Finance 443 Exam 3

Mitchell is a highway contractor whose company is covered with a worker's comp policy and an unendorsed BACF. Which one of the following losses would be covered by his business auto policy?

An employee runs over a subcontractor's equipment with an owned auto

Kenneth, the named insured under a Business Auto Coverage Form (BACF) with symbol 1 shown for liability coverage, causes an automobile accident while driving a rental car on a business trip. Which one of the following correctly indicates whether Kenneth is covered under the liability insuring agreement of his BACF for this accident?

Kenneth is covered because of Kenneth, the named insured, is an insured for any auto

Mary works as a volunteer at a local library. The library is covered by an unendorsed commercial general liability policy. Which one of the following best describes Mary's status under the policy if she is named in a lawsuit by a visitor that was injured in the library?

Mary would qualify as an insured

A federal worker's comp statute eliminates the right of most maritime workers (other than crew members of vessels) to sue their employers and in return requires such employers to provide injured or ill workers with benefits like those provided by state worker's comp statutes. The name of this statute is the

United States Longshoe and Harbor Worker's Comp Act

Chuckie's chicken distributor researches the benefits of consuming chicken versus consuming beef. In November 2011, Chuckie's publishes a brochure outlining the potential health hazards of consuming beef and explaining why chicken is a healthier alternative. Chuckie continues to publish and distribute the same brochure for six months. In March 2012, several beef distributors file a suit against Chuckie's for personal and advertising injury. Which one of the following exclusions would apply to this claim under Coverage B of Chuckie's Commercial General Liability Coverage Form (CGL) with a policy period of January 2012 - January 2013?

material published prior to the policy period

To which one of these does the Coverage A Pollution exclusion not apply?

bodily injury caused by smoke from a hostile fire

Lucy, the owner of Lucy's Flower Shop, was delivering a vase of flowers to a customer, Mrs. White. When Mrs. White opened her front door, her dog ran outside, knocking the flowers from Lucy's hands, and causing the vase to shatter and injure Mrs. White. Although the customer insisted that she would be fine, Lucy received a medical bill for injuries to Mrs. White two years later. The medical treatment had been received one week before Lucy received the bill. Lucy explains the situation to her insurer and requests coverage under her Commercial General Liability Coverage Form (CGL). Will the medical expenses be covered under Coverage C—Medical Payments of the CGL?

no, because the medical expenses must be incurred and reported to the insurer within one year after the date of the accident

An insurer that writes CGL coverage develops a rate for which one of the following?

each business classification the insurer is willing to write

Which one of the following statements is correct regarding the application of workers comp laws in foreign countries?

only a few countries have worker's comp laws comparable to those found in the US and Canada

Which one of the following is an example of injury or damage arising from an occurrence that would be covered by the products and completed operations liability portion of the CGL Coverage form?

a defective gas range manufactured by the insured explodes causing injury

In the liability coverage agreement of the BACF, the insurer expresses its three distinct duties. Which one of the following identifies one of those duties?

a duty to pay covered pollution cost

Emily has just accepted a new position with Argot Industries (Argot). She is a sales representative and will be expected to call on current and prospective customers in her territory. Emily will use her own car to make the sales calls, and Argot will reimburse her for gas and tolls. She has a Personal Auto Policy (PAP) with the minimal mandatory liability limits, but is curious if she is covered under Argot's Business Auto Coverage Form (BACF) while driving her car for Argot business. Which one of the following endorsements, if any, would need to be part of Argot's BACF to provide liability coverage for Emily while she is driving her car for Argot's business?

employees as insureds (CA 99 33)

Big Corporation 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 for Big Corporation

employers nonownership liability loss exposure

The purpose of the Representations condition of the CGL Coverage Form is to

encourage the named insured to read the policy declarations and ensure that the representations made during policy negotiations are correct

If the premium applicable to a particular worker's comp insured is increased or decreased for a future period based on that insured's loss experience for a period in the recent past, the policy uses which one of the following types of rating plans?

experience rating

The "damage to premises rented to you" limit is the most the insurer will pay under Coverage A for damage to any one premises rented to the named insured or temporarily occupied by the named insured due to which one of the following causes?

fire

Which one of the following expenses incurred by the insured without the consent of the insurer would be covered under a CGL Coverage Form?

first aid expenses incurred at the time of the occurrence

Which one of the following describes a coverage trigger applicable to Part Two - Employer's Liability Insurance?

