CPCU 552 Ch. #7
Some fiduciary liability policy exclusions differ from those in other professional liability policies. Which one of the following is an exclusion under a typical, unendorsed fiduciary liability policy? a) Obligations for certain penalties imposed by ERISA b) Obligations to cover claims arising under COBRA c) Obligations to pay for losses resulting from a failure to collect required employee contributions d) Obligations to pay claims made for acts that occur after the retroactive period
c
Under common law and the Securities & Exchange Act of 1934, no director or officer can sue which one of the following types of information to buy or sell corporation stock? a) Outsider information b) Public information c) Insider information d) Quantitative information
c
Acts such as sexual harassment, wrongful termination, and unlawful discrimination are referred to as: a) Wrong employment practices B) Torts c) Reasons to quit a job d) Reasons to fire an employee
a
A customer of a painting contractor contends the painter made an unwelcome sexual advance while working in the customer's home. This claim would be covered by the painting contractor's Employment Practices Liability policy if the: a) Definition of an employee includes employees working away from the Insured premises. b) Policy is endorsed to cover 3rd-party discrimination claims. c) Painter is an independent contractor. d) Advances were unintentional.
b
Which one of the following is a fiduciary duty of directors and officers? a) Duty of information b) Duty of care c) Duty of adherence d) Duty of consent
b
Which one of the following is a specific duty of a fiduciary supported by the Employee Retirement Income Security Act (ERISA)? a) Obtain Certified Public Accountant-level training b) Carry out duties with the diligence of a prudent person c) Be a beneficiary of plan d) Administer the investment plan assets
b
Wrongful termination claims can sometimes allege implied employment contracts arising from which one of the following types of documents? a) Mission statement b) Employee handbook c) Code of conduct d) Vision statement
b
A 35-year-old female was employed at a company for 5 years. During her term of employment the company began having financial difficulty and determined that they needed to layoff 5 of its 125 employees in order to stay in business. The company laid off the female employee and 4 other female coworkers. All of the women had a history of receiving positive employee evaluations. The laid-off workers filed a claim against the company alleging discrimination. Which one the following best describes the basis of the employment practices claim filed against the company? a) Sexual harassment b) Age discrimination c) Wrongful termination d) Retaliation
c
A common defense used to protect directors and officers against claims that allege a breach in the duty of care is the: a) Ultra vires rule b) Securities & Exchange Act of 1934 c) CLass-Action Fairness Act of 2005 d) Business judgment rule
d
A corporation owned by its shareholders is controlled by its: a) Management b) Board of Advisors c) Proxies d) Board of Directors
d
Though most employer-employee relationships are "at will", an employer can change that by creating: a) An implied warranty b) An explicit warranty c) A mission statement d) An implied contract
d
A company's benefit administrator, while acting on behalf of the company, invested 100% of the plan funds in speculative stock. The return on the investment was ten-fold. The duty violated by the plan fiduciary in this instance is: a) Diversification b) Prudence c) Loyalty d) Adherence
a
ABC has a directors and officers (D&O) policy with a limit of $10 million, with a $10,000 SIR coverage A. In order to boost cash-flow, the accounting department made what turned out to be risky investments. While those investments paid off initially, they soon went bad and ABC lost a lot of cash and ended up in a worse cash-flow position than previously. Due to this bad investment and change in the cash-flow pictures, the value of ABC's stock dropped so much that the New York Stock Exchange decided to de-list. AS a result of the de-listing, the stock could no longer be traded and stockholders had nothing more than sheets of paper to show for their investment. The stockholders sued the directors for $100 million. However, a settlement was reached with the stockholders, for the limit on the D&O policy, less defense costs and deductible. With defense costs of $200,000, how much did the stockholders collect under the D&O policy? a) $9,790,000 b) $9,800,000 c) $9,990,000 d) $10,000,000
a
If an employer has both an employee benefits liability (EBL) coverage & fiduciary liability coverage, why is it important to check the wording in both policies' "Other Insurance" provisions? a) To be sure that the 2 policies will not create a conflict in the event of a claim covered by both policies. b) To be sure that the Insured employer is paying an adequate premium for the coverage. c) To be sure that both policies will pay the full amount of any covered claim. d) To be sure that both policies will pre-rate the payment of any covered claim.
a
With respect to defined-contribution retirement plans, the size of employee benefits are dependent upon the plan's earnings. This can lead to class action lawsuits covered under a typical: a) Fiduciary liability policy b) Directors & Officers liability policy c) Employment practices liability policy d) Employee retirement income security policy
a
Workers who believe their employment rights have been violated can file discrimination charges with which one of the following gov't agencies? a) Equal Employment Opportunity Commission (EEOC) b) Fair Labor Standards Act (FLSA) c) Securities and Exchange Commission (SEC) d) Consolidated Omnibus Budget Reconciliation Act (COBRA)
a
The former director of a microchip manufacturing company has recently been hired by a computer manufacturing company. The microchip manufacturing company alleges that the director has breached a confidentiality agreement signed at his departure and revealed trade secrets regarding the microchip manufacturing company tot eh computer manufacturing company. The microchip manufacturing company further alleges that this has resulted in the computer manufacturing company being awarded a significant contract meant for the microchip company, Under a typic directors and officers (D&O) liability policy, the directors legal fees and other losses indemnified by the company would be paid under: a) Coverage A b) Coverage B c) Coverage C d) Coverage
b
An employer's fiduciary liability policy has a one-year term beginning on June 1. On July 15, a claim is filed as a result of a lawsuit by an employee alleging a breach of the employer's obligation in benefits administration. The suit alleges the employer negligently failed to collect required contributions from the employee in February of the same year, resulting in the employee's health insurance being canceled and several medical expenses being denied. The provisions of the fiduciary liability policy will respond by: a) Denying coverage because the loss occurred prior to the policy inception. b) Providing coverage because the claim was made after the policy inception date. c) Denying coverage due to the exclusion related to collection of employee contributions. d) Providing coverage due to the claim being reported after the policy inception and meeting the definition of a wrongful act.
