The Businessowners Policy
What is the maximum amount that the businessowners policy will pay for property damage to an outdoor sign attached to a building? A) $1,000.00 B) $2,500.00 C) Policy limit. D) $500.00
The correct answer was - A: $1,000.00 Explanation: A $1,000 per occurrence limit applies to outdoor signs attached to buildings.
John is thinking about buying a new bicycle. While test-driving a 10-speed bicycle at Paul's bike shop, John was thrown from the bike after the front wheel came off. He is awarded $55,000 for bodily injury as the court found Paul's shop negligent in not closing the quick-release lever. Paul has $600 in lost earnings for the 2 days he had to be in court. What would his policy pay assuming he has enough insurance? A) $55,500.00 B) $55,000.00 C) $55,250.00 D) $55,600.00
The correct answer was - A: $55,500.00 Explanation: This policy would pay for the bodily injury to John up to policy limit, but there is a $250 per day limitation on loss of earnings. Paul would receive $500 for his loss of earnings.
Mary and Sue are customers in Paul's bicycle shop. Mary and Sue are both injured when a stack of bicycles fall on them because they were trying to get a bike off the top shelf. Which of the following statements best describes how Paul's standard businessowners policy would provide coverage in regards to Mary and Sue's injuries? A) Mary and Sue would receive payments for up to the policy limits under the medical expenses coverage whether or not Paul is found to be legally liable. B) Mary and Sue would receive payments for up to policy limits under the bodily injury, supplementary, and medical expenses coverages. C) Mary and Sue would receive payments under the bodily injury liability coverage even if it is determined that Paul is not legally liable. D) Mary and Sue would receive payments for up to the policy limits under the personal injury liability and medical expenses coverages.
The correct answer was - A: Mary and Sue would receive payments for up to the policy limits under the medical expenses coverage whether or not Paul is found to be legally liable. Explanation: Paul's businessowners policy would provide liability protection when the insured becomes legally obligated to pay for damages due to bodily injury, property damage, personal injury, or advertising injury caused by an occurrence to which the insurance applies. The policy would also provide for reasonable medical expenses incurred by any person who requires medical services because of any accident arising out of Paul's business operations. Medical expense coverage provides coverage for reasonable expenses regardless of fault.
Mary is a customer at Bob's bait shop, which is covered by a businessowners policy. Bob's auto strikes her when she is leaving the store parking lot. Mary has medical payments expenses of $450. Bob will find coverage in: A) The businessowners policy does not cover this type of loss. B) Bob's businessowners policy under bodily injury and medical payments. C) under Bob's businessowners policy if he purchased hired and nonowned auto coverage. D) Bob's businessowners policy under bodily injury.
The correct answer was - A: The businessowners policy does not cover this type of loss. Explanation: The medical payments section of the businessowners policy does not cover medical expenses arising out of automobile accidents.
The property coverage in the unendorsed Businessowners policy is written on a (an): A) open peril basis. B) named peril basis. C) limited liability basis. D) valued basis.
The correct answer was - A: open peril basis. Explanation: Property coverage in the unendorsed BOP is provided on an open peril (special form) basis. An endorsement can be added so coverage is provided on a named peril basis.
Which one of the following businesses would be eligible for a businessowners policy? A) Manufacturing facility. B) Motel with two floors. C) Neighborhood bar. D) Public parking garage.
The correct answer was - B: Motel with two floors. Explanation: The BOP does not cover parking garages, bars, or manufacturing operations. Motels that do not exceed three stories and meet other eligibility requirements may be covered under a BOP.
All of the following risk exposures are covered by the liability section of the businessowners policy EXCEPT: A) personal and advertising injury. B) employers liability. C) product liability. D) premises liability.
The correct answer was - B: employers liability. Explanation: The liability section of the businessowners policy excludes coverage for employer's liability, as do almost all general liability coverage forms. This exposure is better covered by a workers compensation policy.
Ted's TV shop, which is covered by a businessowners policy, sustains a fire loss of $50,000 to the building and $25,000 in content damages are incurred. In addition, a customer and an employee are also injured in the fire. Medical payments for their injuries amount to $2,000 for the injured customer and $3,000 for the injured worker. Ted's business income is $5,000 per month, but he is unable to conduct any business for 60 days as a result of the fire. Assuming Ted has adequate limits to cover this loss, how much will his policy pay? A) $75,000.00 B) $90,000.00 C) $87,000.00 D) $77,000.00
The correct answer was - C: $87,000.00 Explanation: The injured worker is covered by workers' compensation, not the businessowners policy. Assuming that Ted's policy limits are adequate, the calculation is $50,000 (building) + $25,000 (contents) + $10,000 (business income) + $2,000 (injured customer's injuries) = $87,000.
Businessowners liability coverage will cover losses due to which of the following occurrences? A) An accident in which the owner's car was involved. B) A fire that damaged the owner's exterior sign. C) A suit brought by a competitor for libel. D) Theft of the owner's weekly receipts.
The correct answer was - C: A suit brought by a competitor for libel. Explanation: Under businessowners liability, the insurer pays on the insured's behalf all sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage, or personal or advertising injury caused by an occurrence to which the insurance applies
Which one of the following is an optional coverage under the businessowners policy? A) Business income. B) Valuable papers. C) Employee dishonesty. D) Personal effects.
The correct answer was - C: Employee dishonesty. Explanation: Business income is automatically included in the businessowners policy. Personal effects and valuable papers are both automatically included in the extensions of coverage. Employee dishonesty is available only as an optional coverage.
