Chapter 14

The standard minimum limit of liability for underlying primary insurance that a Commercial Umbrella Liability policy will require is:

1 million

The standard deductible applicable to Farm Property losses is:

250

Under Coverage J - Medical Payments of the Farm Liability Coverage Form, coverage is provided for reasonable medical expenses of others incurred within:

3 years of the occurrence

Losses to unscheduled farm personal property covered under Coverage F of a Farm Property policy are settled on a(n):

Actual cash value basis Farm personal property, whether scheduled under Coverage E or unscheduled under Coverage F, has an actual cash value loss settlement basis. For unscheduled farm personal property, the Coverage F limit is subject to an 80% coinsurance requirement.

To be covered by Coverage B of a Farm Property policy, other private structures appurtenant to the residential dwelling can have all of the following characteristics, except:

All eligible structures can be rented or held for rental Coverage B insures other residential structures against direct physical loss. Except for private garages, eligible structures may not be rented, held for rental, or used principally for farming purposes.

Under the Equipment Breakdown Protection Coverage Form, which of the following is a covered cause of loss for any coverage the insured selects?

Breakdown to covered equipment caused by metal fatigue Though coverage is not provided for wear and tear damage (like metal fatigue) specifically, resulting damage from a breakdown caused by wear and tear is covered. Lack of or excess power, light, heat, steam, or refrigeration is generally considered an exclusion, except when it is a covered peril for spoilage damage coverage.

All of the following are types of Professional Liability insurance, except:

Commercial Umbrella Liability insurance A Commercial Umbrella Liability policy is a form of excess liability coverage, not professional liability coverage. These policies typically exclude professional liability exposures.

ABC Company includes business income and extra expense coverage on its Equipment Breakdown Protection coverage part. Because this coverage is selected, the insured must:

Complete and submit an Annual Report of Values form to the insurer An Annual Report of Values form must be submitted to the insurer, within the time frame provided by the policy, if the insured selects business income and extra expense coverage. This can be fulfilled by the Business Income - Report of Values Endorsement.

Equipment covered by the Equipment Breakdown Protection Coverage Form includes all of the following, except:

Computer equipment manufactured for sale

Which insurance policy protects against the professional liability exposures of someone acting in the capacity of a director of an organization?

D&O Liability policy

Which of the following is not covered under the Equipment Breakdown Protection Coverage Form?

Damage to equipment during a breakdown test Coverages under the Equipment Breakdown Protection Coverage Form include property damage, expediting expenses, business income, spoilage damage, utility interruption, newly acquired premises, ordinance or law, errors and omissions, and brands and labels. The form specifically excludes damage to equipment undergoing a pressure or electrical test.

All of the following are covered under the Covered Causes of Loss - Basic option to the Farm Property coverage forms, except:

Electrocution of livestock Electrocution of covered livestock is not covered under the Basic option, but it is a covered peril under the Broad and Special options.

Under the Farm Liability Coverage Form, coverage is NOT provided for bodily injury or property damage arising out of the insured's custom farming activities when the insured's custom farming receipts:

Exceed $5,000 for the 12 months immediately preceding the occurrence

The Employee Benefits Liability Coverage Endorsement is designed to provide:

Excess insurance for the insured's liability for acts, errors, or omissions regarding the administration of an employee benefit program

Coverage H of the Farm Liability Coverage Form provides coverage for bodily injury and property damage arising out of:

Farm products liability Coverage H will cover damages arising out of farming operations on the insured location, including fire damage liability and products liability. Though there are some exceptions, damages arising out of the ownership, maintenance, use, operation, loading, or unloading of aircraft, motor vehicles, motorcycle, or watercraft are excluded from Coverage H.

A businessowner's liability regarding ERISA responsibilities is covered by which policy?

Fiduciary Liability Policy

When a Farm Property policy includes Coverage D - Loss of Use, coverage is provided after a covered loss for:

Increased costs necessary to maintain the household's normal standard of living.

A policy written through the NFIP will provide coverage for:

Increased costs to comply with local floodplain management laws Increased costs to comply with local floodplain management laws is provided by NFIP policies, even those written for commercial enterprises. Indirect coverages are not provided by NFIP policies.

Which of the following perils is always excluded under the Farm Property Coverage Form?

Landslide Under the Earth Movement exclusion, earth sinking, landslide, and mine subsidence are all excluded perils. Some exceptions are made to provide coverage for livestock lost by earthquake specifically, but landslides are still excluded in this exception.

Farm personal property scheduled under Coverage E of a Farm Property policy is subject to a limit of liability that is:

Listed for each category of covered property When farm personal property is scheduled under Coverage E, the limits are also scheduled, and will apply to certain classifications of property. Special sublimits may apply.

Under the Farm Property coverage part, which of the following could be insured under Coverage E - Scheduled Farm Personal Property?

