Chapter 9 Insurance Quiz
All of the following are conditions of the insurance provided by a Commercial General Liability policy written on the Claims-Made Form, except: A Insolvency of the insured relieves the insurer of any obligations under the policy B The insured must maintain records necessary so the insurer may compute the premium C The insured cannot sue the insurer until the insured has fully complied with all terms of the policy D Insurance applies as if each named insured were the only named insured, and separately to each insured against whom the claim is brought
A. Bankruptcy or insolvency of the insured or of the insured's estate does not relieve the insurer of its obligations. Insurance applies separately to each insured, as provided by the Separation of Insureds condition. The insured must fully comply with all policy terms before suing the insurer, as provided by the Legal Action Against the Insurer condition. The insured is required to maintain records necessary for premium computations, as provided by the Premium Audit condition.
Which of the following insurance forms is designed for the person who has the potential for a liability exposure caused by negligent acts of the contractor or subcontractor he hires to make repairs, construction, or alterations? A Contingent Liability Insurance B Contractual Liability Insurance C Completed Operations Insurance D Contractors Liability Insurance
A. Contingent liability is liability imposed because of accidents caused by persons other than employees for whose acts an individual, partnership or corporation may be responsible. For example, an insured that hires an independent contractor can, in some cases, be held liable for his negligence.
What are the territorial limits of the Commercial General Liability Coverage Part of the Commercial Package Policy? A United States, its territories and possessions, Puerto Rico and Canada B Only the United States, its territories and possessions C United States, its territories and possessions, Canada, and Mexico D The United States, Puerto Rico and Mexico
A. Coverage applies to occurrences that take place in the coverage territory, or if the products were made in the coverage territory and the suit is brought in the coverage territory.
What is the term for tangible property that cannot be used because it contains the insured's product or work that is defective, inadequate, deficient, or dangerous? A Impaired property B Fungible property C Abandoned property D Assumed property
A. Impaired property is tangible property, other than the insured's product or work, that cannot be used because it contains the insured's product or work that is thought or known to be defective, inadequate, deficient, or dangerous.
Personal Injury Liability Insurance covers all of the following, except: A Bodily Injury B Libel and Slander C False Arrest D Malicious prosecution
A. Personal injury affects one's reputation or emotional well-being and does not include bodily harm or property damage.
Which injury would be covered by a CGL policy? A A leased worker injured on the production line B A customer injured while standing in an area marked as being for employees only C An employee injured by the transportation of mobile equipment during the manufacturing process D The spouse of a sole proprietor injured carrying boxes into the shop
B. A customer injured on the premises is covered under a Commercial General Liability policy. Employees are covered under Workers' Compensation insurance, and a sole proprietor's spouse is not covered, as the spouse is automatically considered an insured.
Under a Commercial General Liability policy, which of the following is not an insured contract? A Elevator maintenance agreement B Advertising contract C Lease of premises D Sidetrack agreement
B. An advertising contract is not one of the insured contracts.
Which of the following is true concerning the Premium Audit condition of the Commercial General Coverage Part? A The records needed to complete the premium audit may be maintained by any insured B The premium audit determines what the earned premium will be at the end of the policy period C The premium audit is the comparison of the insured's premium with the average premium in the insured's rating classification D Premium audit refers to the right of the insured to contest the premium after policy issuance
B. Because the initial premium is an advance, or deposit, premium, the final earned premium is calculated at the end of the policy period through a premium audit conducted by the insurer. The first named insured must keep records sufficient for the insurer to compute premiums based upon sales, receipts, and/or payroll. After an audit, an additional premium is required if these records show that these items are greater than the estimates that developed the deposit premium.
An insured has a Commercial General Liability policy written on the Claims-Made Form. Which of the following is correct regarding the supplemental extended reporting period? A Cancellation of the insured's SERP by the insurer requires 90 days' advance written notice B The SERP's premium is a one-time charge C The SERP increases the policy's limits of insurance D The SERP covers occurrences that take place after the policy term during the supplemental extended reporting period
B. The SERP, purchased as an endorsement, has a premium that is a one-time charge, up to 200% of the policy's annual premium. Like any extended reporting period, it allows an extended time frame in which the insured may report legal claims made against them for occurrences that took place during the policy period. Occurrences taking place during the extended reporting period are not covered. The SERP cannot be cancelled. Extended reporting periods on the CGL do not change the coverage provided, the applicable limits of insurance, or the length of the policy period.
