Minding the Gaps in Commercial Lines Insurance

While the numeric symbols determine what types of autos are covered autos, the

"Who Is an Insured" section of the policy determines who is covered for the use of those autos.

The most commonly used commercial auto policy is the

BAP - business auto policy

Many insurance policies assign special rights and duties to the

FIRST NAMED INSURED If a policy's declarations list the wrong party first, the insurance contract places these responsibilities into the hands of the wrong party.

Insurable interest usually results from

Property Rights Contract Rights Potential Legal Liability

The Walsh Office Building, currently under construction, is insured under a typical inland marine builders risk policy. Which of the following losses would most likely be covered if it occurred during the course of construction? a. A power scaffold used in construction was stolen from the construction site. b. A power scaffold used in construction broke down; substitute equipment had to be rented. c. A brick wall that sustained earthquake damage had to be replaced. d. A brick wall that collapsed due to faulty workmanship had to be rebuilt.

a. A power scaffold used in construction was stolen from the construction site. All risks coverage, which includes theft, applies to machinery used in the construction.

. Greta Gardner sells flowers, and Georgette Baker bakes cakes. Greta and Georgette form a joint venture, G&G Bridal Services, to provide cakes and flowers for weddings and wedding receptions. Greta suggests that G&G Bridal Services be added to Greta Gardner's current CGL policy as an insured, but Georgette comes up with a better option. a. G&G Bridal Services should purchase a separate liability policy in G&G's name. b. G&G can go without liability insurance because its owners' personal liability is very limited. c. G&G Bridal Services should be added to Georgette Baker's policy rather than Greta Gardner's policy. d. Require brides who engage their services to sign a hold harmless agreement, thereby eliminating the need for insurance.

a. G&G Bridal Services should purchase a separate liability policy in G&G's name.

Hungry Dog Food Company frequently ships merchandise by common carrier to retail stores in other states, which often purchase dog food by the truckload. What is the best way for Hungry Dog to insure these shipments? a. Hungry Dog should purchase an annual transit policy. b. Hungry Dog should purchase commercial property coverage with the all risks (special) causes of loss form that includes coverage for property in transit. c. Hungry Dog should rely on the truckers' insurance, as common carriers are liable for any damage to property in transit. d. Hungry Dog should purchase trip transit policies for each sizable shipment.

a. Hungry Dog should purchase an annual transit policy. The suggested policy provides relatively limited coverage for property in transit.

All of the following are currently monopolistic fund states that operate their own workers compensation funds, EXCEPT a. Nevada. b. North Dakota. c. Ohio. d. Wyoming.

a. Nevada.

The declarations of an insurance policy list as named insureds "Orville, Paul, and Trina Hall, doing business as Hall Company." Under the terms of a typical policy, who has a right to receive formal notice if the insurer cancels the policy? a. Only Orville b. Orville, Paul, and Trina c. The cancellation notice will be sent only to the agent who sold the policy. d. The cancellation notice will be sent to Hall Company.

a. Only Orville

Paulette sees no need for business auto coverage, because Paulette's Sausage Company does not own any autos. Even though the business owns no autos, Paulette's Sausage Company might face an auto liability claim if a. Paulette borrows a neighboring business's van to make a large delivery. b. Paulette flies to another city for a trade show and, using her personal credit card, rents an auto to do some sightseeing after the show ends. c. Paulette's employee is struck by a truck while walking to the bank to make Paulette's Sausage's deposit. d. Paulette's incoming shipment of raw meat is damaged when the supplier's refrigerated truck breaks down.

a. Paulette borrows a neighboring business's van to make a large delivery.

Wiggins Company's EPL policy from Zee Insurance Company, which has a $20,000 deductible, includes defense coverage for wage and hour claims subject to a $100,000 sublimit. A wage and hour claim develops, and defense costs come to exactly $75,000. In this case, a. Wiggins will pay $20,000, and Zee will pay the remaining $55,000. b. Wiggins will pay the entire $75,000 if the defense is not successful. c. Zee will pay $20,000, and Wiggins will pay the remaining $55,000. d. Zee will pay the $75,000 defense costs.

a. Wiggins will pay $20,000, and Zee will pay the remaining $55,000. The sublimit typically applies within, not in addition to, the policy's regular aggregate limit, and wage and hour claims are subject to the policy's regular deductible.