The unendorsed businessowners liability coverage excludes: A) products liability. B) personal and advertising injury liability. C) auto liability. D) bodily injury liability.
The correct answer was - C: auto liability. Explanation: While the unendorsed businessowners policy excludes coverage for auto liability, coverage for nonowned and hired autos may be added by endorsement.
The businessowners policy covers collapse of a building if the collapse is caused by any of the following EXCEPT: A) vermin damage. B) weight of rain. C) flood. D) hidden decay.
The correct answer was - C: flood. Explanation: The businessowners policy covers collapse of a building if the collapse is caused by any of specified causes of loss stated in the policy, hidden decay, hidden insect or vermin damage, weight of people or property, weight of rain, or use of defective materials.
All of the following coverages can be found in the businessowners policy EXCEPT A) business income. B) extra expense. C) workers compensation. D) liability.
The correct answer was - C: workers compensation. Explanation: The businessowners policy contains coverages needed by all businesses. All businesses have exposures to loss of business income, liability, and extra expense, but not all businesses have an exposure to workers compensation. In fact, many small businesses that employ fewer than three workers may be exempt from state workers compensation laws.
Ted's shop has a replacement cost of $250,000, and his contents have a replacement cost of $90,000. Ted purchases $100,000 of insurance for building coverage and $75,000 of insurance contents coverage under an unendorsed BOP. Ted sustains a loss by fire that causes $20,000 damage to the building and $5,000 damage to the contents. How much will his policy pay? A) $25,000.00 B) $20,000.00 C) $5,000.00 D) $15,000.00
The correct answer was - D: $15,000.00 Explanation: Fire is a covered cause of loss. However, Ted's policy will only pay for half of the building loss, as he did not purchase 80% of the replacement cost to obtain replacement coverage. The coinsurance clause required $200,000 ($250,000 x 80%) on the building. As Ted only had half that amount, his loss would be limited to 50%, or $10,000. Since the amount of coverage on Ted's contents met his coinsurance requirement ($90,000 x 80% = $72,000, and Ted carried $75,000), the contents will be covered in full.
Ted's TV shop sustains a fire loss and has the following losses: damage to the building $15,000, damage to contents $7,000, debris removal $5,000, and damage to valuable papers and records $15,000. What will his businessowners policy pay assuming his limits are adequate? A) $42,000.00 B) $27,000.00 C) $32,000.00 D) $37,000.00
The correct answer was - D: $37,000.00 Explanation: All losses are covered in full except valuable papers and records, which has a limitation of $10,000 in a single occurrence at each described premises - unless a higher limit is shown in the declarations. For valuable papers and records not at the prescribed premises, the limit is $5,000.
What is the standard deductible on a businessowners policy? A) $250.00 B) $2,500.00 C) $1,000.00 D) $500.00
The correct answer was - D: $500.00 Explanation: The standard deductible on the businessowners policy is $500. Other deductibles, up to $2,500, are available.
Bill is hurt while he is a customer at Sue's flower shop, which is covered by a businessowners policy. He is awarded $50,000 for bodily injury. He also has incurred $2,000 for medical expenses for the first year after the injury and another $1,000 reported in the second year. How much will Sue's businessowners policy pay assuming she has enough insurance? A) $53,000.00 B) $50,000.00 C) $3,000.00 D) $52,000.00
The correct answer was - D: $52,000.00 Explanation: All would be covered except the second year of medical expenses, as they must be incurred and reported to the insurer within one year of the accident.
Which of the following types of business would be better covered by a CGL than a BOP? A) An accountant's office. B) A greeting card store. C) A 12-unit apartment building. D) An oil refinery.
The correct answer was - D: An oil refinery. Explanation: The businessowners policy is designed to meet the insurance requirements of small businesses, such as offices, stores, or apartment buildings.
The businessowners policy form provides protection to buildings, business personal property, or both on a replacement cost basis provided at least 80% insurance-to-value is maintained. If the limit of insurance is less than 80% of replacement, how will the loss be settled? A) Losses will still be paid on a replacement cost basis, because that is how a businessowners policy is written. B) Losses will be paid on a proportionate share basis. C) Losses will be paid on an ACV basis. D) Losses will be paid on either an ACV or proportionate share basis, whichever is lessor.
The correct answer was - D: Losses will be paid on either an ACV or proportionate share basis, whichever is lessor. Explanation: If the limit of insurance is less than 80% of replacement cost, losses will be paid on either an ACV or proportionate share basis, whichever is lessor. The coinsurance penalty would apply.
Ted, the owner of a TV store, is covered by an unendorsed businessowners policy. He detains Bill, a customer, for shoplifting. The police come, and Bill is not charged with any crime. Bill is very upset with Ted and sues Ted's TV store for damages. Where might Ted find coverage for this loss? A) Ted's businessowners policy will cover this loss under bodily injury. B) Ted's businessowners policy does not provide coverage as he did not buy a separate endorsement. C) This coverage is not covered in businessowners policy and cannot be purchased in the standard market. D) This coverage is included in the businessowners policy under personal injury.
The correct answer was - D: This coverage is included in the businessowners policy under personal injury. Explanation: The businessowners policy would provide liability protection if the insured becomes legally obligated to pay damages because of bodily injury, property damage, personal injury, or advertising injury caused by an occurrence to which the insurance applies
