FIL 352 Test #2

An Auto Dealer filed a report to its insurer showing auto values of $3 million. The dealer then had a loss from a hailstorm of $500,000. When investigating the loss, the insurer learned that dealer understated the auto values and that the actual value of the dealer's autos was $4 million. Disregarding any deductible that might apply, how much would the insurer pay for the loss? Nothing $300,000 $375,000 $500,000

375,000

Employee

A person hired to perform services for another under the direction and control of the other party, called the employer.

Customer limitation (of the ADCF)

A provision that excludes liability coverage for customers of auto dealers unless they are uninsured or have limits below required financial responsibility law

Exclusive remedy

A provision that serves as a compromise between employer and employee for occupational injuries/disease. Workers' compensation policy states that a worker cannot sue their employer for a work-related injury, but instead automatically receive medical benefits and compensation for lost wages while they are unable to work - all without having to prove the employer's negligence. In return for these benefits, employers don't have to worry about lawsuits from injured employees.

Experience modification

A rate multiplier under workers compensation that is derived from the amount of three-year historical losses of the employer as it compares to similar employers

Retrospective rating plan

A rating plan that adjusts the insured's premium for the current policy period based on actual loss experience during the current period subject to a minimum and maximum

Competitive state fund

A state fund that sells workers compensation insurance in competition with private insurers

Which one of the following losses would be covered under Section II (Business operations coverage) of the Auto Dealers Coverage Form (ADCF)? A. Expenses resulting from the need to recall autos with defective air bags. B. Property damage to an auto engine caused by oil leaking after a technician failed to replace a plug. C. Hail damage to new autos being stored on an open lot. D. Pollution damage caused by the improper disposal of oil and other fluids used in the operations.

B

Which of the following symbols is used to designate a business's "Owned private passenger autos" A. Symbol 1 B. Symbol 2 C. Symbol 3 D. Symbol 4

C

Zone rated vehicles

Trucks in the medium and larger size classes that are operated beyond a 200-mile radius of the principal garaging location and that are subject to zone rating, which considers the territories in which insured vehicles operate.

When describing workers compensation, explain what is meant by "exclusive remedy"

states that a worker cannot sue an employer for a work-related injury as long as they are receiving benefits from workers' comp. The workers' compensation exclusive remedy provision serves as a compromise between employer and employee.

What are the three insurer duties specified under the liability insuring agreement (Section II) of the BACF?

-Duty to pay bodily injury and/or property damages for which the insured is legally liable as a result of an auto accident while operating the insured's business -Duty to pay covered pollution expenses that directly result from the escape of fluids that are caused by an auto accident -Duty to defend for cases related to coverages provided under the policy

What exclusions are listed under the liability coverage (Section II) of the BACF?

-Expected or intentional injury -Contractual liability - except for "insured contracts" (similar to CGL) -Workers Compensation (and related) -No coverage for property under the care, custody, or control of the insured -Loading and unloading exclusions - no coverage before moving property into a covered auto or after final delivery place -No coverage while operating equipment attached to covered autos (operations exclusion) -No coverage for completed operations performed by autos -(If not involved in an accident) Pollution -War -Racing and demolition

Policyholder dividends

An insurance plan where the insurer may decide to "rebate" a portion of paid premiums if the loss experience of the insurer is good

Bruno Corporation (Bruno) is insured under a Business Auto Coverage Form (BACF) with a $300,000 liability limit. A Bruno employee is involved in an accident while using his own truck to move property belonging to Bruno. The employee's personal auto policy has a $500,000 liability limit. If $600,000 in damages is awarded because of the accident, Bruno's BACF insurer would pay: A. 0 B. 100,000 C. 300,000 D. 600,000

B

Many states have funds from which employers may purchase workers compensation insurance. Such funds may be either: A. Regulated or unregulated B. Competitive or monopolistic C. Competitive or regulated D. Monopolistic or unregulated

B

The business auto policy condition that states that the insured must cooperate with the insurer in its investigation and defense of the accident or loss is the: A. Legal Action Against the Insurer Condition. B. Duties in the Event of Accident, Claim, Suit, or Loss Condition. C. Concealment, Misrepresentation, or Fraud Condition. D. Transfer of Rights Against Others Condition.