Zelma's small factory is the only source of fans used in Brock humidifiers, and Brock's manufacturing plant is located in the same community as Zelma's factory. No other firm makes similar fans, so Brock would suffer a serious business income loss if Zelma's plant were to close for any reason. From Brock's perspective, the Zelma plant is a(n) a. contributing location. b. leader location. c. manufacturing location. d. recipient location.

a. contributing location. A business that delivers materials or services to the insured is a contributing location.

Sampson Inc. wants to be sure that its umbrella policy covers claims arising out of prior entities to which Sampson has been related. One way of doing this is to name all the prior entities in the umbrella declarations. Alternatively, Sampson might a. convince its insurer to modify the umbrella policy to include prior entities. b. exclude prior entities coverage from the CGL policy. c. purchase a second umbrella that covers only prior entities. d. use vague wording such as "Sampson Inc. and all related entities" in the umbrella.

a. convince its insurer to modify the umbrella policy to include prior entities.

Fitzgerald, Inc., purchased employee benefits liability (EBL) coverage as an endorsement to its existing CGL policy. Coverage under the endorsement began on the date the endorsement was issued-June 1, 2018-and the endorsement's coverage is subject to a retroactive date of May 1, 2018, the date the CGL policy itself took effect. Gretchen, a Fitzgerald employee, incurred medical expenses in July and submitted them to the insurance company that offers Fitzgerald's employee medical coverage. Gretchen then made a claim against Fitzgerald on September 1, 2018, after discovering that Fitzgerald's human resources director failed to submit the necessary enrollment forms for Gretchen when she was hired in January 2018. Fitzgerald's CGL a. does not cover Gretchen's claim because the administrative error happened before the retro date. b. covers Gretchen's claim because her loss occurred during the endorsement's coverage period. c. covers Gretchen's claim because it was made during the endorsement's coverage period. d. does not cover Gretchen's claim because the EBL endorsement doesn't apply to administrative errors.

a. does not cover Gretchen's claim because the administrative error happened before the retro date.

Conway Company currently conducts operations in North Carolina and South Carolina. Conway's workers compensation policy includes other states coverage in all other states that do not have monopolistic funds. Leon, a Conway employee, will be attending a weeklong conference in Kentucky. Conway a. has automatic other states coverage for this incidental exposure. b. may safely rely on the policy's employers liability coverage as a stop gap measure. c. must purchase workers compensation insurance from the state, because Kentucky is a monopolistic fund state. d. should immediately notify its workers compensation insurer.

a. has automatic other states coverage for this incidental exposure.

Rodney, a sculptor, frequently has work on display at various locations other than his primary business address. For example, as much as $30,000 of Rodney's property might be at a trade show, an exhibition, a fair, or even in the garage behind his house. Rodney's property insurance policy currently covers property at "any other location," subject to a $10,000 limit. Rodney should a. have the "any other location" limit increased to at least $30,000. b. limit the amount of personal property that is away from his primary business location at any given time. c. make sure no coinsurance penalty applies to property at "any other location." d. reduce his exposure by covering off-premises property on a replacement cost basis.

a. have the "any other location" limit increased to at least $30,000. To avoid a coinsurance penalty, Rodney should make sure the property is insured to value.

Janine gave her brother Roy a personal loan that enabled him to make the down payment on the restaurant Roy now operates. Therefore, Janine believes she has a right to share in any insurance proceeds that might result from damage to restaurant property. In addition to being named in the declarations of the restaurant's insurance policy, if she wishes to share in any loss recovery, Janine should have a(n) a. insurable interest in the damaged property. b. preloss waiver of subrogation. c. signed lease agreement with Roy. d. oral agreement with Roy.

a. insurable interest in the damaged property.