c
How did many insurers change the definition of "sponsored plan" in their fiduciary liability policies in response to the passage of the Health Insurance Portability & Accountability Act (HIPAA) of 1996? a) Many Insurers removed the definition of "sponsored plan." b) Many Insurers narrowed the definition of "sponsored plan" to specifically exclude those plans subject to HIPAA. c) Many Insurers decided to wait for court action before changing the definition of "sponsored plan." d) Many Insurers broadened the definition of "sponsored plan" to include those plans subject to HIPAA.
d
How is the word "loss" used differently in a directors and officers (D&O) liability policy versus in a Commercial General Liability (CGL) policy? a) In a CGL policy, the total "loss" payable includes payments of defense expense; in a D&O policy, defense expenses are outside the total amount payable b) In a D&O policy, defense expenses are not payable. c) In a CGL policy, defense expenses are not payable. d) In a D&O policy, the total "loss" payable includes payment of defense expense; in a CGL policy, defense expenses are outside the total amount payable.
d
The named Insured in a fiduciary liability policy is: a) The plan trustee b) The Insured plan c) The plan administrator d) The sponsor organization
d
A shareholder may bring a derivative suit against a director or officer for having ownership in a competing business. This is a breach of their: a) Loyalty b) Obedience c) Disclosure d) Care
a
An employer requires that its employees be at least 6 feet tall. Which one of the following types of potential Employment Practices Liability claims is likely to result from this requirement? a) Disparate treatment discrimination b) Disparate impact discrimination c) Sexual harassment d) Retaliation
b
What is the term applied to directors of a company who are not otherwise affiliated with that company and who do not have a pre-existing relationship with the company? a) Outside directors b) Inside directors c) Independent directors d) Dependent directiors
c
Jean is a director on the board of an apparel promotion company. Towards the company, Jean owes a duty of: a) Undivided time b) Profitability c) Divided loyalty d) Undivided loyalty
d
A lawsuit brought by one or more shareholders in the name of the corporation is a: a) Derivative lawsuit b) Class action lawsuit c) Fiduciary lawsuit d) Retaliation lawsuit
a
A small non-profit homeless shelter provides its services to a local community. Several homeless occupants allege that the shelter director administers preferential treatment in the distribution of food, toiletries, and cots based upon race. This claim against the shelter would be covered under a(n): a) Employment practices liability policy with added 3rd-party discrimination coverage. b) Directors & officers policy with both Coverage A & Coverage B. c) Directors & Officer liability policy with no employment practices exclusions. d) Employment practices liability policy with a broad form definition of wrongful acts.
a
Although a corporation's directors and officers must exercise care when making decisions about the running of the company, courts have held that they cannot be held liable for honest mistakes. This latitude allowed by courts to officers and directors is called the: a) Business judgment rule b) Nonjudgmental rule c) Due diligence rule d) Honest mistake rule
a
An Insured has an unendorsed employment practices liability (EPL) policy with a $500,000 limit of liability and a $25,000 retention. A former employee alleges injuries sustained when another employee's acquaintance entered the premises and assaulted the employee, with injuries and damage totaling $100,000. Is this a covered claim, and if so, how much will the Insurer pay? a) No, coverage does not apply. b) Yes, coverage applies. Insurer pays $75,000. c) Yes, coverage applies. Insurer pays $80,000. d) Yes, coverage applies. Insurer pays $100,000.
a
An employer has a personnel policy that requires employees to be at least 6 feet tall before they can be considered for an office managerial position. This action would be cause for an employee to file a discrimination claim against the employers Employment Practices Liability policy based on: a) Disparate impact b) Overt discrimination c) Disparate treatment d) Overt harassment
a
An individual alleges a wrongful act by the director of a company. In order to classify the allegation as a claim under a directors & officers policy, which one of the following must occur? a) A written demand for monetary or non-monetary relief b) A verbal demand for monetary or non-monetary relief c) The threat of a filed lawsuit against the director d) The initiation of criminal proceedings
a
Coverage A and Coverage B of most D&O liability policies insure different entities for the same type claims. Which one of the following is an entity insured under these policies for claims brought against the entity or individual? a) The corporation itself b) Customers of the corporation c) Stockholders of the corporation d) Employees of the corporation
a
Coverage B of the insuring agreement in the directors and officers (D&O) liability policy is also called: a) Indemnification coverage b) Direct coverage c) Individual coverage d) Entity coverage
a
Employment Practices Liability policies often provide coverage for 3rd-party discrimination claims filed by: a) Customers who have been sexually harassed. b) Employees who have been discriminated against. c) Employees who were wrongfully terminated. d) Customers dissatisfied with product reliability.
a
Fred is a nurse working the first shift at Save our Souls Hospital (SOS). He is the only man and the only unmarried nurse on that shift. He also has more seniority than all but one more nurse other nurse on his shift. SOS needs to hire more nurses for the first shift and brings on 3 young women straight out of nursing school - all of whom are married with young children. A couple of months late, Bob, the SOS President realizes that he made a mistake hiring 3 nurses for the first shift. Bob needs to trim the first shift by 1 person - either by laying someone off or transferring someone to the third shift. The new young women have made it clear to Bob that they can only work the first shift. Bob wants to keep as many people employed as possible, so he decides to transfer Fred to the third shift. Fred balks at this transfer and tells Bob that he is being treated unfairly because he is the only male nurse on that shift. He sues SOS for discrimination damages. What is the term given to the type of discrimination Fred is claiming? a) Disparate treatment b) Overt discrimination c) Disparate impact d) Intentional discrimination
a
Legislation has greatly expanded the basis for employment-related discrimination claims. These laws can create employment practice liability (EPL) loss exposures. Which one of the following is true regarding these exposures? a) EPL policies specifically exclude some violations created by law. b) Federal employment-related laws are broader than state laws. c) Corporate risk managers need only deal with the insurable exposures. d) Major types of employment-related claims are mutually exclusive.
a
Most directors and officers policies have a claims-made coverage trigger. Which one of the following does an extended reporting period add? a) 30 - 60 days automatic tail coverage b) 60-90 days automatic tail coverage c) 2-7 years of coverage after the automatic tail d) 6 years of coverage after the automatic tail
a
Some organizations such as school boards, municipalities, and non-profit organizations carry a special type of directors and officers (D&O) liability policy. What is the name given to this type of D&O coverage? a) Occupation-specific b) Director-specific c) Officer-specific d) Insured-specific
a
The Employee Retirement Income Securities Act (ERISA): a) Was enacted in response to abuses & underfunding in many benefit plans. b) Was enacted to ensure that all workers have retirement programs. c) Addresses only retirement plans. d) Applies only to group health insurance.