B

Auto dealers have potential liability for damage to customers' autos in their care, custody, or control. Which one of the following provides this coverage? A. Physical damage coverage. B. False pretense coverage. C. Garagekeepers coverage. D. Bailees coverage.

C

Differentiate the available options for covering auto physical damage

Collision insures against direct damage to a covered auto caused by collision with another object or by overturn Comprehensive coverage insures direct and accidental loss or damage on an open perils basis - Except collision or overturn Includes glass breakage, contact with an animal, and damage by falling objects Specified causes of loss coverage is a named peril alternative to comprehensive coverage - covers only specifically named perils including fire, lightning, explosion, theft, windstorm, hail, and others

List and describe the exclusions under garagekeepers coverage of the ADCF.

Contractual obligations - no exception for "insured contracts" Theft by the insured, employees, or stockholders Defective parts—Loss resulting from damaged parts is excluded, but damage caused by the defective part is covered if in insured's care Losses resulting from insured's faulty work Loss to electronic equipment (audio/video) that is not permanently installed Losses related to war

Trailer interchange coverage

Coverage for a motor carrier's liability for damage to trailers in its possession under a written trailer interchange agreement.

Garagekeepers coverage

Coverage for damage to customers' autos left in the named insured's care while the insured is servicing, parking, or storing them

Medical payments coverage

Coverage that pays necessary medical expenses incurred within a specified period by a claimant (and in certain policies, by an insured) for a covered injury, regardless of whether the insured was at fault.

An employer requests an employee to stop at a bakery on their way to work in the morning to pick up pastries for an early staff meeting. While waiting in line at the bakery, another customer spills their hot cup of coffee on the employee and as a result the employee is badly burned. Is the burn a compensable injury under most wokers compensation statutes? A. Yes, because the injury was sudden and accidental. B. No, because the injury did not happen on the employer's premises. C. No, because the injury occurred while commuting to work. D. Yes, because the employee was conducting a work-related function.

D

What types of businesses are eligible for the Auto Dealers Coverage Form? A. Detailing and automated car washing outlets B. Parking lot and valet parking services C. Service stations and repair shops D. Franchised and non-franchised auto and trailer dealers

D

Extraterritorial provisions

Determines the status of workers compensation benefits for employees who are temporarily working outside their home state

Doctrine of respondent superior

Employer is responsible (vicarious liability) for their legal agents

Voluntary Compensation and Employers Liability Coverage Endorsement

Extends workers compensation and employer liability coverage to some types of employment that are normally exempt from statutory workers compensation, such as farm, domestic, and casual workers

Assigned risk plans (or involuntary market)

For employers who want private insurance but whose application was rejected by insurers. The state assigns applicants to a private insurer who must accept risks proportional to their voluntary market share in that state.

In order to apply coverage regardless of legal liability for damage to a customer's vehicle in the insured's care, custody, or control, an Auto Dealers Coverage Form would also need -Broad Form Products coverage -Garagekeepers Direct Primary coverage -Customer Complaint Legal Defense coverage -Dealers Driveaway Collision coverage

Garagekeepers Direct Primary coverage

Permanent partial disability

Impairs the injured employee's earning capacity for life. The employee is able to work at reduced efficiency.

List and briefly describe the different auto insurance coverages available under the ADCF.

Liability - similar to the BACF protecting the auto dealer from liability claims related to driving autos as part of the auto dealership operations. Includes pollution cost/expense and legal defense. Garagekeepers - provides liability protection of bailees who have temporary possession of customers' autos Physical damage

Scheduled injuries

Occupational injuries that result from the loss of specific body parts for which state statutes outline (or "schedule") specific benefits, such as a number of weeks of pay. The assumption is that the impairment produces loss of wages over the employee's lifetime.