for bodily injury by accident, the policy that is in effect when the injury occurs is the policy that applies

Commercial General Liability coverage for mercantile businesses is rated using a premium base of

gross sales

Which one of these is an example of an entity to whom the Coverage A Liquor Liability exclusion would not apply?

an insured not in the alcoholic-beverage business that becomes liable for injury resulting from serving alcoholic beverages

Which one of the following would be excluded under Coverage B - Person and Advertising Injury Liability of the CGL policy?

an offense committed by an insured whose business is broadcasting

Which one of the following statements about the loss conditions in Section IV of the BACF is true?

anyone seeking coverage under the form must submit to physical examinations by physicians as often as the insurer may reasonable request

Physical damage and liability premiums are calculated for zone rated vehicles by doing which one of the following?

applying the primary factor to base premiums

To be covered under a worker's comp statute, an injury or disease (in most states) must meet which one of the following requirements?

arise out of and in the course of the employment

In applying for the BACF, the insured mistakenly listed the age of one of its drivers as 28 instead of 22. Which one of the following correctly indicates whether coverage would be void if that driver were involved in an accident?

coverage would apply because the misrepresentation was not intentional

Carl's Cabinets sells and installs cabinets in apartment buildings. After installation but before an apartment is occupied, two of the cabinets are damaged when they fall from the wall as a result of improper installation. Carl's CGL Coverage Form excludes coverage for damage to the cabinets because of which of the following exclusions?

damage to your work

Which one of the following property loss exposures can a business most likely avoid by leasing an auto instead of buying it?

decrease in or loss of the auto's value

In some no-fault states, the noneconomic loss threshold is expressed in terms of a dollar amount of damages resulting form the injury. In other states, the threshold is expressed as a

definition of serious injury

The specified causes of loss coverage of the business auto policy includes coverage for which one of the following?

derailment of a conveyance transporting the insured vehicle

One of the conditions found in the BACF addresses the bankruptcy or insolvency of the named insured. Which one of the following statements about claims settlement in the event of bankruptcy of the insured is most accurate?

if the insured is relieved through bankruptcy of an obligation to pay a liability claim, the insurer is still obligated to pay the loss

Which one of the following statements is correct with respect to large deductible worker's comp plans?

it allows the insured to self-insure most of its worker's comp claims without establishing a qualifying self-insurance plan

Which one of the following statements about Part One of the Worker's Comp and Employers Liability Policy is true?

it contains no exclusions

Which one of the following statements is true with respect to Part One of the Worker's Comp and Employer's Liability Policy?

it covers all operations of the employer except those otherwise insured or specifically excluded by endorsement

Which one of the following statements is correct with respect to limits of liability applicable to Part Two - Employer's Liability Insurance?

it includes a bodily injury by disease policy limit

Which one of the following statements about interest that accrues on the amount of a judgement before the actual entry of the judgement by the court is true?

it is called prejudgement interest

Prior to settlement of a claim under Andy's CGL policy, Andy declared bankruptcy. Due to Andy's bankruptcy proceeding, what is the obligation of Andy's insurer?

it is obligated to defend Andy and pay judgements or settlements as though Andy had remained solvent

Which one of the following best describes the effect of the Voluntary Compensation and Employers Liability Endorsement?

it obligates the insurer to pay an amount equal to the compensation benefits that would be payable if exempt employees were subject to the worker's comp law

Warren works at Omega Corporation (Omega). One morning while walking to work, Warren is hit by another Omega employee riding her bicycle to work. He suffers a permanent partial disability. Which one of the following statements is correct with regard to Omega's worker's comp insurance?

it would not provide coverage because injuries occurring while traveling to or from work at a fixed location are generally not covered

Lime Green Paper Company owns three cars and a pickup truck. Lime Green's sales employees use their own vehicles for business. Lime Green is insured under a BACF form with symbol 1 - Any Auto for liability coverage and symbol 2 - Owned Autos Only for physical damage and medical payments coverages. One of Lime Green's employees caused an accident while driving his own car on company business, damaging another auto and injuring the driver and two passengers. Lime Green's employee was injured in the accident, and his car was damaged. Which one of the following correctly indicates the coverage that Lime Green's BACF provides for this loss?

liability coverage for the damage to the other auto and injuries to the other drive and passengers