a
The Employee Retirement Income Security Act (ERISA) is the federal law that governs retirement and other benefit plans. ERISA was enacted in response to: a) Abuses and underfunding in many benefit plans following several insolvencies. b) Banks investing funds in investments that resulted in numerous defaults in the market. c) Foreign countries beginning to participate in the retirement and benefit programs. d) Congress insisting on acting as the watchdog of the corporate benefit programs.
a
The Employee Retirement Income Security Act (ERISA) spells out the 4 duties of a benefit plan fiduciary. Which duty requires that the fiduciary act with a certain level of skill and diligence? a) Duty of prudence b) Duty of loyalty c) Duty of diversification d) Duty of adherence
a
The majority of cases of alleged wrongful employment practices arise from which one of the following? a) Wrongful termination b) Discrimination c) Sexual harassment d) Retaliation
a
Which one of the following best describes Side A-only coverage added as a separate coverage for directors and officers? a) Does not include entity coverage b) Provides reimbursement coverage to the corporation when the corporation indemnifies the director c) Is written only on a pure excess basis d) Can be frozen as a corporate asset by a bankruptcy court.
a
Which one of the following best describes disparate treatment? a) Unfavorable or unfair treatment of someone in comparison to other similar individuals b) Indirect discrimination against a group c) A type of employee benefit loss exposure d) A specific observable action to discriminate against a person or class of persons
a
Which one of the following is a distinguishing characteristic of a derivative suit? a) Damages recovered, except for the expenses of bringing the suit, go directly to the corporation. b) It is brought by one or more individuals representing the interests of an entire group of people. c) Persons outside of the corporation may initiate such lawsuits. d) Such lawsuits are made in the name of individual customers or employees.
a
Which one of the following is a major responsibility of corporate directors? a) to perpetuate a competent board through regular elections b) to manage investments and disbursements of the corporation's assets c) to create the proper annual & interim reports for shareholders d) to establish the procedures & operational goals for each department
a
A suit has been filed by the United States of American against a publicly traded industrial corporation. The suit alleges that the corporation has violated the Clean Air Act by filing false statements regarding the level of emissions and air pollution generated by the company. The suit individually names the Chief Executive Officer (CEO) & a board of directors as co-dependents with the corporation. The type of suit that has been filed is...? a) Class action suit b) Non-derivative suit c) Derivative suit d) Antitrust suit
b
ABC Company is a small, family-owned business that has never purchased employment practices liability (EPL) insurance. Susan is a temporary worker at ABC, having been placed there by Temporary Placements Company. Susan is a member of a fundamentalist religious group that requires that she wear some unusual clothing. The people at ABC have always tolerated Susan's clothing and have never expressed any problems or concerns about it. Recently, Gerald purchased ABC and at the same time purchased an unendorsed EPL policy that covers actions by employees against the firm. Gerald comes from a very conservative background and when he discovers that Susan is not an employee of the company he tells her that, because of her unusual beliefs and clothing, she is no longer welcome at ABC. Susan sues ABC and Gerald, claiming wrongful termination and religious discrimination. Will ABC's EPL policy provide coverage for this action? a)Yes, ABC's EPL policy will provide coverage for this action, because Susan is a "de-facto employee" b) No, ABC's EPL policy will not provide coverage for this action, because it does not include independent contractors in the definition of employee. c) Yes, ABC's EPL policy will provide coverage for this action, but only after the case has been decided in court. d) No, ABC's EPL policy will not provide coverage for this action, because it excludes religious discrimination
b
ABC Corporation and its directors have been sued by a group of shareholders, alleging that mis-management of the company led to a large drop in the per-share price of the stock. ABC has a directors and officers (D&O) liability policy. After a long, drawn-out period, ABC's directors and officers Insurer has reached an agreement with the shareholders to settle their claim for a certain amount of money. However, ABC neither likes nor approves of this settlement and refuses to consent to the settlement. Because of that refusal to consent to the settlement, the insurer says that ABC must fund its own defense from this point forward. What is the name given to the clause in the policy invoked by the Insurer in this case? a) The out-of-pocket clause b) The hammer clause c) The extra expense clause d) The defense clause
b
Although a corporation may not want to settle any derivative suits out of court, why under common law might such settlements not benefit the corporation? a) the corporation would be considered to be the wrongdoer b) No determination of wrongdoing is made c) The results are not binding on all participants d) The results are sealed and, thus, hidden from the stockholders
b
An employer who fires a worker because he/she exposed unethical or illegal practices leaves itself vulnerable to which one of the following types of employment practice claims? a) Harassment b) Retaliation c) Discrimination d) Fiduciary
b
Carlota is a Vice President of Operations at LMN Enterprises. She is an exempt employee, meaning she is not entitled to: a) Contingent income b) Overtime pay c) Compensatory time off d) Pension benefits
b
Corporate directors are considered to have met their duty of care if they: a) Discharge their responsibilities according to the same standards that an employee of the organization would use b) Act in good faith and in a manner they reasonably believe to be in the best interests of the corporation c) Conduct themselves in a manner that guarantee's the enterprise's profitability d) Make informed decisions based upon their special business skills
b
Fiduciary liability loss exposures arise mainly when beneficiaries of a plan make a claim against the plan officials for breach of their fiduciary duties. Which one of the following is a specific duty of a plan fiduciary? a) To act in a way that is solely in the best interests of the organization providing the benefits. b) To ensure that the plan's investments are sufficiently diversified to minimize the risk of large losses. c) To carry out duties in such a way that no investment plans will lose money for the beneficiaries. d) To minimize actions that comply with the plan documents but may not be in compliance with the law.