Liberalization

One of the general conditions in commercial auto insurance. If the standard coverage offered by the insurer is broadened with no additional premium, it is automatically and immediate applied to existing insureds' policy

Subrogation

One of the loss conditions in commercial auto insurance. After a claim payment is made to a policyholder, subrogation means that any right to recovery from negligent third parties is transferred to the insurer

Underinsured motorist coverage

Provides coverage from the driver's insurer for injuries caused by a negligent driver who has insufficient limits

Uninsured motorist coverage

Provides coverage from the driver's own insurer for injuries caused by an uninsured, negligent driver (or hit-and-run driver)

Other States Insurance (Part Three of NCCI's WC & EL policy)

Provides coverage in the specific states listed if business operations expand to new states beyond those listed in Part One of the policy

MCS 90 endorsement

Required by the Motor Carrier Act of 1980, it provides assurance to the public that certain vehicles (generally heavier and hauling hazardous chemicals) have protection to pay liability damages resulting from negligence

What are the exclusions under Part Two (Employers Liability) of the NCCI's WC & EL policy?

Statutory obligations such as workers compensation Losses outside the coverage territory (which is the US, its territories or possessions, and Canada) Employment practices - demotion, harassment, discrimination, or termination (these are management liability) Bodily injury intentionally caused by the insured Fines or penalties imposed for violation of federal or state law Punitive damages for injury or death of any illegally employed person Bodily injury to employees employed in violation of the law with the knowledge of the insured or any executive officers of the insured

Auto Dealers Coverage Form (ADCF)

The ISO coverage form designed to meet the auto, general liability, and errors and omissions liability insurance needs of auto and trailer dealers.

Permanent total disability

Unable to ever return to gainful employment

Determine the workers compensation premium. Reggie is a roofing contractor who employs twelve roofers and two clerical workers. Total estimated annual remuneration and rates (per $100 of remuneration) is $500,000 for roofers, $9 rate $80,000 for clerical workers, $0.30 rate Reggie has an experience modification of 0.90 and is also entitled to another 5 percent premium discount offered by the insurer.

((500,000 x 9/100) + (80,000 x 0.30/100)) x 0.90 x (1-0.05)=38,680.20

Business auto coverage form (BACF)

-For most commercial organizations that have auto exposures -Available coverages include: -Auto liability -Auto physical damage -Un-/Under-insured motorist coverage -Medical payments

Auto dealers coverage form (ADCF)

-For motor vehicle dealers Combines both auto and general liability exposures -Available coverages include: -Auto liability -Garagekeepers (bailee protection -Auto physical damage -General liability coverage - BI/PD, personal/advertising, medical payments -Acts, errors, or omissions

List and describe the auto physical damage exclusions of the BACF.

-Nuclear hazards -War / military action -Losses incurred during races or demolition contests -Uninsurable auto losses or those that are not sudden in nature - wear and tear, mechanical breakdown, tires -Electronic equipment in a covered auto even if permanently installed - car audio/visual/data components, radar detectors, and similar devices -Reduction in value after a loss

An auto dealer is concerned about coverage for the physical damage to autos before they are delivered to their lot from the distributor. The dealer regularly has autos delivered over 75 miles from the point of distribution. Which one of the following ADCF endorsements would best provide the physical damage protection the dealer is looking for? A. Dealers Driveaway Collision Coverage endorsement B. Broad Form Products Coverage endorsement C. Garagekeepers Direct Coverage Option endorsement D. False Pretense Coverage endorsement

A

One of the conditions in the Business Auto Coverage Form addresses physical damage losses where the Named Insured and the Insurer disagree about the amount of a covered loss. Which one of the following statements concerning those conditions is most accurate? A. Both the Named Insured and the Insurer hire and pay their own appraisers and then share the cost of hiring an umpire. B. The Named Insured is required to consent to the appraisal value determined by the Insurer, otherwise the Named Insured will forfeit coverage. C. The Named Insured is required to hire an independent appraiser to assess the damages, and the findings of the appraiser are binding. D. The Insurer is required to hire an umpire at its own expense to establish the final cost of any disputed losses.

A

Which one of the following business would likely not be eligible for coverage under the BACF? A. A motor carrier that transports the property of others. B. A multi-state corporation that prints textbooks for universities. C. A manufacturer of various steel and aluminum tools. D. A local grocery store that also services automobiles.