The management of Maryland Marine Co. (MMC) must ensure that proper coverage is obtained for work- related injuries. The employee population of MMC is a mixture of full-time and part-time employees as well as some casual employees for one-time tasks. Much of MMC's work is done by independent contractors and temporary employees during peak seasons. Which one of the following statements about these persons is true?

many states workers compensation statutes exclude casual labor (short-term employees)

Morgan Company is involved in a lawsuit that is covered under its unendorsed CGL Coverage Form. Which one of the following would be covered under the supplementary payments section of the CGL policy?

post judgement interest awarded by the judge

Which one of the following requirements must be met before an employer may operate a "qualified" self-insurance worker's comp plan?

posting a surety bond

XYZ contractor, covered under an unendorsed CGL Coverage Form, is installing kitchen cabinets in a customer's home. The contractor manufactured the cabinets. While the contractor is fastening a cabinet, it falls and injures the customer. Which one of the following best explains how coverage under the contractor's CGL Coverage Form applies in this case?

premises and operations liability applies because the contractor was in the process of installing the cabinets

For the purpose of the Other Insurance condition of the CGL Coverage Form, all applicable coverages are classified as either excess insurance or

primary insurance

Top Electronics manufactures and sells electronic equipment and is insured under a CGL policy. A television manufactured by Top Electronics malfunctions in a customer's home, causing a fire. Assuming Top Electronics is found to be liable for the damage to the customer's home, any payments made under the policy will be subject to which one of the following limits?

products-completed operations aggregate

Joe Motors is an automobile repair shop. Which one of the following would be the best way for the owner to maintain the goodwill of its customers?

purchasing garage keepers insurance

The formula used to determine the premium for a CGL policy is

rate x rate exposure = premium

Worker's comp benefits include which one of the following?

rehabilitation benefits

Business owner Joanna paid an estimated premium under her CGL policy. After the initial policy period had expired, the insurer determined through its premium audit that Joanna's estimated premium was $5,200 greater than her true earned premium determined. In this situation, the insurer is obligated to do which one of the following?

return the $5,200 to Joanna, subject to any applicable policy premium that might apply to the policy

The Separation of Insureds condition states that the insurance provided by the policy applies in which one of the following ways?

separately to each person insured

The supplementary payments section of the CGL Coverage Form describes which one of the following?

specific items to be paid in addition to damages

Three employees of a hardware store damaged a tile floor while moving concrete pavers from their delivery truck to an outdoor patio shop. Many of the pavers were also damaged during the move. How will the hardware store's BACF apply to this loss?

the BACF will cover only the property liability for the damage to the tile floor

Which one of the following statements about provisions in Part One of the Worker's Comp and Employer's Liability Insurance Policy is true?

the accident causing the injury must occur during the policy period

Smith Construction Company is covered under an unendorsed CGL Coverage Form. While working at a job site, Smith ruptured a natural gas line causing a small fire to a neighboring retail store. The following claims have been made against Smith due to this occurrence. 1. Fire damage to the neighboring store 2. Pain and suffering claimed by the store owner 3. Loss of income by the store owner until repairs are made to the store 4. Fire damage to the backhoe owned by Smith Which one of the following statements is correct?

the backhoe is property owned and is excluded

Joan has a BACF. Which one of the following losses would be covered as auto physical damage?

the cost to repair vehicle damage that results from hitting a deer

Under the CGL Coverage Form, the named insured's employees and volunteer workers are insureds for liability claims arising from which one of the following?

the employees or volunteer workers duties as such, subject to certain exceptions

Part two of the Worker's Comp and Employer's Liability Policy requires which one of the following with respect to covered injuries?

the injury must arise out of employment necessary or incidental to the insured's work in a state or territory listed in the policy

A state should be listed in Item 3C of the Worker's Comp and Employer's Liability Insurance Policy information page under which one of the following circumstances?

the insured expects operations might be extended to that state

Which one of the following losses would be covered by the Business Auto Coverage Form (BACF)?

the insured has agreed to pay for liability losses caused by the insured's negligence that a shipper may incur while the insured is hauling goods for the shipper

Which one of the following losses would be covered by the Auto Medical Payments Coverage endorsement to the business auto policy?

the insured is injured when he trips and falls exiting a covered auto

The Random Bookstore (random) is covered by an unendorsed CGL Coverage Form. A customer in the store tripped over her untied shoelace and fell, breaking her right arm. Which one of the following is a reason Random's insurer might refuse to pay any damages under Random's CGL policy?