b
Many D&O liability policies may contain a 3rd insuring agreement called Coverage C. Coverage C makes the corporation an entity for claims made against it for wrongful acts. Which one of the following explains why bother Coverage B, which insures the corporation, and Coverage C which also insures the corporation, may both be needed? a) Coverage C would cover individual directors and officers while Coverage B covers for reimbursement to the corporation. b) Coverage B covers for indemnification to its directors and officers while Coverage C covers for the corporation's wrongful acts. c) If the Insurance carrier were to decline coverage under Coverage B, the Insured would still be able to make claim under Coverage C. d) If the limits under Coverage B were exhausted the Insured would be able to proceed under the Coverage C provision of the policy.
b
Marcus has filed na employment discrimination claim against his employer and lodged a complaint with the Equal Employment Opportunity Commission (EEOC). If the EEOC dismisses Marcus's discrimination complaint, it will: a) Bar his suit b) Not bar his suit c) Diminish the value of his suit d) Transfer the claim to another gov't agency
b
Regarding sexual harassment claims, isolated incidents are insufficient from a legal standpoint to establish the existence of which one of the following types of work environments? a) Unpleasant b) Hostile c) Diverse d) Congenial
b
The "employment at will" legal dcotrine has allowed employers to terminate employment relationships with or without cause at any time. An exception to "employment at will" is: a) The practice of constructive discharge. b) The theory of implied contract. c) Claims for a hostile work environment. d) Retaliation type claims.
b
What is the difference in the coverage provided by a directors and officers liability insurance policy (D&O) and the coverage provided under the Commercial General Liability Coverage Form (CGL) and the Business Auto Coverage Form (BACF)? a) The D&O liability insurance policy provides coverage against indirect losses, while the CGL & BACF cover only direct losses. b) The D&O liability insurance policy provides coverage for wrongful acts that do not qualify as bodily injury, property damage, personal injury, or advertising injury. c)The D&O liability insurance policy provides coverage against direct losses, while the GL & BACF cover only indirect losses. d) The D&O liability insurance policy only provides remedies in the form of "actions", while the CGL & BACF pay cash.
b
What is the purpose of Coverage A under a Directors and Officers (D&O) liability policy? a) To indemnify the corporation for its own wrongful acts, if such indemnification is not required or permitted by law. b) To indemnify the individual directors and officers for their wrongful acts, if such indemnification is neither required nor permitted by law. c) To reimburse the corporation for sums that it must pay on behalf of its directors and officers , if such reimbursements is not required or permitted by law. d) TO reimburse the corporation for hte premiums paid to the D&O insurer if such reimbursement is not required or permitted by law.
b
What is the unique term for the Named Insured in a fiduciary liability policy? a) Fiduciary organization b) Sponsoring organization c) Benefit organization d) Employee organization
b
What was the reason for the 1988 passage of the "Worker Adjustment & Retraining Notification Act?" a) To make mass layoffs of workers easier for employers b) To mitigate the effects of mass layoffs c) To outlaw mass layoffs of workers by employers d) To provide new training for current employees
b
When the value of a 401-K plan drops significantly, what is the name of the Federal law under which the effected employees may bring suit? a) Social Security Act b) ERISA c) Federal Pension Reform Act d) Federal Employer Liability Act
b
Which one of the following best describes the types of plans the Employee Retirement Income Security Act applies to? a) Employee benefit plans that relate to retirement funding. b) All types & sizes of employee benefit plans. c) Employee benefit plans for employers with 5 or more employees. d) All plans declared as employee benefit plans & registered by the employer.
b
Which one of the following captions describes the Coverage C insuring agreement of a directors and officers (D&O) policy? a) Direct coverage b) Entity coverage c) Corporate reimbursement coverage d) Indemnification coverage
b
Which one of the following statements is accurate concerning a standard, unendorsed directors and officers (D&O) policy? a) A policy provides 15-25 day automatic tail coverage, with an occurrence coverage trigger. b) A policy provides 30-60 day automatic tail coverage, with a claims made coverage trigger. c) A policy provides 120-day automatic tail coverage, with a claims-made coverage trigger. d) A policy does not provide automatic tail coverage, with an occurrence coverage trigger.
b
Which one of the following statements is true regarding Coverage B of a directors and officers (D&O) liability policy? a) Coverage B insures the individual directors and officers, indemnifying them for covered claims when neither required nor permitted by law. b) Coverage insures the corporation for amounts that it is lawfully required to pay to settle claims against the directors and officers. c) Coverage B coverage is restricted to losses for which the corporation does not or cannot provide indemnification to the director or officer. d) Coverage B makes the corporation itself as an insured for claims made against it because of wrongful acts covered by the policy.
b
XYZ, LLC has a 401-K plan for its 401-K plan for its employees. Employees may contribute up to 10% of their salary on a pre-tax basis to the plan and XYZ, LLC promises to match the first 4% of each employee's contribution. However, XYZ has been experiencing some severe money troubles for several years. As a result, the Chief Financial Officer ordered that the 401-K's. When they get their account statements, they see that the contributions have not been made and file a suit against XYZ, LLC. Explain whether or not the fiduciary liability policy that XYZ has will cover the defense and any potential judgement arising out of this lawsuit. a) No, the fiduciary liability policy will not cover XYZ, LLC for any expenses arising out of this suit - defense expenses or any potential judgment. The policy contains a specific exclusion of any intentional acts on the part of the Insured. b) No, the fiduciary liability policy will not cover XYZ, LLC for any expenses arising out of this suit - defense expenses or any potential judgment. The policy contains a specific exclusion for the Insured's failure to properly fund an employee benefit plan. c) Yes, the fiduciary liability policy will cover both the defense expenses and any potential judgment against XYZ, LLC that arise out of this suit. d) Yes, the fiduciary liability policy will cover the defense expenses, but not cover any potential judgment against XYZ, LLC that arise out of this suit.