In the course of her normal business activities, Sarah signs many contracts that require her to name another party as an additional insured under Sarah's CGL policy. If Sarah adds a blanket additional insured endorsement to her CGL, a. other parties will automatically become additional insureds if Sarah contractually agrees to give them additional insured status. b. other parties will automatically become additional insureds if they sign a contract with Sarah requesting additional insured status. c. the CGL definition of "insured contract" will be revised to accommodate this need. d. the contractual liability exclusion in Sarah's CGL will be deleted.

a. other parties will automatically become additional insureds if Sarah contractually agrees to give them additional insured status.

No matter what symbol is used, newly acquired mobile equipment deemed an auto should be

added to the schedule in the policy declarations

Under the BAP, named insureds are covered for any covered auto. "Permissive users," meaning individuals using covered autos with the named insured's permission,

are insureds only for the use of autos owned, hired, rented, or borrowed by the named insured.

Harding Hotel is a luxury hotel that attracts celebrities and other affluent guests. Adding third-party non-employment-related liability coverage to Harding's EPL policy will ensure that Harding has protection for which of the following claims or allegations that would not be covered without the endorsement? a. A guest complains that Amanda, a hotel housekeeper, failed to properly clean his room. b. A guest complains that Tammi, a desk clerk, refused to give him a room because of his ethnicity. c. Cara, a Harding restaurant employee, alleges that a guest propositioned her when she delivered the meal he had ordered from room service. d. A guest complains that Diana, a bartender in the hotel lounge, refused to serve him another drink because he was loud and abusive.

b. A guest complains that Tammi, a desk clerk, refused to give him a room because of his ethnicity. Third-party liability coverage endorsements broaden the scope of EPL policies so that they now cover harassment and discrimination claims made by nonemployees.

Many liability policies cover certain parties as insureds even though they do not qualify as named insureds. Which of the following parties is not likely to qualify as an insured under a CGL policy that lists only "Stuart Company Inc." as the named insured? a. Claudia Diaz, Stuart Company's chief financial officer b. Harper Corporation, a Stuart Company subsidiary c. Leta Stuart, Stuart Company's chief executive officer d. Scott Rice, a Stuart Company employee

b. Harper Corporation, a Stuart Company subsidiary

Carmen is evaluating two professional liability insurance proposals. Insurer A's $5 million policy provides for defense costs outside limits, while Insurer B's $5 million policy provides for defense costs within limits. Carmen will probably decide to choose Insurer A's policy because a. Carmen will be better able to control the defense of a claim under Insurer A's policy. b. Insurer A's policy is more likely to be able to pay for a large claim. c. the premium for Insurer A's policy is lower. d. with Insurer A's policy, claimants are less likely to take steps that increase defense costs.

b. Insurer A's policy is more likely to be able to pay for a large claim

Maritime law uses several specialized terms in defining the rights of injured sailors and other ship-bound workers. Which one of the following terms refers to room and board, food, and so forth that the injured worker obtains on land during the period of his or her recuperation? a. Cure b. Maintenance c. Rehabilitation d. Wages

b. Maintenance

More than one insured is involved in a pending claim that will probably be large enough to involve Mooney's umbrella policy. If the umbrella has a. a "separation of insureds" clause, it would eliminate coverage for any innocent insured if another insured has violated a policy condition. b. a "severability of interests" clause, it would preserve coverage for an innocent insured if another insured has violated a policy condition. c. a subrogation provision, it would require the insured most directly responsible for the loss to indemnify other insureds against which claims or suits are made. d. an "insured versus insured" provision, it would preserve coverage for claims or suits brought by one insured against another.

b. a "severability of interests" clause, it would preserve coverage for an innocent insured if another insured has violated a policy condition.

