Chapter 10 Practice Questions

Which one of the following is correct with respect to the professional liability coverage available under the businessowners policy (BOP) and the Commercial General Liability (CGL) Coverage Form? A. An important difference between the BOP's liability coverage and the CGL's is the availability of optional professional liability coverage endorsements for use with BOP. B. The professional liability exposures of pharmacies, barbers, beauticians, veterinarians, funeral directors, optical and hearing aid stores, and printers are automatically covered under the BOP. C. A CGL policy is typically used to cover the professional liability exposures of providers of professional services, such as physicians, accountants, or engineers. D. BOP liability includes coverage for bodily injury or property damage resulting from the rendering of or failure to render any professional service.

A. An important difference between the BOP's liability coverage and the CGL's is the availability of optional professional liability coverage endorsements for use with BOP.

Which one of the following types of business is usually eligible for coverage under a businessowners policy? A. Apartment building B. Savings and loan institution C. Amusement park D. Automobile dealership

A. Apartment building

Which one of the following best describes the process for rating business income and any additional coverages that are automatically included in the bussinessouwners policy (BOP)? A. BOP property rates include loadings (built-in charges) for these coverages. B. BOP manuals include a specific additional premium amount for each additional coverage. C. These coverages are usually provided at no additional premium. D. Rates are computed separately for each and then added to the base rate.

A. BOP property rates include loadings (built-in charges) for these coverages.

Why are some of the "property not covered" exclusions in the Building and Personal Property Coverage Form (BPP) not included in the BOP? A. Because some of the "property not covered" exclusions apply to types of businesses that are not eligible for a BOP. B. Because insurers offer endorsements to allow insureds to "buy back" excluded property coverage. C. Because the policies are not similar to one another. D. Because the BOP has no exclusions.

A. Because some of the "property not covered" exclusions apply to types of businesses that are not eligible for a BOP.

Which one of the following property coverages is often included or available as an option in a businessowners policy (BOP)? A. Employee dishonesty B. Nuclear hazard C. Flood D. Earthquake, landslide, and subsidence

A. Employee dishonesty

Which one of the following is correct with respect to animal mortality insurance? A. It covers the loss of valuable animals by death resulting from accident, injury, sickness or disease, or theft. B. Under ISO CLM rules, nonfarmers are not eligible for animal mortality coverage. C. Animal mortality insurance policies specifically exclude show dogs, circus animals, and laboratory animals. D. It covers loss of livestock by specified causes such as electrocution, accidental shooting, or drowning.

A. It covers the loss of valuable animals by death resulting from accident, injury, sickness or disease, or theft.

Which one of the following statements is correct with respect to crop-hail insurance? A. It may also cover harvested crops against named perils while being transported to the first place of storage. B. It is offered by the federal government and covers crops against loss caused by hail and often other perils. C. It typically excludes coverage for fire, windstorm, and damage caused by livestock or vehicles. D. It is usually included in the ISO Farm Property—Farm Personal Property Coverage Form.

A. It may also cover harvested crops against named perils while being transported to the first place of storage.

Under the businessowners policy (BOP) A. Many coverages that would require separate policies or coverage parts in the commercial package program are either included or available as options. B. The types of businesses that are considered to be eligible for coverage have become increasingly restricted. C. All of the coverage options that are available in the commercial package program are automatically included. D. The trend has been for a decreasing, more restricted number and variety of coverages and endorsements.

A. Many coverages that would require separate policies or coverage parts in the commercial package program are either included or available as options.

Which one of the following statements best describes how businessowners policies (BOP) coverages compare with those provided by commercial package policies? A. The BOP coverages are similar to the coverages provided under commercial package policies. B. The BOP currently does not offer the full range of coverage options available in a commercial package policy. C. The BOP provides exactly the same coverage as the ISO commercial package policy. D. The coverages provided by the BOP are significantly broader than those provided by a commercial package policy.

A. The BOP coverages are similar to the coverages provided under commercial package policies.

Which one of the following statements is correct with respect to the businessowners policy (BOP)? A. The available limits for certain property such as money orders are often quite low with minimal or no options for higher limits. B. BOP policies are, with a few, limited exceptions, rated manually. C. Business income coverage on BOP policies is most often separately rated. D. Whether a building is frame, joisted masonry, or fire resistive is an underwriting consideration, not a rating factor.

A. The available limits for certain property such as money orders are often quite low with minimal or no options for higher limits.