b
A company has had significant declines in an employee benefit plan. Significant abuses and underfunding have left the benefit plan on the brink of being insolvent. When employees file a suit against the company, which one of the following policies would respond? a) Employment practice liability policy b) Directors & Officers insurance policy c) Fiduciary liability insurance policy d) Employee Retirement Income Security Act (ERISA)
c
A typical securities class action complaint contains an allegation such as: a) Directors and officers have failed to fulfill legal duties owed to employees under the Employee Retirement Income Security Act of 1974 (ERISA) b) Directors and officers have violated state environmental statutes c) Insiders have profitably sold their personal holdings in the company's shares while the share price was artificially inflated d) Directors and officers have used the corporate jet for personal use
c
ABC Corporation encourages its directors and officers to serve as outside directors for local not-for-profit organizations and consequently ABC wishes to provide the D&O coverage for them for this service. Why might ABC obtain a separate policy called an outside directors liability policy rather than include the exposure on its corporate policy? a) Coverage for separate entities is not available under the basic corporate D&O policy. b) As a not-for-profit, the rate will be much less than adding the coverage to the corporate policy. c) Claims paid will not reduce the aggregate limit of liability under the regular corporate policy. d) Claims are not as likely to be made against a not-for-profit company as under the corporate policy.
c
An occupation-specific directors and officers policy such as an Educators' Professional Liability policy may be preferrable to a non-specific independent directors liability policy because: a) The policy can not be rescinded even in the event of nonpayment of premiums. b) Coverage is excess over the corporation's directors and officers liability policy. c) Coverages often include Employment Practices liability and Professional liability. d) The policy provides Side A-only coverage for a reduced premium.
c
Directors and officers are considered to have met their duty of care if they have met 2 standards. Which one of the following is one of these standards? a) Maintaining and enforcing the corporate charter & bylaws. b) Approve important financial matters & corporate reports c) Act in a manner believed to be in the corporation's best interests d) Be involved in establishing the goals & policies of the organization
c
Directors and officers of a corporation owe special duties to the stockholders of that corporation. Those duties include: the duty of care; the duty of loyalty; the duty of disclosure; and the duty of obedience. What is the term used to describe these duties? a) Legal b) Moral c) Fiduciary d) Ethical
c
Directors' and Officers' fiduciary duties include the duty of: a) Trustworthiness b) Reliability c) Obedience d) Credibility
c
Employers face a number of potential loss exposures due to federal legislation and state laws. Of the various types of Employment Practices Liability (EPL) claims, which one of the following is a major type of EPL claim? a) An overtime pay claim b) A retirement claim c) A retaliation claim d) An exempt employment claim
c
Fiduciary liability loss exposures from benefit plans arise mainly out of the possibility that: a) Employees will allege that they did not receive salary and other compensation commensurate with their contributions to the organization. b) Shareholders will allege that the organization's directors & officers were negligent in allocation resources to benefit plans. c) Beneficiaries of an employee benefit plan may make a claim against the plan officials for breach of their fiduciary duties. d) Vendors that provide benefits will file liens against the corporation's assets for unpaid balances due.
c
On March 1, 2009, a townhouse association purchased a Directors & Officers Liability Policy for the March 1, 2009 to March 1, 2010 policy period. The policy contains a March 1, 2009 retroactive date. On April 23, 2009 the association was named in a lawsuit alleging improper removal of a board member in which the lawsuit took place on February 1, 2009. Which one of the following best describes the scope of coverage provided by the claims-made provision of the policy? a) The would be coverage under the policy since the claim was reported within the policy period. b) There would be coverage under the policy since the association had no knowledge of the claim prior to the effective date of the policy c) There would be no coverage under the policy since the wrongful act occurred prior to the retroactive date of the policy. d) There would be no coverage under the policy since the policy contained a full prior acts exclusion.
c
Some Employment Practices Liability (EPL) insurers offer additional coverage and services to its Insureds. Additional coverages commonly offered by an EPL Insurer include which one of the following coverages? a) Errors & omissions coverages b) Workers compensation coverage c) 3rd-party discrimination coverage d) Occupational Safety & Health Act violations coverage
c
Which one of the following federal laws gives workers and their families who lose their health benefits the right to choose whether to continue group health benefits provided by their group health plan for a limited period of time under certain circumstances? a) Family Medical Leave Act (FMLA) b) Fair Labor Standards Act (FLSA) c) Consolidated Omnibus Budget Reconciliation Act (COBRA) d) Employee Retirement Income Security Act (ERISA)
c
Which one of the following is the advantage in securing a separate outside directors liability policy for corporate directors serving in an organization not affiliated with the insured corporation? a) The outside entity and the Insured corporation's consent are required to settle the claim. b) The deductible on the corporation's regular directors and officers policy would be waived. c) Claims paid by the policy will not reduce the aggregate limit of the Insured corporation's regular directors and officers policy. d) Coverage would apply even if the Insured organization had no direct knowledge of the director's participation.
c
Employee practices liability (EPL) policies typically agree to pay loss resulting from claims made during the policy period for a wrongful act. Which one of the following is a correct statement regarding claim awards that include back pay? a) EPL policies all address the issue of coverage for both front pay as well as for back pay. b) EPL policies exclude claims for back pay relating to discrimination claims. c) EPL policies provide coverage for front pay awards but exclude claims for back pay. d) Some EPL policies cover claims for back pay for certain types of claims.
d
Employment practices liability loss exposures are effected by a statute which establishes minimum wage & overtime rates, and regulates the employment of children. The statute applies to employers with at least 2 employees engaged in interstate commerce and a business volume of over $500,000 per year. Which one of the following statutes is described? a) Civil Rights Act of 1991 b) Employee Retirement Income Security Act c) Consolidated Omnibus Budget Reconciliation Act d) Fair Labor Standards act
d
Independent directors on the board are those that are not otherwise affiliated with the corporation they are serving. They may insist on having their own D&O coverage. A reason for this request would be...? a) That it would not be as likely that issues of coverage for the total board would be construed against them. b) So that it would be less likely that they would be sued for issues of other board members c) Due to the fact that it is less expensive than covering the total board of directors d) So that their insurance limits will not be diluted by claims against other directors.