Current building codes could have a substantial impact on the amount of time that Crane Corporation will not be operating if an explosion destroys more than 50 percent of its factory. Before Crane can begin reconstruction of the damaged portion of its building, the undamaged portion will have to be demolished, and the replacement structure will have to be redesigned to comply with current building codes. To cover Crane's business income lost during the extended period of reconstruction attributable to building code compliance, Crane should a. add ordinance or law coverage to its building and personal property policy coverage form. b. add ordinance or law coverage to its business income and extra expense policy. c. purchase business income and extra expense insurance on an agreed value basis. d. purchase higher limits of business income and extra expense insurance.

b. add ordinance or law coverage to its business income and extra expense policy. The ISO business income form does not cover the income lost or extra expense incurred during the additional time needed to comply with these laws. Coverage for this exposure is available via endorsement CP 15 31.

Sue is in the business of selling used motorcycles, not computers. However, her business probably has computer-driven communication capabilities that include a. a hard drive. b. an email address. c. chain links. d. chrome extensions.

b. an email address.

Deena Robertson Inc. has a controlling interest in several other entities and may acquire additional entities in the course of its business. Deena Robertson's insurance policies should ideally include a. broad form property damage coverage. b. broad named insured wording. c. a reporting form endorsement. d. a schedule listing all owned entities.

b. broad named insured wording.

An exclusion in one of Pittman Company's liability policies excludes coverage for "any claim based on or directly or indirectly arising out of any actual or alleged bodily injury." The problem with this wording is that it a. affords coverage in certain situations where one would reasonably expect not to have coverage. b. excludes claims that are not closely related to the actual purpose of the exclusion. c. includes terms that are not defined. d. is too narrow to qualify as an absolute exclusion.

b. excludes claims that are not closely related to the actual purpose of the exclusion.

A "Utility Services-Time Element" endorsement (CP 15 45) has been added to the business income coverage form for Brenda's Restaurant. This endorsement a. applies only when the damaged utility property is on Brenda's premises. b. excludes losses from damage to overhead transmission lines unless the "including overhead transmissions" option has been activated. c. extends Brenda's building and personal property coverage to apply to loss from damage to electric company property. d. includes coverage for loss of electronic data resulting from a power outage.

b. excludes losses from damage to overhead transmission lines unless the "including overhead transmissions" option has been activated. The endorsement provides time element coverage.

From the insured's standpoint, per occurrence limitation of liability clauses or margin clauses that are attached to a blanket property insurance policy a. are desirable because they convert blanket limits to specific, per location limits. b. have the undesirable effect of converting blanket limits to specific, per location limits. c. provide considerable flexibility in determining what insurance limits to carry. d. remove the limitation that would otherwise limit the maximum recovery for loss at a particular location to the amount shown in a schedule.

b. have the undesirable effect of converting blanket limits to specific, per location limits. These clauses essentially remove the advantages of insuring on a blanket basis, and the removal is not desirable from the insured's standpoint.

Scotty was unable to find an insurer that would provide both professional liability and general liability coverage, so he now has general and professional liability policies from two different insurers. If he examines these policies, Scotty should ideally find that a. both policies include anti-stacking provisions. b. if both policies cover a particular claim, one policy will provide primary coverage and the other will provide excess coverage. c. the two policies contain different definitions for the same terms because they serve different purposes. d. the two policies provide as many coverage overlaps as possible.

b. if both policies cover a particular claim, one policy will provide primary coverage and the other will provide excess coverage.

The "aircraft, autos, or watercraft" exclusion in a standard, unmodified CGL policy leaves a coverage gap for insured businesses that use aircraft. The CGL excludes coverage for bodily injury or property damage arising out of all the following EXCEPT a. aircraft ownership. b. liability assumed under an "insured contract," as defined. c. loading or unloading aircraft. d. negligent supervision of a pilot.

b. liability assumed under an "insured contract," as defined.

Because Castillo Company added the "Employee Hired Autos" endorsement (CA 20 54) to its BAP, Castillo employees are now protected if they a. rent an auto in Castillo's name on a business trip and use it for nonbusiness purposes. b. rent an auto in their own names with Castillo's permission for use in Castillo's business. c. rent their personal autos to Castillo to meet a temporary business need. d. use their own cars when conducting Castillo's business.

b. rent an auto in their own names with Castillo's permission for use in Castillo's business. The endorsement amends the who is an insured section under the BAP to include employees of the named insured while operating autos hired or rented by them under a contract with the employer's permission while performing duties related to the employer's business.