Which one of the following types of risks generally would be eligible for the businessowners policy program? A. An automobile business B. A bar C. A bank D. A clothing store

D. A clothing store

The ISO commercial property program offers three causes of loss forms--basic, broad, and special. Most insurers' businessowners policies (BOPS) provide A. Named perils coverage with the option to add an endorsement for special form coverage. B. Coverage on a named perils basis only. C. A choice among basic, broad, and special form coverage. D. A named perils form, similar to the broad form, and a special form.

D. A named perils form, similar to the broad form, and a special form.

Which one of the following types of contractors would some insurers consider eligible for coverage under a businessowners policy? A. A general contractor that supervises subcontractors B. A wrecking and demolition contractor that occupies a home office building of 75,000 square feet in area C. A contractor that specializes in installing insulation with annual receipts of $10 million D. A small residential carpentry contractor

D. A small residential carpentry contractor

Which one of the following best describes the process for rating business income and any additional coverages that are automatically included in the businessowners policy (BOP)? A. Rates are computed separately for each and then added to the base rate. B. BOP manuals include a specific additional premium amount for each additional coverage. C. These coverages are usually provided at no additional premium. D. BOP property rates include loadings (built-in charges) for these coverages.

D. BOP property rates include loadings (built-in charges) for these coverages.

The seasonal increase provision, commonly included in businessowners policies, functions somewhat like the peak season endorsement used with the commercial property coverage part. However, the BOP seasonal increase provision differs from the peak season endorsement in that A. The seasonal increase provision applies automatically. B. It doubles the business personal property limit. C. The insured must report fluctuating values monthly. D. It is not subject to insurance-to-value requirements.

A. The seasonal increase provision applies automatically.

Which one of the following statements is correct with respect to the liability coverage available under a businessowners policy (BOP)? A. Both ISO and AAIS offer endorsements that allow insureds to add workers compensation coverage to the liability section of their BOP policy. B. Both ISO and AAIS offer BOP endorsements adding employee benefit liability coverage and employment practices liability coverage. C. Insurers subscribing to ISO or AAIS BOP programs must offer all coverage options that ISO or AAIS makes available. D. BOPs cannot be endorsed to add professional liability coverage.

B. Both ISO and AAIS offer BOP endorsements adding employee benefit liability coverage and employment practices liability coverage.

Which one of the following statements is correct with respect to the liability coverage available under businessowners policies (BOPS)? A. BOP coverage automatically includes coverage for bodily injury from the rendering of or failure to render any professional service. B. Certain liability coverage options are not part of most BOP programs because the insureds that need them generally do not qualify for BOPs. C. BOP coverage is typically written on a claims-made basis, with the coverage trigger being claims reported during the policy period. D. Optional, occurrence-based coverage is not available in BOPs because it is usually reserved for covering liability exposures that need special underwriting.

B. Certain liability coverage options are not part of most BOP programs because the insureds that need them generally do not qualify for BOPS.

The farm program broad form causes of loss covers death of livestock from which one of the following additional perils? A. Theft or attempted theft B. Electrocution C. Mysterious disappearance D. Euthanasia

B. Electrocution

Which one of the following types of property can be insured under Coverage E—Scheduled Farm Personal Property of the ISO Farm Property—Farm Personal Property Coverage Form? A. Household personal property B. Farm products, materials, and supplies C. Outdoor radio or television equipment or wiring D. Magnetic recording or storage media for electronic data

B. Farm products, material, and supplies.

Which one of the following can be insured under Coverage E—Scheduled Farm Personal Property of the ISO Farm Property—Farm Personal Property Coverage Form? A. Private light poles B. Livestock C. Growing crops D. Permanent fixtures attached to a building

B. Livestock

Which one of the following is true with regard to the coverage limits in the liability section of the businessowners policy (BOP)? A. The minimum liability limits offered with BOPs are typically far lower than in the ISO CGL. B. Maximum limits are more restricted than the CGL; few insurers offer per occurrence limits over $2 million in their BOPs. C. BOP liability is subject only to an each occurrence limit; it has no general aggregate or products/completed operations aggregate limits. D. BOP policies typically offer insureds more flexibility in selecting liability coverage limits than do CGL policies.

B. Maximum limits are more restricted than the CGL; few insurers offer per occurrence limits over $2 million in their BOPS.