A

Zook Construction is a highway contractor whose company is covered with a workers compensation policy and an unendorsed Business Auto Coverage Form (BACF). Which one of the following losses would be covered by his business auto policy? A. An employee runs over a subcontractor's equipment with an owned auto. B. Vandals damage a bulldozer at a construction site after the end of the workday. C. One of his employees is injured while making a delivery to a job site. D. One of his autos has an engine breakdown on the road and has to be repaired.

A

Voluntary insurance market

A business seeking workers compensation coverage can purchase insurance from a private insurer who has the ability to accept or reject the applicant

Professional employer organizations (PEOs)

A business that contracts with firms to lease employees. PEOs provide many HR functions including payroll and benefits (including workers compensation)

Trailer interchange agreement

A contract under which two motor carriers agree to swap trailers and to indemnify each other for any damage that occurs to the other's trailer while it is in the borrowing motor carrier's possession.

Temporary partial disability (TPD)

A disability caused by a work-related injury or disease that temporar- ily limits the extent to which a worker can perform job duties; the worker is eventually able to return to full duties and hours.

Temporary total disability (TTD)

A disability caused by a work-related injury or disease that temporar- ily renders an injured worker unable to perform any job duties for a period of time.

Monopolistic state fund (exclusive state fund)

A facility, owned and operated by a state government, that provides workers compensation insurance and does not permit any private insurers to sell workers compensation insurance in that state.

Employers mutual insurance company

A mutual insurer established by a state's legislature to write workers compensation insurance for any qualified employer in the state.

Independent contractor

A person (or organization) hired to perform services without being subject to direction and control regarding work details.

Workers Compensation and Employers Liability Insurance Policy (WC&EL policy)

A standardized policy created by the National Council of Compensation Insurance (NCCI) that is used in most states to provide workers compensation and employers liability insurance

Workers compensation statute

A state law that obligates employers to pay specified medical, disability, rehabilitation, and death benefits for job-related injuries and diseases, regardless of fault

Comprehensive physical damage coverage

A type of auto insurance that provides physical damage coverage on an open perils basis (other than collision damage). Examples include theft, flood damage, or impact with an animal

Specified causes of loss physical damage coverage

A type of auto insurance that provides physical damage coverage only for perils explicitly named in the policy (such as theft, fire, lightning or hail)

No fault insurance

A type of insurance required in many states where individuals involved in an auto accident are indemnified for losses by their own insurance company, regardless of whose fault the accident is

Personal injury protection

A type of no fault insurance that provides benefits for medical expenses and sometimes other damages (such as lost wages)

Collision coverage

A type of physical damage insurance that pays for losses incurred as a result of colliding with another object, or damage caused by overturn

Large deductible plan

An insurance policy that includes significant retention of losses by the employers. Losses up to $100,000 are charged back to the employer but amounts over the large deductible are insured.

Waiver of Our Right to Recover From Others Endorsement

Bars the insurer from recovering payments paid to an employer because the employer has entered a contract that requires a waiver of subrogation rights for workers compensation

Describe the garagekeepers direct coverage options in the ADCF.

Both modify garagekeepers coverage to apply regardless of whether is legally liable Direct excess option Garagekeepers legal liability coverage is primary If not legally liable, direct coverage is excess over other collectible insurance (regardless of whether other insurance coverage applies) Direct primary option - Even if other insurance exists, the whole loss is paid

Muller Mfg. has purchased the Rental Reimbursement Coverage endorsement for their commercial auto policy with a 24-hour waiting period, a daily limit of $50, and a maximum limit of 10 days. To replace a damaged car whose repairs are expected to be completed in 5 days, Muller rents a temporary substitute auto for 5 days on the day the original car was damaged. If the cost of the rental is $50 per day, how much will Muller's insurer pay? A. 0 B. 80 C. 200 D. 250

C

Under the BACF, collision is generally understood to mean: A. Any incident in which a vehicle loses its equilibrium. B. The striking together of a vehicle with any object that is not a vehicle. C. A striking together with violent impact. D. Collision only with another vehicle.