Because Castillo Company added the "Employee Hired Autos" endorsement (CA 20 54) to its BAP, Castillo employees are now protected if they a. rent an auto in Castillo's name on a business trip and use it for nonbusiness purposes. b. rent an auto in their own names with Castillo's permission for use in Castillo's business. c. rent their personal autos to Castillo to meet a temporary business need. d. use their own cars when conducting Castillo's business.

b. schedule these autos in the BAP's declarations.

Sylvester owns and occupies an office building that he could otherwise rent out for $1,500 a month. As used in Sylvester's ISO business income forms, the term "rental value" includes a. revenues derived from renting equipment and other personal property to others. b. the fair rental value of the premises Sylvester occupies. c. the value of real property that is rented to one or more tenants. d. use and occupancy.

b. the fair rental value of the premises Sylvester occupies. "Rental value" includes the fair rental value of any portion of the premises the insured occupies.

Moran's commercial umbrella policy has many other exclusions, but it does not contain any punitive damages exclusion. Therefore, if a multimillion-dollar judgment for punitive damages is awarded against Moran and Moran's underlying policy excludes punitive damages, a. the umbrella insurer will pay either the award for compensatory damages or the award for punitive damages, whichever is greater. b. the umbrella will drop down to provide primary coverage for the punitive damages award if the law permits it. c. the umbrella will not provide coverage for the punitive damages award because of the underlying policy's punitive damages exclusion. d. the umbrella will provide coverage for the punitive damages award in all states.

b. the umbrella will drop down to provide primary coverage for the punitive damages award if the law permits it.

As the treasurer of a church, Geneva is directly involved in its building campaign to raise the funds to expand the sanctuary. She is a willing volunteer and supposedly receives no compensation for her services. However, a routine audit uncovers the fact that Geneva has been diverting church funds to her personal use. Assuming limits are adequate, the employee theft coverage of the church's ISO crime coverage form a. will cover the loss because the form's "employee" definition specifically includes volunteers. b. will cover the loss if the "Include Volunteer Workers as Employees" endorsement has been added. c. will cover the loss if the "Include Volunteer Workers Other Than Fund Solicitors as Employees" endorsement has been added. d. will not cover the loss because Geneva is not a paid employee of the named insured.

b. will cover the loss if the "Include Volunteer Workers as Employees" endorsement has been added. ISO forms do not specifically address volunteer workers.

The Hyde Corporation has a D&O policy with a $5 million limit and a fiduciary liability policy from the same insurer with a $1 million limit and a tie-in endorsement. If Hyde's directors are hit with a stock drop claim, the most the insurer will pay under these policies is a. $1 million. b. $4 million. c. $5 million. d. $6 million.

c. $5 million. A "tie-in" endorsement states that the most the insurer will pay for both claims is the greater of the D&O limit ($5 million in this case) or the fiduciary limit ($1 million in this case).

Brandie is an officer of Turner Furniture Company. With the consent and support of her chief executive officer, Brandie also serves on the board of the nonprofit Brick Foundation. Turner's D&O policy includes outside directorship liability coverage on a double excess basis. This means that it will protect Brandie for a large D&O claim resulting from her activities on the Brick Foundation board only if a. Brick's D&O insurer denies the claim and Brick is financially unable to reimburse Brandie for the claim. b. Brick's D&O insurer denies the claim, but Brick reimburses Brandie for the claim. c. Brick's D&O insurer pays the claim and Brick is financially unable to reimburse Brandie for the claim. d. Brick's D&O insurer pays the claim and Brick reimburses Brandie for the claim.

c. Brick's D&O insurer pays the claim and Brick is financially unable to reimburse Brandie for the claim. Outside directorship liability coverage written on a double excess basis will be required to pay claims only after (1) the outside organization's D&O insurer pays the claim and (2) the outside firm is financially unable to reimburse the director or officer for the claim.