the insured must be legally obligated before the insurer has the duty of paying

If the insured has operations in a particular state on the effective date of the policy but that state is not listen in Item 3A of the Worker's Comp and Employers Liability Insurance (WC&EL) Policy Information Page, which one of the following statements is true?

the insured must notify the insurer within thirty days or else no coverage will apply for that state

Gawne Manufacturing (Gawne) owns a manufacturing facility that is insured under an unendorsed CGL. Gawne also has a commercial auto policy. An unregistered truck, not subject to a compulsory or financial responsibility law, is used solely on the premises to move supplies around the facility. Recently, the truck collided with a customer's automobile, which was parked on the premises. Which one of the following statements is true with regard to Gawne's truck?

the truck is considered mobile equipment and the claim would be covered under the CGL

Which one of the following sets of information is used in private passenger auto premium calculations for commercial auto physical damage?

the vehicle's original cost new and the rating territory

The Voluntary Compensation and Employer's Liability Coverage Endorsement to a worker's comp policy is needed for which one of the following reasons?

the worker's comp laws of most states exempt some types of employment from statutory workers compensation benefits

An automobile dealership intended to sell and automobile for $25,999 but mistakenly advertised it for sale at a price of $15,999. The dealership honored the advertised price and sustained a loss of $10,000 by doing so. The dealership has an unendorsed Commercial General Liability policy. The dealership files a claim for this loss with its insurer. Which one of these statements best describes the insurer's probable response to the claim filed by the dealership?

the wrong description of prices coverage B exclusion applies, and there is no coverage

BBC Manufacturing (BBC) has an unendorsed CGL Coverage Form. BBC has expanded its sales outside the US. Due to injuries from alleged defective products of BBC, lawsuits are brought in Europe, Mexico, Canada, and Puerto Rico. Which one the following statements describes the extent for which BBC's insurer will provide coverage or defense in these jurisdictions?

there is coverage and defense for Canada and Puerto Rico, since these are covered territories

Before workers compensation statutes were enacted, what was the remedy for employees with work-related injuries?

they had to establish that the employer was at fault to recover damages

Which one of the following best describes the purpose of stop gap coverage when used with workers compensation insurance?

to cover employers in monopolistic fund states that do not include employers liability with their worker's comp policies

An employer that decides to purchase specific excess insurance to cover catastrophic workers compensation losses must pay losses that are which one of the following?

up to the retention for one occurrence

Which one of the following statements is correct with respect to Part One of the Worker's Comp and Employer's Liability Policy?

when the insurer pays benefits, any right of recovery against a third party becomes the right of the insurer

Which one of the following statements is correct with regard to the United States Longshore and Harbor Worker's Comp Act?

workers compensation and LHWCA exposures must be covered and rated separately

International Toys (IT) manufactures toys in South Carolina and sells them to store around the world. A customer in Europe is injured when one of the toys malfunctions and severs the customer's hand. The customer files suit in the US. If IT is found liable, does its CGL cover the customer's claim?

yes, because the toys were manufactured in the US

Dale's Dive Shop rents a 20-foot boat for an employee outing. While Dale is driving the boat on a lake, he accidentally injures a swimmer. Does Dale's CGL cover the swimmer's bodily injury?

yes, because this watercraft qualifies as an exception to the watercraft exclusion

The methodology for rating trucks, tractors, and trailers depends on whether the vehicle must be

zone rated or not

Bill's Premium Packing (BPP) operates a fruit and vegetable canning operation. It purchases its produce from growers in three states in the Northeast. As a result, its operations are seasonal and during peak periods it depends on large numbers of casual laborers who are exempt from coverage under the applicable state workers compensation laws. Therefore, the company has purchased a Voluntary Compensation and Employers Liability Endorsement for its Workers Compensation and Employers Liability Insurance (WC&EL) Policy. When a casual laborer is badly injured on the job, the worker launches a lawsuit against BPP, alleging negligence. Which one of the following best describes how BPP's WC&EL insurer would respond?

the insurer would defend the insured against the employee's suit and pay any settlement awarded, subject to stipulated limits of liability

The named insured under a CGL Coverage Form dies, and Sarah becomes a temporary custodian of the named insured's property. The coverage for Sarah under the deceased named insured's CGL form applies only to liability arising out of

the maintenance or use of the named insured's property

Which one of the following is true of the supplementary payments in the CGL Coverage Form?

the obligation to pay these supplementary payments ends when the limit of insurance is exhausted

An insured keeps his truck in a garage. A deer gets trapped in the garage and, in an attempt to escape, climbs on top of the truck, breaking the windshield and causing several dents in the hood. The insured's BACF provides physical damage coverage for specified causes of loss with a $100 deductible and collision with a $250 deductible. It will cost the insured $750 to replace the broken windshield and $1,200 to repair the dents. How much, if anything, will the business auto insurer pay for this loss?