d
Mitch has been as underwriter at Regional Insurance Company for several years. He has always been attracted to one of the file clerks named Debbie. One year on his birthday, Mitch approached Debbie in the file room and asked for a "birthday kiss." Debbie said "no" and laughed it off. Unfortunately, Mitch persisted and became more and more aggressive in his pursuit of the "birthday kiss." Debbie complained to her supervisor, Louise, about the incident with Mitch. Debbie also contended that Mitch has said several things to her over the years and that Louise knew about it but didn't do anything, saying that "Mitch is harmless and wouldn't hurt a fly." Debbie then claims sexual harassment and quits her job. She then sues Regional Insurance Company stating that she could no longer work there under the current "working conditions." What is the term for the "working conditions" to which Debbie was referring? a) Unwelcome advances b) Interference with job responsibilities c) Inability to earn a living d) Hostile work environment
d
QRS, LLC has been a small town's largest employer for a long time. When the owner of QRS, LLC died, the company was forced to lay off 25% of its workforce, because the proper life insurance was not in force for the owner. These mass lay-offs resulted in bad publicity in the town paper and much negativity directed at the company in various town meetings. The Employment Practice Liability (EPL) policy in force for QRS, LLC provided money to cover QRS's costs to retain a PR firm. Such costs are called: a) Bail out costs b) Unnecessary costs c) Forced costs d) Reputation management costs
d
The Employment Retirement & income Security Act (ERISA) governs: a) Employers exempt from the federal minimum wage law. b) Federal and state pension plans. c) Employers engaged in interstat commerce. d) Employee benefit & retirement plans.
d
Tom, Bill, and Adam are the 3 largest shareholders in ABC Corporation. Recently, the price of ABC's stock has dropped severely. Tom, Bill, and Adam decide to bring a suit in their own names against the directors. In that suit, Tom, Bill, and Adam allege that the directors failed to review the company's financial statements and that they also failed to properly monitor the company's affairs. The suit being brought by Tom, Bill & Adam is referred to as: a) Derivative suit b) Nuisance suit c) Unnecessary suit d) Non-derivative suit
d
What are the 2 ways that an employment practices liability (EPL) policy defines "wrongful acts?" a) "All-risks" & named perils b) Broad form & "all-risks" c) Named perils & named exclusions d) Broad form & named perils
d
What does ERISA stand for? a) Employee Retirement Income Stability Act b) Employer Retirement Income Security Act c) Employee Retirement & Insurance Security Act d) Employee Retirement Income Security Act
d
Which one of the following is an important sattute for organizations seeking to identify & analyze fiduciary liability loss exposures? a) Fair Labor Standards Act b) Equal Employment Opportunity Commission Acts c) Americans with Disabilities Act d) Employee Retirement Income Security Act (ERISA)
d
The director of a corporation has been named in a suit brought by a stockholder of the corporation alleging a failure to correct inaccurate statements made within its prospectus. What is the classification of the suit made: a) Non-derivative suit b) Civil suit c) Derivative suit d) Class action
a
The director of a corporation has been named in a suit brought by a stockholder of the corporation alleging a failure to correct inaccurate statements within its prospectus. The stockholder filed suit in his own name. Which one of the following is the most likely classification of the suit? a) Non-derivative suit b) Civil suit c) Derivative suit d) Class action
a
What is the name given to a claim by an employee who says that he/she was fired because of the filing of a workers compensation claim? a) Retaliation claim b) Harassment claim c) Discrimination claim d) Insurance claim
a
Which one of the following is often covered under fiduciary liability policies? a) Claims arising under the Consolidated Omnibus Budget Reconciliation Act (COBRA) b)Claims for acts that occurred before the retroactive period c) Claims because of criminal and fraudulent acts d) Claims because of failure to properly fund a plan
a
The administrators of a retirement plan decide the plan will exclude all women from coverage. The women formerly covered by the plan file suit with allegations that the decision to negate their coverage was imprudent. The administrators of the plan should seek protection from lawsuit under which one of the following policies? a) Directors and officers liability b) Employment practices liability c) Fiduciary liability d) Commercial general liability
c
The purpose of the severability of interests provision of a directors and officers liability policy is to: a) Provide automatic coverage for directors and officers of new entities resulting from mergers. b) Continue coverage for directors and officers after they have retired from their positions c) Remove a coverage exclusion for innocent directors and officers who did not have knowledge of wrongful acts d) Exclude coverage for claims made against directors and officers covered under prior policies
c
To prove that a hostile work environment exists, an employee generally must show several facts. Which one of the following is one of those facts? a) The employer did not know about the harassment. b) Remedial action taken by the employer was ineffective. c) The harassment affected a term or condition of employment. d) The employee is not a member of a protected class.
c
What is the name given to directors and officers coverage that covers only the individual liability of the insured directors and officers? a) Directors-only coverage b) Officers-only coverage c) Side-A only coverage d) Individuals-only coverage
c
Which one of the following explains the difference between the "broad form" & the "named perils" form definition for wrongful acts in the employment practices liability insurance policy? a) The named perils form provides indemnity and defense cost while the broad form provides "all-risks" coverage. b) The named perils form provides coverage on a claims made basis while the broad form provides coverage on an occurrence basis. c) The named perils form provides a listing of offenses while the broad form provides a general description. d) The named perils form provides for wrongful acts on an "all-risks" basis while the broad form provides coverage for a brief listing.
c
A corporation's directors are: a) Elected by the corporation's officers b) Appointed by the corporation's officers c) Elected by the corporation's shareholders d) Appointed by the corporation's management
c
The chief financial officer (CFO) of ABC Corporation was charged with administering the company's 401(k) plan for employees. Because the ABC stock value was growing at a double digit rate, the CFO invest the full 401(k) funds in ABC stock. 2 years later, the ABC stock dropped significantly due to new competition in the market. An employee group brought suit against the CFO for not properly diversifying the 401(k) investments and for not being prudent in carrying out his duties managing the 401(k). Which one of the following policies would provide coverage for the CFO for defense of this lawsuit? a) Fiduciary liability policy b) Directors and officers liability policy c) Employment practices liability policy d) Comprehensive general liability policy
a
Which one of the following statements is true regarding the use of deductibles and coinsurance in directors and officers (D&O) liability policies? a) Substantial deductibles often apply to Coverage B, with a small or no deductible applicable to Coverage A. b) Most D&O policies include a percentage deductible that disappears after a claim has reached a certain amount. c) Because there is no "valuation" in D&O Insurance, D&O policies do not contain a coinsurance provision. d) D&O policies do not have deductibles but generally impose a substantial coinsurance penalty for underinsurance.