C

Which one of the following endorsements or coverage should be added to the workers compensation & employer liability Insurance Policy of an employer in the US that has employees temporarily in England? A. Alternate Employer Endorsement B. Voluntary Compensation and Employers Liability Coverage Endorsement C. Foreign voluntary compensation coverage D. Out of state coverage

C

Before the enactment of workers compensation statutes, employers were protected against employee lawsuits by common-law defenses. Under which one of the following common-law defenses were employees unsuccessful in recovering damages from occupational injuries resulting in part from the employee's own negligence? A. Assumption-of-risk B. Fellow-servant rule C. Statute of limitations D. Contributory negligence

D

Homme Guitars is weighing whether to lease vehicles for its employees or have them drive their own autos while on company business. Which one of the following exposures is created if Homme decides in favor of employee-owned autos? A. Physical damage B. Hired auto C. Borrowed auto D. Employer's nonownership liability

D

In the liability insuring agreement of the Business Auto Coverage Form (BACF), the insurer expresses its three distinct duties. Which one of the following identifies one of those duties? A. duty to insure all vehicles owned by the named insured B. duty to cover physical damage to the insured's autos C. duty to comply with laws and regulations D. duty to pay covered pollution cost

D

The Insured has a business auto policy. Vandals break a window in the Insured's pickup truck. While the Insured is waiting for the Insurance company to appraise the claim, rain enters through the broken glass and causes additional damage. What is the Insurance company's liability for the loss? A. The insurance company is liable for the damage by the vandals and the damage from the rain. B. The Insurance company is not liable for either the damage by the vandals or the damage from the rain. C. The insurance company is liable for the damage from the rain but not the damage by the vandals. D. The Insurance company is liable for the damage by the vandals but not the damage from the rain.

D

Which one of the following endorsements to the BACF covers employees when renting vehicles in their own names to conducts the employer's business? A. Rental Reimbursement B. Drive Other Car -- Broadened Coverage C. Employees as Insureds D. Employee Hired Autos

D

Loss of consortium

Deprivation of benefits of a family member due to injuries caused by an employer (or other defendant). The spouse or other family member of someone injured or killed in an accident can sue for damages based on loss of consortium.

A business leases automobiles for its employees to drive on business. In addition, a few employees use their own cars in performing their job duties. Which one of the following automobile loss exposures exists? -Bailee loss exposure -Employers non-ownership liability loss exposure -Operations liability loss exposure -Products and completed operations liability loss exposure

Employers non-ownership liability loss exposure

Motor carrier coverage form (MCCF)

For businesses that transport property or people Provides coverage for owner-operators who lease to motor carriers

Foreign voluntary compensation coverage

For employees outside the US, this endorsement provides "home-state" coverage with no time limit and may cover repatriation expense and endemic diseases

Monetary threshold

In no-fault auto insurance, a monetary threshold restricts the ability to sue negligent parties unless the damages exceed a specific dollar amount (such as $5,000 of medical expenses)

Verbal threshold

In no-fault auto insurance, a verbal threshold restricts the ability to sue negligent parties unless the degree of the injury is met (such as dismemberment, permanent injury, or death)

Owner-operators

Individuals who lease themselves and their owned trucks to motor carriers to transport property for the motor carrier.

List and briefly describe the different sections of the NCCI's WC&EL policy.

Information page - contains information about the insured, a summary of coverages (included states, limits of liability, other states insurance, and endorsements), and premium details Part One - Workers compensation. Obligates the insurer to pay all benefits required by state law Part Two - Employers liability. Protects the employer against liability claims for occupational injury/disease that are not covered by workers compensation Part Three - other states insurance if the employer expands beyond current coverage.

List and describe three categories of commercial auto loss exposures.

Liability exposures: Operating vehicles that might cause bodily injury or property damage to others - including employees operating vehicles within the scope of employment Non-owned autos - businesses may rent or hire autos for anywhere from a couple hours to years and have potential liability for physical damage Bailees have temporary possession of autos - car service / repair Property exposure - Physical damage to autos that a business has a financial interest in (e.g., collision or comprehensive coverage) Personal loss exposures - personal injury / medical payments

List and briefly describe the types of benefits paid under workers compensation statutes.

Medical benefits provides first-dollar benefits (no employee cost sharing) for all covered injuries or disease including hospital, medical, Disability income benefits which compensates injured employees for lost wages typically paid as a percentage of pre-injury wages. Includes "scheduled injuries". Rehabilitation benefits - in an attempt to get the employee back to work as soon as possible. Death benefits - including a flat amount for burial expense and replacement of the worker's weekly wage which varies by the number of dependents

What coverage is provided for newly acquired autos under the BACF?