Which of the following would not be considered an insured under a Commercial General Liability policy? A Executor of the CEO's estate after their death B An LLC employee's spouse assisting in cleaning the office so they can leave for vacation more quickly C Real estate manager acting on behalf of the insured D Volunteer worker handing out flyers for the insured's business
B. The spouse of an LLC employee is not considered an insured. The LLC and its members and managers are considered insureds. Regardless of designation, volunteer workers, employees, those acting as the insured's real estate manager, and the insured's legal representative acting after the insured dies are all considered insureds as well
Under a Commercial General Liability policy, all of the following statements about the supplemental extended reporting period are correct, except: A The SERP provides an unlimited period for the insured to report claims made against them B The insurer may cancel the SERP after the insured pays the premium C The SERP must be purchased within 60 days after the end of the policy D The SERP is only available for policies written on a claims-made basis
B. The supplemental extended reporting period cannot be cancelled once its premium is paid. The premium is a one-time charge. The SERP, available as an endorsement, must be purchased either during the policy period, or within 60 days after the end of the policy period.
Which of the following would NOT be excluded under Coverage A of a Commercial General Liability policy? A Damage to the insured's work B Injuries resutling from the insured's operation of mobile equipment C Injuries resulting from a product that has been recalled D Injuries to employees covered by Workers' Compensation
B. Under the Aircraft, Auto, or Watercraft exclusion, liability coverage is provided for the operation of mobile equipment, such as bulldozers or power cranes. However, the Mobile Equipment exclusion specifically excludes coverage for liability resulting from the transportation of mobile equipment by the insured's auto. Injuries covered by Workers' Compensation, damage to the insured's own products or work, and damages resulting from product recalls are all exclusions on the CGL.
Which of the following is true concerning the Premium Audit condition of the Commercial General Coverage Part? A Premium audit refers to the right of the insured to contest the premium after policy issuance B The records needed to complete the premium audit may be maintained by any insured C The premium audit determines what the earned premium will be at the end of the policy period D The premium audit is the comparison of the insured's premium with the average premium in the insured's rating classification
C. Because the initial premium is an advance, or deposit, premium, the final earned premium is calculated at the end of the policy period through a premium audit conducted by the insurer. The first named insured must keep records sufficient for the insurer to compute premiums based upon sales, receipts, and/or payroll. After an audit, an additional premium is required if these records show that these items are greater than the estimates that developed the deposit premium.
Which of the following is not a type of personal and advertising injury covered by a Commercial General Liability policy? A Slander B Malicious prosecution C Breach of contract D Infringement of copyright
C. Breach of contract is excluded from the definition of personal and advertising injury that applies to coverages provided by Coverage B.
What type of insurance indemnifies the legal liability of an insured for the actions of the insured's subcontractors? A Contractual Liability Insurance B Contractors Liability Insurance C Contingent Liability Insurance D Completed Operations Insurance
C. Contingent liability arises when a business is held legally liable for the actions, or failures to act, of other parties, such as sub-contractors or independent contractors.
Under a Commercial General Liability policy, all of the following are considered a type of personal and advertising injury, except: A Violation of copyright B Misappropriation of advertising ideas C Extortion D Infringement of copyright
C. Damages resulting from criminal acts, such as damages owed to others resulting from the insured extorting another party, are excluded from coverage under Coverage B.
As defined by a Commercial General Liability policy, an insured contract includes all of the following, except: A An elevator maintenance agreement B A lease of premises C An indemnification agreement regarding property damage arisingo ut of demolition operations affecting a railroad crossing D A sidetrack agreement
C. Insured contracts include leases of premises, easement agreements, agreements to indemnify the municipality, sidetrack agreements, and elevator maintenance agreements. The definition provided by the CGL excludes contracts or agreements that indemnify a railroad for bodily injury or property damage arising out of construction or demolition operations that affect any railroad bridge, tunnel, or crossing.
All of the following statements about medical payments coverage under a Commercial General Liability policy are correct, except: A Coverage applies to injuries that occur because of the insured's operations B Coverage applies to expenses that are incurred and reported to the insurer within 1 year of the accident C Coverage applies to the named insured's injuries D Coverage applies to injuries that occur on the premises that the insured owns or rents
C. Medical payments coverage provided by Coverage C is not available for any insured, except for volunteer workers.
Choose the false statement about the CGL policy. A Contingent Liability Policies are also called Owners and Contractors Protective Liability B The insurer's written consent is required for any transfer of rights and duties to another person C Coverage is automatically provided for watercraft liability D The insurer may examine the insured's books anytime during the policy period, or within 3 years after the policy ends
C. No liability coverage is provided for bodily injury or property damage arising out of the ownership, maintenance, use, or entrustment to others of aircraft, autos, and watercraft.