How can an auto dealer structure the physical damage coverage of its auto dealers policy to avoid a high retained loss if some peril, such as a hailstorm, simultaneously damages many vehicles in its premises? a. Include a low per auto deductible b. Include a high per auto deductible c. Include a maximum per loss (aggregate) physical damage deductible for loss by all perils d. Include a maximum per loss (aggregate) deductible that applies only to theft or vandalism losses

c. Include a maximum per loss (aggregate) physical damage deductible for loss by all perils

Which one of the following is an example of a time element loss? a. Cost of demolition and reconstruction to comply with building codes that did not exist at the time when the building was originally constructed b. Cost of repairing damage to a building or its contents c. Loss of income incurred while damaged property is being repaired or replaced d. Loss of inventory and operating equipment that cannot immediately be replaced

c. Loss of income incurred while damaged property is being repaired or replaced A firm's income loss varies with the length of time it takes to repair or replace the damaged property.

Heather rents space in a strip mall where she will open a tanning parlor. The 1-year lease she signs holds her responsible for any damage to the portion of the building she occupies. The damage to premises rented to you coverage of Heather's CGL policy a. covers damage by any peril if Heather is responsible for causing it. b. covers fire damage to rented property regardless of Heather's liability. c. covers only fire damage and then only if Heather is responsible for the fire. d. does not apply because Heather leases the property for more than a week.

c. covers only fire damage and then only if Heather is responsible for the fire.

After much deliberation, Quinn Corporation recently decided to buy D&O insurance despite Quinn's status as a privately held corporation. When applying for a line of credit, Quinn Corporation's treasurer is surprised to learn that bank loan officers ask whether Quinn has D&O liability insurance. When the treasurer asks why the question was asked, he learns that a. D&O insurance can serve as collateral for a loan. b. D&O insurance is a negative factor, from the bank's perspective, because small companies with D&O insurance often fail to survive. c. having D&O coverage is an indication that the company is soundly managed. d. the bank will want to be named as an additional insured under Quinn's D&O policy.

c. having D&O coverage is an indication that the company is soundly managed. Merely providing evidence of D&O coverage indicates to a loan officer that the private company is soundly managed.

Guadalupe Ship Company might face penalties if it is determined that one or more of its employees are subject to the LHWCA. These penalties can include a. deportation. b. expatriation. c. imprisonment. d. seizure of Guadalupe's property.

c. imprisonment.

In comparing her organization's commercial umbrella policy and its underlying general liability policy, Valeria discovers that both policies have an aircraft liability exclusion. In the definitions section of both policies, she learns that the umbrella defines "aircraft" broadly enough to include any aircraft while the definition in the general liability policy's "aircraft" definition makes an exception for non-piloted aircraft such as model airplanes and drones. The broader definition in the umbrella policy a. also applies to the underlying general liability policy. b. indicates that the umbrella provides broader aircraft liability coverage than the underlying general liability policy. c. indicates that the umbrella provides narrower aircraft liability coverage than the underlying general liability policy. d. is irrelevant unless the organization currently operates model aircraft or drones.

c. indicates that the umbrella provides narrower aircraft liability coverage than the underlying general liability policy.

A provision in Trujillo Corporation's commercial umbrella policy incorporates into the umbrella the terms and conditions of Trujillo's underlying CGL policy. The existence of this provision a. increases the likelihood of drop down claims that will be subject to a self-insured retention. b. indicates that coverage under both policies is not closely coordinated. c. means the so-called umbrella is really a follow form excess policy. d. will minimize coverage disputes.

c. means the so-called umbrella is really a follow form excess policy.

CGL policies normally cover professional liability claims a. for nonmedical professionals. b. only for certain types of medical professionals. c. only if an endorsement adds professional liability coverage. d. unless coverage is excluded by endorsement.

c. only if an endorsement adds professional liability coverage.