Owned autos (Symbols 1 through 6, or 19) are automatically covered, even without notifying the insurer- premium may change after premium audit (or review) For Symbol 7, acquired autos are covered if both: The insurer insures all autos owned by the named insured, or the newly acquired auto replaces a covered auto and Coverage is requested within thirty days of the acquisition

What are the supplementary payments in the BACF liability coverage (section II)?

Payable in addition to the limit of insurance: -Expenses incurred by the insurer (e.g., claims investigation, legal defense) -The cost of required bail bonds due to a covered accident (Up to $2,000) -The cost of release attachment bonds in any suit that the insurer defends -All reasonable expenses incurred by the insured at the insurer's request -Court costs for any suit defended by the insurer Post-judgment interest

Differentiate the limits of insurance for Sections II and III in the BACF.

Section II (Liability) has a per occurrence (i.e., per accident) limit for all injuries (BI, PD, covered pollution expense) - there is no aggregate (or per policy period) limit Section III (physical damage) has no explicit limit, but the insurer will not pay more than: (1) ACV or (2) cost to repair/replace

Describe the three primary factors used to price insurance for trucks under the BACF.

Size class is the weight of the truck - four classes including light, medium, heavy, and extra-heavy Business use (three classes) - How the truck is used in the business Service - workers and supplies/equipment Retail - pickup / delivery to households Commercial - everything else Radius class - operating area (from garaging location) Local - Within 50 miles Intermediate - 51-200 miles Long distance - beyond 200 miles

What numeric symbols are used to determine covered autos for various coverages under the BACF?

Symbol 1—Any Auto (broadest and most expensive coverage) Symbol 2—Owned Autos Only Symbol 3—Owned Private Passenger Autos Only Symbol 4—Owned Autos Other Than Private Passenger Autos Only Symbol 5—Owned Autos Subject to No-Fault Symbol 6—Owned Autos Subject to a Compulsory Uninsured Motorists Law Symbol 7—Specifically Described Autos (very narrow coverage) Symbol 8—Hired Autos Only Symbol 9—Nonowned Autos Only (liability only) Symbol 19—Mobile Equipment Subject to Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only

Which one of the following symbols used in the Business Auto Coverage Form (BACF) is correctly described? Symbol 1—Owned Autos Only Symbol 2—Owned Private Passenger Autos Only Symbol 7—Hired Autos Only Symbol 9—Nonowned Autos Only

Symbol 9—Nonowned Autos Only

How does the ADCF covered auto symbols differ from BACF?

Symbols 21 through 29 are used for the ADCF in the same way that Symbols 1 through 9 were used in the BACF Symbol 30 indicates garagekeepers coverage (autos in the care, custody, control) Symbol 31 indicates physical damage protection for the dealer's inventory

False Pretense Coverage endorsement

The endorsement that deletes the False Pretense exclusion from the ADCF and agrees to pay for loss as a result of the named insured's (1) being tricked into voluntarily parting with an auto or (2) acquiring an auto from a seller who did not have legal title.

Dealers Driveaway Collision Coverage endorsement

The endorsement that modifies the Auto Dealers Coverage Form to cover an auto dealer for collision damage to any covered auto while being driven or transported from the point of purchase or distribution to its destination if such points are more than fifty road miles apart.

Motor Carrier Coverage Form

Used to insure a person or an organization providing transportation by auto in the furtherance of a commercial enterprise including businesses that transport property or people

Alternate Employer Endorsement

Usually the PEO or temp agency gets WC&EL policy, but this endorsement will add the client company as an insured

Employers nonownership liability

When an employee uses his or her own auto to further the employer's business and is involved in an accident where the responsibility is attributed to the employer

Employers nonownership liability

When an employer is financially responsible for its employees' operation of their autos that are used in the employer's business

Employers liability

While most occupational injuries/disease are covered by workers compensation statutes and are the exclusive remedy, there are specific situations where an employee can still sue. The potential for these lawsuits and resulting damages is employers liability.