Livestock

The Causes of Loss - Basic option on Farm Property policies includes all of the following perils, except:

Loading and unloading accidents Loading and unloading accidents are covered by the Broad and Special options, but not the Basic option. This also means that loading and unloading accidents are not covered by the Livestock Coverage Form.

An insured has coverage under the Equipment Breakdown Protection Coverage Form. A $25,000 sublimit applies to all of the following losses, except:

Loss to equipment that is used to supply utility services to the premises and that is owned by a private utility

When the Actual Cash Value Endorsement is attached to the Equipment Breakdown Protection Coverage Form, how much will the insurer provide for damaged property that is obsolete?

No coverage is provided Property that is obsolete or useless to the insured is not covered by the endorsement or an unendorsed Equipment Breakdown Protection Coverage Form.

When a Commercial Umbrella Liability policy provides coverage for the insured's personal and advertising injury liability, the applicable limit of insurance is typically which kind of limit?

Per person Coverage for personal and advertising injury liability under a Commercial Umbrella Liability policy is typically subject to a per person limit of insurance. Payments under this coverage will also reduce the aggregate limit that applies to the policy.

Which of the following statements about specialty and professional liability insurance policies is correct?

Specialty liability insurance is available for businesses with a higher-than-average exposure for being legally liable for a loss, and policies are written on nonstandard forms to fit the needs of the insured. Rather than providing excess coverage, these policies fill coverage gaps left by other commercial liability policies, meaning most specialty liability policies will focus on liability related to financial losses, rather than bodily injury or property damage losses that are covered by other policies.

An insured's equipment, protected by the Equipment Breakdown Protection Coverage Form, is exposed to dangerous conditions. The insured may:

Suspend coverage provided for that piece of equipment

Livestock is not eligible for coverage under which Covered Causes of Loss option available to Farm Property policies?

The Covered Causes of Loss - Special option cannot be applied to livestock. Instead, only the Basic and Broad options are available to insure livestock. The Comprehensive option does not exist.

An insured has coverage under the Equipment Breakdown Protection Coverage Form, with the Actual Cash Value Endorsement attached. Under the endorsement, the insurer may opt to pay the actual cash value of damaged property, which is calculated on what date?

The date of the breakdown

All of the following statements about the insurer's duty to defend under a specialty liability policy are correct, except:

The insurer always has a duty to defend the insured, like other commercial liability policies. The specialty liability insurer's duty to defend the insured is different from the duty provided by other policies. To give the insured more control over legal matters, the insurer may have no duty to defend the insured. Under the Shrinking Limits Defense Provision, defense costs incurred by the insurer may reduce policy limits. Under the Consent to Settle Provision, the insurer may be required to obtain the insured's consent prior to settling a claim or suit.

Under the Definitions section of the Equipment Breakdown Protection Coverage Form, covered equipment always includes:

They are written on nonstandard forms Specialty liability insurance is available for businesses with a higher-than-average exposure for being legally liable for a loss, and policies are written on nonstandard forms to fit the needs of the insured. Rather than providing excess coverage, these policies fill coverage gaps left by other commercial liability policies, meaning most specialty liability policies will focus on liability related to financial losses, rather than bodily injury or property damage losses that are covered by other policies.

The Mobile Agricultural Machinery and Equipment Coverage Form may not be used to insure:

Vehicles primarily designed and licensed for use on public roads Like other Farm Property coverage forms, the Mobile Agricultural Machinery and Equipment Coverage Form does not insure vehicles designed primarily for use on public roads. Cotton pickers, harvester-thresher combines, and four-wheel ATVs must be specifically declared and described in the Declarations in order to be covered.

Which of the following is NOT a type of coverage provided under a Farm Liability policy?

Workplace injury liability Farm Liability policies include Coverage H - Bodily Injury and Property Damage Liability, Coverage I - Personal and Advertising Injury Liability, and Coverage J - Medical Payments. Workplace injuries are exclusively covered by Workers' Compensation.

The Equipment Breakdown Protection Coverage Form would not cover which of the following?

An air conditioning unit intentionally disabled by an employee. The Equipment Breakdown Protection Coverage Form excludes intentional losses.

Employment Practices Liability insurance is intended to provide coverage in the event that:

An employer fires an employee for reporting a breach of employment contract

Under the Equipment Breakdown Coverage Form, which of the following describes expediting expenses?

Cost of repairs that shorten the period of restoration Expediting expenses are the extra costs incurred to hasten the period of restoration. By getting the business up to speed more quickly, these expenses are offset by the ability to generate revenue sooner.

The Equipment Breakdown Protection Coverage Form would consider which of the following losses to be a breakdown?

Mechanical or electrical failure of pressure equipment

When a limit of insurance is indicated on the Declarations page of the Equipment Breakdown Protection Coverage Form, expediting expenses coverage pays for which of the following?

Temporary expenses to expedite permanent repairs of damaged property essential for the operation of the business