Under the Commercial General Liability coverage part of a Commercial Package policy, all of the following are automatically considered an insured, except: A Employees other than executive officers, but only for acts within the scope of their employment B Executive officers of a nonprofit, but only with respect to their duties as the insured's officers C Members of a past partnership who are not shown as a named insured in the Declarations D Anyone named in the Declarations
C. People or organizations connected to the conduct of any past or current partnership, joint venture, or limited liability company (LLC) must be shown as a named insured in the Declarations. Otherwise, certain individuals are automatically considered an insured based on the designation of the named insured. If a corporation or nonprofit is designated, the organization and its executive officers, directors, and stockholders are automatically insureds. Regardless of designation, the insured's employees are also automatically considered insureds.
Product liability would cover: A Product recall B A vending machine that injured a customer's hand C A restaurant customer who contracts food poisoning D Contractual liability
C. Product liability applies to bodily injury the product causes away from the insured's premises. A customer contracting food poisoning is a perfect example of product liability.
Which of the following statements is incorrect about Supplementary Payments under the CGL? A The insurer's claim-related expenses are included B Payments do not reduce the Limit of Liability C Supplementary payments apply to losses under all Section I coverages D The cost of bail bonds is included up to $250
C. Supplementary Payments only apply losses insured under Coverages A and B. They are not applied to no fault Medical Payments, since these are issued without involvement of a suit.
Under a Commercial General Liability policy, all of the following statements about the supplemental extended reporting period are correct, except: A The SERP provides an unlimited period for the insured to report claims made against them B The SERP is only available for policies written on a claims-made basis C The insurer may cancel the SERP after the insured pays the premium D The SERP must be purchased within 60 days after the end of the policy
C. The supplemental extended reporting period cannot be cancelled once its premium is paid. The premium is a one-time charge. The SERP, available as an endorsement, must be purchased either during the policy period, or within 60 days after the end of the policy period.
Which of the following is not one of the limits of liability provided by Commercial General Liability policies? A Medical expense limit B General aggregate limit C Bodily injury limit D Personal and advertising injury limit
C. There is no unique limit for bodily injury losses, though payment for such losses would be subject to other policy limits, such as the per occurrence limit, the general aggregate limit, the products-completed operations aggregate limit, or the medical expenses limit.
A Commercial General Liability policy has a general aggregate limit of $1 million and an each occurrence limit of $100,000. The policy pays a claim for a $500,000 loss, and subsequently pays a second claim for a $300,000 loss. How much of the general aggregate limit remains to apply to further covered occurrances? A $200,000 B Zero C $1 million D $800,000
D. $800,000 of the general aggregate limit remains for future occurrences in the policy period. Both occurrences are subject to the each occurrence limit, so only $100,000 of each claim is payable by the policy. $1 million - $100,000 - $100,000 = $800,000.
Which of the following is not a contingent liability exposure? A Owners and Contractors Protective liability exposure B Contractual liability exposure C Liability exposure of insured's sub-contractors D Premises liability exposure
D. Contingent liability exposures exist when the insured is held liable for the actions or failure of actions of others.
Under a Commercial General Liability policy, all of the following statements about coverage provided for the insured's products liability are correct, except: A Coverage applies to bodily injury occurring away from premises the insured owns or rents B Coverage applies to bodily injury the product causes C Coverage applies to property damage the product causes D Coverage applies to damage to the product itself
D. Liability insurance protects against the insured's liability for damage to the property of others, meaning coverage is never provided by liability policies for physical damage to the insured's own property. Products liability coverage covers damage or injuries caused by the insured's product, but does not include damage to the product itself.
Personal injury liability insurance does not cover which of the following? A False Arrest B Malicious prosecution C Libel and Slander D Bodily Injury
D. Personal injury is a type of loss that injures a person's reputation, emotional well-being, or other non-physical attributes, as distinct from bodily harm or property damage.
A chemical manufacturer requires protection for pollution liability and clean up costs. Which of the following pollution liability coverages should the business purchase? A Limited Pollution Extension Endorsement B Pollution Extension Endorsement C Limited Pollution Liability Coverage Form D Pollution Liability Coverage Form
D. The Pollution Liability Coverage Form provides coverage for both pollution liability and governmentally-mandated clean up.
Which of the following is an insured under the CGL policy? A Trustee's spouse B Spouse of LLC members C Spouse of volunteer worker D Spouse of a partner
D. The spouse of any individual or partner designated on the Declarations is also an insured.