Regarding property coverage under the businessowners policy, which one of the following statements is true? A. The businessowners policy offers three causes of loss forms, including the basic, broad, and special forms. B. One of the distinguishing features of most businessowners policies is the automatic inclusion of business income and extra expense coverage. C. Businessowners policies never include an insurance-to-value provision. D. The standard valuation provision in the businessowners policy is actual cash value.

B. One of the distinguishing features of most businessowners policies is the automatic inclusion of business income and extra expense coverage.

Which one of the following property coverages is often included or available as an option in a businessowners policy (BOP)? A. Aircraft, automobiles, and watercraft B. Outdoor signs C. Radio, television, or satellite antennas and their wiring, masts or towers D. Land on which the property is located, growing crops, and lawns

B. Outdoor signs

Most insurers that offer business owner-type policies for contractors rate the liability coverage for eligible contractors separately from the property coverages by applying a separate liability rate to the insured's A. Total building and personal business property coverage limits. B. Payroll, receipts, or number of full- and part-time employees. C. Average annual number of construction contracts. D. Requested per occurrence liability coverage limits.

B. Payroll, receipts, or number of full- and part-time employees.

Which one of the following statements is correct with respect to eligibility for coverage under a businessowners policy (BOP)? A. Insurers consider most manufacturing businesses as being eligible for their BOP programs. B. Some insurers have expanded the eligibility for their BOP programs to include restaurants and contractors. C. Eligible risks must exceed 50,000 square feet in total floor area or $8 million in annual gross sales at each location. D. Every insurer that writes businessowners insurance uses the same eligibility rules to define the types of businesses that it will accept.

B. Some insurers have expanded the eligibility for their BOP programs to include restaurants and contractors.

Businessowners policy (BOP) rating incorporates which one of the following variables? A. Whether the policy is new business or a policy renewal B. The amount of the policy deductible C. Whether the coverage is claims-made or occurrence-based D. The number of stories in the insured building

B. The amount of the policy deductible.

Which one of the following statements is correct with respect to the livestock coverage provided by most farm policies? A. The livestock coverage provided by most farm policies covers high-valued animals for illness and disease. B. The livestock coverage provided by most farm policies is not adequate for some farmers and ranchers. C. Farm policies normally offer "all risk" coverage for animals. D. Livestock coverage is only used by farmers.

B. The livestock coverage provided by most farm policies is not adequate for some farmers and ranchers.

Which one of the following types of buildings would most likely be eligible for coverage under a bussinessouwners (BOP) policy? A. A 10-story apartment building of 100,000 square feet containing offices B. An eight-story office building that covers 50,000 square feet C. A 10,000 square foot building housing an insurance agency D. A 70,000 square foot office building with no apartments

C. A 10,000 square foot building housing an insurance agency.

Which one of the following statements is correct with respect to the liability coverage provided by the businessowners policy (BOP)? A. Hired and nonowned auto liability coverage is not available with a BOP. B. Personal and advertising injury liability coverage and medical payments coverage may be added to the BOP by endorsement. C. BOP liability coverage closely resembles the coverage provided by the occurrence version of the CGL coverage form. D. BOP liability coverage is limited to premises and operations, products and completed operations, and liability assumed under contract.

C. BOP liability coverage closely resembles the coverage provided by the occurrence version of the CGL coverage form.

Which one of the following statements is correct with respect to the ISO's Farm Property—Farm Personal Property Coverage Form? A. The classes of property that can be insured under Coverage E include growing crops, and trees, plants or shrubs grown for commercial purposes. B. It has the advantage that an underwriter cannot decline to cover any property that is eligible for coverage under manual rules. C. Coverage E—Scheduled Farm Personal Property applies to only those classes of farm personal property for which a specific limit of insurance is shown in the declarations. D. The coverage provided for eligible classes of property is quite broad and is not subject to restrictions or sublimits.

C. Coverage E--Scheduled Farm Personal Property applies to only those classes of farm personal property for which a specific limit of insurance is shown in the declarations.

Which one of the following statements is correct with respect to Coverage G—Barns, Outbuildings and Other Farm Structures of the ISO farm program? A. It covers both the structure and its contents for each building specifically listed on the form. B. It provides similar coverage to Coverage B-Other Private Structures Appurtenant to Dwellings. C. Coverage G is used to insure all types of farm buildings and structures other than the dwelling and private garages. D. It can be used to insure all buildings located on a farm premises.