Chuck purchases a new pickup truck. Although he will use the truck in his work as a plumber, he intends to insure it under the PAP that also covers the family station wagon rather than under his firm's BAP. The PAP will cover this pickup only if a. Chuck is a farmer or a rancher. b. Chuck reports the pickup to his insurer before he buys it. c. the pickup is titled in Chuck's name, not the business name. d. the pickup's gross vehicle weight rating is 1,000 pounds or less.

c. the pickup is titled in Chuck's name, not the business name.

equipment that is subject to motorvehicle laws should be

covered under a BAP, not the CGL

Kitty owns an 18-unit apartment building that is insured under a standard, unendorsed ISO building and personal property coverage form. All units are the same, and, until recently, the building was fully occupied. However, a nearby factory recently shut down, and, for the past 90 days, only 6 of Kitty's apartments have had tenants. Now she discovers that lightning has caused $10,000 in damage to the roof. The apartment building is insured to value, so no coinsurance penalty applies to this loss. Ignoring deductibles, how much will Kitty's insurer pay for this loss? a. Nothing b. $3,000 c. $8,500 d. $10,000

d. $10,000 This answer incorrectly assumes that coverage is reduced by 15 percent because the building was vacant.

Jamar's production equipment, which is 10 years old, will be insured on a replacement cost basis. The equipment is expected to last 20 years. He purchased the equipment new for $60,000. If Jamar were to buy the same equipment today, it would cost $100,000. According to Jamar's accounting records, the equipment has a current book value of $40,000. What limit of insurance should Jamar purchase in order to insure this equipment for its full insurable value? a. $40,000 b. $50,000 c. $60,000 d. $100,000

d. $100,000 The equipment's actual cash value would be $50,000 if straight-line depreciation is applied, but this equipment is insured for replacement cost, not ACV.

What type of insurance is usually used to cover property that is temporarily in a warehouse as it is being shipped from one point to another? a. A business auto policy (BAP) naming the trucker as an insured b. Blanket coverage commonly referred to as a TARP c. Commercial general liability insurance written on the warehouse d. Inland marine transit policies

d. Inland marine transit policies A tarp, or tarpaulin, is a large sheet of water-resistant or waterproof material. Blankets are not generally waterproof.

An EBL endorsement is attached to Blake Company's CGL. The parties insured under this endorsement would include a. all of Blake's full-time employees. b. Blake's directors and officers. c. family members of Blake's employees who are entitled to benefits under one or more of Blake's employee benefit plans. d. Lemuel, a human resources employee who administers Blake's benefit plans.

d. Lemuel, a human resources employee who administers Blake's benefit plans.

Pat, a full-time Kuki Corporation employee, manages Kuki Corporation's pension plan. Because Pat is a fiduciary, a. Pat must furnish an individual bond and pay for it with her own funds. b. Pat is protected from claims against her personal assets. c. Pat is protected from claims brought against Kuki. d. Pat's personal assets can be confiscated to restore any plan loss caused by her negligence.

d. Pat's personal assets can be confiscated to restore any plan loss caused by her negligence. Pat does not need to furnish her own bond.

Orville, Paul, and Trina Hall formed a partnership that does business as Hall Company. Orville handles sales, Paul handles production, and Trina handles administration. The best way to list these parties' names in their insurance policy's declarations would be a. Hall Company. b. Hall Company, a partnership owned by Orville, Paul, and Trina Hall. c. Orville, Paul, and Trina Hall. d. Trina, Orville, and Paul Hall doing business as Hall Company.

d. Trina, Orville, and Paul Hall doing business as Hall Company.

Gene's Bar had to close following a fire that started in an office wastebasket. Gene's reopens 6 months later, but it takes 4 weeks more for most of Gene's regular customers to return. As a result, the bar's business income is much lower than normal during the first 4 weeks after it reopens. If Gene's has a commercial property policy with the business income and extra expense coverage form but none of the available coverage options, it has coverage for income lost during the 6 months during which it was closed. But does it have coverage for the reduction in income suffered during the first 4 weeks after reopening? a. No, coverage ends when the property is (or should have been, given the exercise of due diligence) repaired or replaced. b. This loss is covered only if Gene's Bar's policy includes an operations resumption endorsement. c. Yes, the business income and extra expense coverage form automatically provides coverage for as long as it takes for the insured's business income to be the same as it was prior to the damage. d. Yes, the extended business income additional coverage, which is included in the unmodified policy, covers business income loss suffered during the first 60 days after the damaged property has been repaired or replaced.

d. Yes, the extended business income additional coverage, which is included in the unmodified policy, covers business income loss suffered during the first 60 days after the damaged property has been repaired or replaced. There is a time limit on extended business income.