a
A company carries a Directors and Officers (D&O) liability policy containing a typical definition of loss and a $1M annual aggregate limit. The company suffers a covered loss result in payment of $300,000 of indemnity, $200,000 of defense costs, and a criminal fine of $25,000. After this loss, the company's remaining annual aggregate limit would be: a) $475,000 b) $500,000 c) $675,000 d) $700,000
b
A female supervisor consistently reprimands male, but not female, employees for using the Internet for personal use. This is an example of: a) Overt discrimination b) Disparate treatment c) Disparate impact d) Adverse impact
b
A large manufacturing corporation administers a health care plan with a clause that allows terminated employees to maintain their group health benefits for 90 days under the Consolidated Omnibus Budget Reconciliation Act (COBRA). A former employee of the company has filed a claim alleging that they lost all health care benefits after being terminated. The company maintains current Directors & officers (D&O), Employment Practices Liability (EPL), and Fiduciary Liability policies. The claim would be covered: a) By the EPL policy b) Under the fiduciary liability policy c) By the D&O policy d) Under the workers compensation polciy
b
ABC Corporation was self-insured for its employee health insurance benefits. John was the personnel director and was charged with administering the plan. John found that the female portion of the workforce made use of the health insurance coverage much more than the male portion. In an effort to reduce the expense of the health insurance program, John began to eliminate jobs within the company that were held by females. As a result, a group of female employees brought suit against John and against ABC for discrimination and wrongful termination. Which one of the following policies held by ABC would respond and defend John? a) Directors and officers liability policy b) Employment practices liability policy c) Fiduciary liability policy d) Comprehensive general liability policy
b
An office-supplies distributor requires its drivers to be able to lift 100 pounds with proper form. 45 women who have denied employment during the current year file a class action lawsuit alleging that the lifting requirement is unfairly discriminatory against women. The distributor promptly reports the claim to its Employment Practices Liability (EPL) Insurer. In court, the distributor is found guilty of discrimination since the heaviest item actually distributed weighs only 20 pounds. The EPL carrier incurs $50,000 in defense costs and the court orders a $900,000 judgement against the distributor to be split among the 45 women. There is a $1 million limit of liability including defense costs; Retroactive Date is 01/01/1970; Retentions are $25,000. The EPL policy will pay: a) $50,000 for defense costs and nothing for the judgment. b) $50,000 for defense costs and $875,000 for the judgment. c) $50,000 for defense costs and $900,000 for the judgment. d) Nothing for the defense costs and $900,000 for the judgment.
b
The Health Insurance Portability & accountability Act of 1996 (HIPAA) required that certain provisions in fiduciary liability policies be changed. One of those changes was to the definition of "wrongful act." How did many Insurers change the definition of "wrongful act" in their fiduciary liability policies in response to the passage of HIPAA? a) Many Insurers removed the definition of "wrongful act." b) Many Insurers added "breach of duties imposed by HIPAA" to the definition of "wrongful act." c) Many Insurers decided to wait for court action before changing their definition of "wrongful act." d) Many Insurers removed coverage for fines assessed under HIPAA.
b
The marketing department of a software company suggest raising the price of its most successful and popular software. The board of directors approves the decision. The price increase causes the company a large decrease in market share and the company stock prices go down. 12 men & 8 women employees of the marketing department are involved in the pricing strategy that ultimately lead to the product's decline. All of the women are terminated; however, none of the men lose their positions. Shareholders file a derivative suit against the directors claiming a breach of duty for approving the change in product pricing without requesting and reviewing adequate information to substantiate the change. Additionally, the women employees file suit for wrongful termination and sex discrimination. The software company's: a) Directors and officers liability policy will respond to the shareholder suit, and the fiduciary liability policy will respond to the suit by the terminated employees. b) Directors and officers liability policy will respond to the shareholder suit, and the employment practices liability policy will respond to the suit by the terminated employees. c) Fiduciary liability policy will respond to the shareholder suit, and the employment practices liability policy will respond to the suit by the terminated employees. d) Directors and officers policy will respond to the shareholder suit, and the employment practices liability policy will exclude coverage for the suit by the terminated employees due to its being an Equal Employment Opportunity Commission (EEOC) violation.
b
Under the Employee Retirement Income Securities Act (ERISA), the duties of a plan fiduciary include which one of the following? a) Supervision b) Diversification c) Record-keeping d) Non-disclosure
b
Which one of the following must be endorsed to a fiduciary liability policy to be considered an "insured plan?" a) Customized retirement plan b) Multi-employer plan c) A group health insurance plan d) Profit-sharing plan
b
A fiduciary liability claim has been filed by the employees of a company. The employees allege that poor funding administration of the company-managed health insurance plan has resulted in an exponential increase in the plans cost. Which one of the following acts would govern any abuses in managing the plans funding? a) Family & Medical Leave Act (FMLA) b) Health Insurance Portability & Accountability Act of 1996 (HIPAA) c) Employee Retirement Income Security Act (ERISA) d) Consolidated Omnibus Budget Reconciliation Act (COBRA
c
In most ways, fiduciary policies closely resemble D&O and employment practices liability (EPL) policies. Which one of the following is true about fiduciary liability policies? a) The policy provides liability coverage for all participants or beneficiaries of the plan. b) Covered legal defense expenses are provided in addition to the policy limits. c) To be covered claims must be first reported during the policy period. d) The definition of a wrongful act includes acts of any plan participant or beneficiary.
c
Joe owns a small stock brokerage, XYZ Company. He also serves as a director & pension fund fiduciary at XYZ Company. Most of the pension fund at XYZ Company is invested in the company's own stock. When XYZ starts having financial troubles, the price of the stock goes down. Various brokers at Joe's firm want to move much of the XYZ pension fund to a safer investment. However, Joe fails to approve the transfer, because he fears the effect such a move would have on XYZ. As a result, the value of the pension fund drops. Which one of the following fiduciary duties is Joe breaching by focusing solely on the possible financial impact that a change would have on XYZ Company? a) Duty of prudence b) Duty of diversification c) Duty of loyalty d) Duty of adherence
c
A corporate officer serves on the board of directors at a local, not-for-profit charity organization at the request of his corporation. If the risk management goal of the corporation is to provide coverage for this officer while preserving the aggregate limit of the corporation's policy from any claims paid with respect to the officer's service to the not-for-profit, which is their best alternative? a) The corporation should assume the officer has adequate coverage under the policy for the non-profit organization and take no further action. b) The corporation should cover the officer by adding an endorsement to its existing directors and officers (D&O) policy. c) The corporation needs to take no other action as this officer is covered by its existing directors and officers (D&O) policy. d) The corporation should cover the officer with an outside directors liability policy.