C. Coverage G is used to insure all types of farm buildings and structures other than the dwelling and private garages.

Which one of the following covers crops against hail, fire, windstorm accompanying hail, damage caused by livestock, and vehicles? A. Multi-peril crop insurance B. Farm inland marine insurance C. Crop-hail insurance D. Special-form farm insurance policies

C. Crop-hail insurance

The businessowners policy (BOP) offers a major benefit for smaller insureds because A. Insureds that do not own automobiles represent a lower liability risk and are therefore eligible for a premium discount on their BOP liability coverage. B. The Business Auto Coverage Form is generally included in BOPs, either as part of the form or by endorsement. C. For an insured that owns no automobiles, the availability of hired and nonowned auto coverage under the BOP eliminates the need to obtain a separate business auto policy. D. Liability coverage for hired and nonowned autos, aircraft, and watercraft can be added to the form by endorsement.

C. For an insured that owns no automobiles, the availability of hired and non owned auto coverage under the BOP eliminates the need to obtain a separate business auto policy.

Which one of the following coverages is often included or available as an option in a businessowners policy (BOP)? A. Dishonest acts by the insured's partners, members, officers or managers B. War, riot, or military action C. Mechanical breakdown D. Workers compensation

C. Mechanical breakdown

The standard property valuation provision in business owner policies (BOPS) is A. Agreed value. B. Actual cash value. C. Replacement cost. D. Guaranteed replacement cost.

C. Replacement cost

Multiple Peril Crop Insurance (MPCI), offered through the Federal Crop Insurance Corporation (FCIC), covers unexpected crop production losses due to A. Neglect. B. Theft. C. Windstorm. D. Poor farming practices.

C. Windstorm

Which one of the following statements is correct with respect to the business income and extra expense coverage provided by the businessowners policy (BOP)? A. The coverage can be added to the BOP by endorsement and is subject to an additional premium. B. Typically, it is subject to coinsurance, monthly limitation, or a total dollar limit. C. It is generally subject to special underwriting requirements, such as a completed business income worksheet. D. Business income loss and extra expenses are usually payable for up to 12 months following a covered loss.

D. Business income loss and extra expenses are usually payable for up to 12 months following a covered loss.

Business personal property eligible for coverage under the businessowners policy (BOP) includes A. Business personal property in a 100,000 square foot office. B. Business personal property owned by a bank. C. Personal property in residential condominium units. D. Business personal property of a wholesaler that occupies a 15,000 square foot building.

D. Business personal property of a wholesaler that occupies a 15,000 square foot building.

All of the following statements regarding Coverage E—Scheduled Farm Personal Property of the ISO Farm Policy are true, EXCEPT: A. The types of property that can be insured under Coverage E include farm products, farm equipment, and several other classes of farm personal property. B. Coverage E can be used to cover individually scheduled items of farm personal property. C. Coverage E applies to only those classes of farm personal property for which a specific limit of insurance is shown in the declarations. D. Coverage E is subject to an 80 percent coinsurance provision.

D. Coverage E is subject to an 80 percent coinsurance provision.

Which one of the following statements is correct with respect to rating a businessowners policy (BOP)? A. Rating optional coverages is usually much more complex than rating the comparable coverages in a commercial package policy. B. It does not take into account the type of building construction, such as frame or joisted masonry. C. Business income coverage is rated separately from building coverage. D. It is usually much simpler than rating a comparable commercial package policy.

D. It is usually much simpler than rating a comparable commercial package policy.

Which one of the following can be insured under Coverage F—Unscheduled Farm Personal Property of the ISO Farm Property—Farm Personal Property Coverage Form? A. Vehicles primarily designed and licensed for road use B. Racehorses and show horses C. Irrigation equipment D. Livestock

D. Livestock

Most insurers that offer businessowner-type policies for contractors rate the liability coverage for eligible contractors separately from the property coverages by applying a separate liability rate to the insured's... A. Average annual number of construction contracts. B. Requested per occurrence liability coverage limits. C. Total building and personal business property coverage limits. D. Payroll, receipts, or number of full- and part-time employees.

D. Payroll, receipts, or number of full- and part-time employees.

How are businessowners policies rated? A. They are rated by the local rating bureau. B. They are rated based on the credit score of the applicant. C. They are rated based on loss experience. D. They are rated based on the amount of coverage provided.

D. They are rated based on the amount of coverage provided.