1. Jay, an engineer, just learned of a punitive damages award made against a colleague who designed a bridge that failed, resulting in several deaths. Wondering whether his own professional liability insurance covers punitive damages, Jay examines its definition of "damages" and is relieved to find that it is broad enough to include punitive damages. Before concluding that his policy covers punitive damages awards, Jay should also check the policy's a. coverage territory. b. declarations. c. definition of injury. d. exclusions.

d. exclusions.

Although White Company's CGL policy covers many types of liability claims, it would not provide coverage if White should become responsible for bodily injury or property damage a. due to fumes from a defective air conditioner in White's building. b. due to smoke from a building fire on White's premises. c. resulting from a diesel fuel leak in White's tractor. d. resulting from a leaky underground storage tank on White's premises.

d. resulting from a leaky underground storage tank on White's premises.

Before her company was permitted to erect the pedestrian bridge across the train tracks, Dinah had to sign a contract in which she agreed to indemnify and hold the railroad harmless for any injury or damage arising out of Dinah's work. According to Dinah's standard, unmodified CGL policy, a. Dinah will have to pay an additional premium because of this exposure. b. the CGL's contractual liability insuring agreement will cover Dinah's obligations. c. the contract to indemnify the railroad is an insured contract. d. the contract to indemnify the railroad is not an insured contract.

d. the contract to indemnify the railroad is not an insured contract.

Charley occasionally does some landscaping work at Lois's office. Charley does not technically qualify as an employee, but Lois's workers compensation and employers liability policy has been amended with the addition of the "Voluntary Workers Compensation and Employers Liability Endorsement" (WC 00 03 11 A). When Charley accidentally cuts off his toe while using Lois's weed trimmer, a. her insurer will pay the claim and Lois will be required to reimburse the insurer. b. the aggregate limits available to pay other claims against Lois will be reduced. c. the insurer will subrogate against Lois for providing an unsafe workplace. d. the insurer will offer to compensate Charley based on applicable workers compensation statutes.

d. the insurer will offer to compensate Charley based on applicable workers compensation statutes.

Brant Trucking Company has a standard unendorsed BAP (CA 00 01) that provides coverage if Brant is responsible for pollutants that are being a. discharged. b. dispersed. c. released into the atmosphere. d. transported to a refinery.

d. transported to a refinery.

Some liability policies extend coverage to unnamed subsidiaries. In many cases, subsidiaries are covered only

if they meet ownership requirements.

the CGL includes mobile equipment that

is NOT subject to motor vehicle laws

A business that never rents a vehicle might still have a hired auto exposure if

it borrows a vehicle for business purposes

Under the BAP,an insured is anyone liable for the conduct

of a named insured or a permissive user.

Commercial auto policies are designed to protect business entities from losses that arise from the

ownership, maintenance, or use of motor vehicles.

The PAP may deny coverage when the auto is:

registered in the name of a business has a GVW of 10,000 or greater used in for business purposes as outlined by the PAP

a common BAP coverage gap is when the incorrect vehicle

symbols are used

The BAP is not appropriate for insuring personal autos because

the BAP does not have family coverage and the PAP does

Business entities like service stations and parking garages are bailees because

they have their customers' autos in their care, custody, and control.

Failure to completely or accurately list those who are to be insured when completing an application leads

to an improper listing of insureds in the policy declarations. This can create a big gap between the coverage the applicant intended to purchase and coverage that the policy actually provides. Simply stated, a party that is not listed in the declarations may have no coverage when a loss occurs.

Does a business entity that owns no autos need a BAP?

yes as someone's autos are likely to be used on the company's behalf creating an exposure