d
A plan fiduciary who fails to act according to plan documents has most clearly breached which one of the following fiduciary duties? a) Prudence b) Loyalty c) Diversification d) Adherence
d
A regional barbecue restaurant decided to expand nationally. Although market research indicated that the expansion would not be profitable, the restaurant chain's management decided to move forward with the plans. The company's retirement assets were heavily invested in corporate stock. After the expansion, the stock price fell more than 50%. Which one of the following management liability policies would respond to the employees' suit against the company for the reduction in their retirement assets? a) Employee benefits liability policy b) Employment practices liability policy d) Directors & officers liability policy d) Fiduciary liability policy
d
Human Resource Manager Jim has received medical records of employee Drew in connection with a pending health insurance claim. Distracted by an unrelated conversation, Jim left Drew's medical records near the office photocopier, where 5 co-workers were able to view the materials. Jim & his company may have some legal exposure pertaining to which one of the following federal laws that calls for protection of employee medical information and subjects employers & fiduciaries to penalties for non-compliance? a) RICO b) FICA c) ERISA d) HIPAA
d
Jill has bad allergies and gets weekly shots to combat their effects. She wants to change jobs, but fears that her new employer's group health insurer will not cover her allergy expenses. However, her new employer tells her that the Federal law known as the Health Insurance Portability & Accountability Act (HIPAA) takes care of that for her. How is Hill helped by HIPAA in this instance> a) HIPAA makes sure that the health insurer can collect na appropriate premium for the exposure. b) HIPAA provides for a "set-aside" fund to cover Jill's allergy expenses c) HIPAA allows for coverage of Jill's allergy expenses after she has been employed for year. d) HIPAA limits the application of the exclusion of "pre-existing medical conditions."
d
Patrick works in the benefits department at a company whose responsibilities involve selecting investments that support the employee benefit plan. One of the investment options happens to be at a firm where Patrick's friend works. He knows the friend could use the money that would come from the substantial investment the benefit plan would create. Despite the fact there are more sound investments, Patrick decides to invest heavily in the friend's company. The investments perform adequately. Is this a violation of Patrick's fiduciary duties? a) No, his duties would have been violated, had the investment performed poorly. b) No, the investment provided adequate performance and no harm was done. c) Yes, the plan had the potential to perform better than it did. d) Yes, he has a duty to act solely in the interest of the plan and participants.
d
The Health Insurance Portability & Accountability Act (HIPAA) sets standards for health insurance, prohibits discrimination in enrollment, and improves disclosure about group health plans. Which one of the following is a response that fiduciary insurers have provided in response to the HIPAA law? a) They have provided coverage for up to $100,000 for any criminal fines imposed due to HIPAA. b) They provide endorsements for fidelity bond coverage for the fiduciary liability policy. c) They extend coverage for loss due to failure to collect required employee contributions. d) They have provided an endorsement to cover civil fines that HIPAA can impose.
d
A specific observable action to discriminate against a person or class of persons is: a) Overt impact b) Disparate impact c) Disparate treatment d) Overt discrimination
d
An employee benefit plan fiduciary has a duty of prudence, meaning that: a) The fiduciary's actions must be solely in the best interests of the plan and all of its participants and beneficiaries. b) The fiduciary must ensure that the plan's investments are sufficiently diversified to minimize the risk of large losses. c) The fiduciary must act according to the plan documents and applicable law. d) The fiduciary must carry out the duties with the skill, prudence, and diligence of a prudent person familiar with such matters.
d
Bill and John are employees of XYZ Corp. and also serve on XYZ's board of directors. They have been asked to serve as directors for New Charity Organization. XYZ wants to protect Bill and John from any possible financial loss from their service for New Charity Organization. What is the name of the type of policy that XYZ can purchase to protect Bill and John while they serve on the board at New Charity Organization? a) An other company directors liability policy b) An inside directors liability policy c) An excess directors liability policy d) An outside directors liability policy
d
Directors (& sometimes officers) owe a duty of loyalty to the: a) Federal Securities and Exchange Commission b) Employees that support the corporation they serve c) Customers of the corporation they serve d) Stockholders who elect them
d
A business has declared bankruptcy and a corporate officer has been sued for wrongdoing in handling corporate assets. It is determined that the officer is held liable for $1,000,000. Due to the bankruptcy, the corporation's assets have been frozen. The corporation's directors and officers (D&O) policy provides coverage with a $500K each loss limit and a $2M aggregate limit. As a result of this suit, the D&O policy will pay: a) $500,000 under Coverage A with a $1,,500,000 aggregate limit remaining. b) $500,000 under Coverage B with a $1,500,000 aggregate limit remaining. c) $500,000 under Coverage A and $500,000 under Coverage B with a $1,000,000 aggregate limit remaining d) Nothing due to the bankruptcy clause which excludes coverage in this instance.
a
A female job seeker was denied employment at a local law firm as she did not fulfill a job requirement that all employees be at least 6 feet tall. An employment practices liability claim was filed against the law firm alleging discriminatory actions. The type of discrimination described in this instance is: a) Disparate impact b) Disparate treatment c) Overt discrimination d) Gender discrimination
a
A law that affects employment practices liability loss exposures is the Worker Adjustment & Retraining Notification Act, which: a) Requires employers to provide notice 60 days in advance of covered plant closings & mass layoffs b) Prohibits discrimination against disabled persons and requires an employer to make reasonable accommodations in the workplace for disabled employees. c) Establishes minimum wage & overtime rates and regulates the employment of children. d) Prohibits discrimination against individuals age 40 or older based solely on their age.
a
What is the term given to the duty to act for someone else's benefit? a) An imposed duty b) A fiduciary duty c) An insurable duty d) A non-exempt duty
b
