value of $300,000 is covered under a BPP, subject to an 80% coinsurance provision. Show your calculations. a) What is the minimum amount of insurance that must be purchased on this building to avoid a coinsurance penalty? b) Assume that the owner purchased $180,000 coverage (ACV) on the building. What amount would the owner be paid in the event of a $100,000 covered loss (ACV) to the building. Disregard any deductible that might apply.

a) The minimum amount of insurance that must be purchased is: 0.80 x $300,000 = $240,000. b) The amount the owner would be paid in a $100,000 loss would be: $180,000 x $100,000 = 75,000 $240,000

Moo Shu, Inc., is a meat packing company specializing in canned hams and frozen pork products. Moo Shu's insurer offered a renewal of Moo Shu's CGL policy only on a claims-made basis with a retroactive date the same as the date of the renewal, January 1 of this year. Moo Shu's previous CGL policies were written on an occurrence basis. For the following losses, determine whether coverage is provided. If coverage is provided, will it be covered by Moo Shu's previous occurrence CGL policies, or by the current claims-made policy. a) A claim involving contaminated ham occurred last November 15, but was not reported until March 15 of this year. b) A claim involving contaminated frozen pork occurred February 20 of this year, and was reported March 1 of this year. c) A claim involving allergies due to additives to pork products occurred two years ago, but was not reported until April of this year

a) This claim would be covered by the previous occurrence-based policy. b) This claim would be covered by the current claims-made policy. c) The occurrence-based policy in force at the time of the occurrence would provide coverage

Clothing Store was insured under an ISO Commercial General Liability (CGL) Coverage Form that expired on September 30, the date Clothing Store went out of business. A customer who was injured at Clothing Store on September 15th, during the store's final sale, made a claim for her injuries on October 15th. Explain whether this loss would be covered if Clothing Store's CGL coverage had been provided on: a) A claims-made coverage form: b) An occurrence coverage form:

a) Yes. It was made within the 60 day extended reporting period. b) Yes. Claim took place within the policy period

For each of the following loss situations, identify (i) the crime involved and (ii) which insuring agreement of the crime coverage form, if any, would apply: pg 5.4 -5.45.15 a) As the driver of an armored car carried bags of money from a supermarket to the armored car, two people pointed guns at the driver and took the bags of money. b) Securities valued at $10,000 were taken from an office safe after the safe was broken into. c) A payroll department employee issued himself two paychecks, instead of one, for six months before being caught.

a) robbery - outside the premises insuring agreement b) safe burglary - inside the premises - robbery or safe burglary of other property is subject to a special limit of $2000 per occurrence. c) Theft - Employee theft coverage

Jones Manufacturing has Equipment Breakdown Insurance. Please indicate (yes or no) whether each of the following losses are covered or not covered under the policy . For any non covered loss briefly explain your reason why. a) A power surge in an electrical line causes a boiler's control circuits to malfunction, shutting it down. b) Jones Manufacturing's steam boiler explodes, resulting in damage to the plant and machinery. c) A 30-year old boiler breaks down one morning. The engineers inspecting it conclude that, "The boiler just wore out from years of use." pg 6.12 - 6.16

a) yes b) yes  c) no - wear and tear or deterioration is not covered