$0

Black and White Bakery (BWB) owns a private passenger vehicle and two vans, which are insured under an unendorsed Business Auto Coverage Form (BACF) with a $500,000 limit of insurance for liability coverage. James, a BWB employee, was driving his own vehicle to meet with a customer to discuss a large wedding that BWB was catering. His vehicle is insured under a Personal Auto Policy (PAP) with a $100,000 limit of insurance for liability coverage. On his way to the meeting James went through a stop sign and struck another vehicle, seriously injuring the driver. The other driver made a claim against James and BWB for $60,000 in bodily injury to himself and damage to his vehicle. The investigation determined that James was responsible for the accident. BWB was also liable because James was driving his vehicle in the course of employment for BWB at the time of the accident. How much, if any, will BWB's auto insurer pay for this accident?

$0

Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio. While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $250,000; ii) damage to the bike repair shop building rented to Dan - $125,000; iii) damage to the remainder of the building - $200,000; and iv) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000. Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. The insuer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000; and the policy's general aggregate is $2,000,000. Under the Commercial General Liability policy, how much will the insurer pay for Dan's business personal property?

$0

Acme Manufacturing Company is insured under two primary Commercial General Liability (CGL) policies. Policy A has an each-occurrence limit of $1,000,000 and Policy B has an each-occurrence limit of $2,000,000. Acme submitted a claim for $2,400,000 arising from a single occurrence for an incident that is covered by both policies. How much of the claim is payable under Policy B if the loss payment is based upon contribution by equal shares?

$1,400,000

Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio. While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $125,000; ii) damage to the bike repair shop building rented to Dan - $250,000; iii) damage to the remainder of the building - $300,000; and iv) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000. Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. The insurer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000; and the policy's general aggregate is $2,000,000. Under the Commercial General Liability policy, how much will the insurer pay for damage to the bike repair shop building rented to Dan?

$100,000

Alice has the use of a company car insured with a Business Auto Coverage Form with one endorsement, for uninsured motorists (UM) coverage. Alice was in an accident while driving the car and sustained the following losses: $ 200 - housekeeper for one day $ 300 - physical therapy and rehabilitation $ 400 - lost wages $1,000 - hospital bills $2,000 - pain and suffering The other driver was at fault but had no insurance. Assuming that no other insurance applies, how much can Alice collect under her employer's UM coverage?

$3,900

Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio. While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $150,000; ii) damage to the bike repair shop building rented to Dan - $250,000; iii) damage to the remainder of the building - $300,000; iv) damage to Jane's business personal property - $80,000 and v) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000. Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. Dan's insurer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000 and the policy general aggregate is $2,000,000. Under the Commercial General Liability policy, how much will the insurer pay for all damages?

$780,000

Zelda has an automobile accident that is covered by a Business Auto Coverage Form. The accident results in a pollution expense due to gasoline spilling from the covered auto, as well as property damage and bodily injury to a third party. The cost for the bodily injury is $1,000 along with $2,000 property damage. The pollution clean-up cost is $5,000. Ignoring any deductible that may apply, how much will Zelda's insurer pay for these losses?

$8,000

Under the CGL Coverage Form, medical payments coverage applies to which one of the following?

a volunteer worker of the named insured

When rating CGL coverage, the exposure is a measure of the

size of the business operations to be insured

Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio. While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $125,000; ii) damage to the bike repair shop building rented to Dan - $250,000; iii) damage to the remainder of the building - $300,000; iv) damage to Jane's business personal property - $80,000 and v) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000. Jane has coverage under her own business insurance policy which would pay 80 percent of damages to her business personal property with a $1,000 deductible. Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. Dan's insurer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000 and the policy general aggregate is $2,000,000. Under Dan's Commercial General Liability policy, how much will the insurer pay for damage to Jane's business personal property?

$80,000

Wilson was driving his business auto when is was struck by a hit-and-run driver. He looked to his business auto policy for coverage for his injuries. Which one of the following symbols shown on his policy automatically provides such coverage?

Symbol 6 - Owned Autos Subject to a Compulsory Uninsured Motorists Law