Commercial General Liability Coverage Practice Questions

At what point in time is the earned premium used to compute the final premium determined for the premium audit? a. At the end of the policy period b. At the time the premium deposit is made c. Monthly d. At the beginning of the policy period

A. At the end of the policy period Explanation An additional premium is required if the earned premium is greater than the premium deposit. A premium credit (or refund) may apply if the deposit was greater than the minimum premium required by the audit.

All of the following are true of the Occurrence Form, except: a. The length of the retroactive date will depend upon the insurer b. Supplementary payments are automatically included c. The injury or damage must occur during the policy period d. As long as the injury or damage occurred during the policy period, the claim date is immaterial

A. The length of the retroactive date will depend upon the insurer Explanation The Occurrence Form does not have a retroactive date. However, any earlier Occurrence Form policy will cover a claim for damages occurring during the period when coverage was in force.

All of the following are true, except: a. The supplemental tail must be purchased at the beginning of the policy period b. Under the mini tail, the insurer must be notified of a claim within 60 days after the end of the policy period c. Under the supplemental tail, the insured must request coverage within 60 days after the end of the policy d. The extended reporting period does not increase the policy limits

A. The supplemental tail must be purchased at the beginning of the policy period Explanation The supplemental tail can be purchased up to 60 days after the end of the policy term.

The CGL condition 'Insured's Right to Claim Information' applies to which form(s)? a. Occurrence only b. Claims-Made only c. Nether Claims-Made nor Occurrence d. Both Claims-Made and Occurrence

B. Claims-Made only Explanation The CGL condition 'Insured's Right to Claim Information' applies to the Claims-Made form only.

Which of the following would not reduce the General Aggregate Limit under a Commercial General Liability Coverage Form? a. The insurer pays a claimant injured by a product made by the insured b. A small fire in the insured's office causes damage to the leased premises c. The insured misappropriates the advertising slogan of a competitor d. A customer is injured on premises and the insured calls an ambulance to take the injured party to the hospital for treatment

A. The insurer pays a claimant injured by a product made by the insured Explanation A products claim has its own aggregate, and product losses do not reduce the General Aggregate.

An insured had one claim for $35,000 in damages and another for $25,000. The insured's Commercial Package Policy has a Products and Completed Operations Aggregate Limit of $100,000 with a $20,000 limit per occurrence. How much of the aggregate remains for all other claims in the policy period? a. $65,000 b. $60,000 c. $20,000 d. $100,000

B. $60,000 Explanation Only $20,000 is paid by the insurer on each of the two claims because the per occurrence limit is $20,000. This reduces the remaining Aggregate to $60,000 ($100,000 - $40,000 = $60,000).

A ramp collapses after being built and injures a pedestrian. Which type of liability would apply? a. Operations b. Completed Operations c. Products d. Premises

B. Completed Operations Explanation If the walk ramp had collapsed while being built, Operations coverage would apply, but since it collapsed after completion, Completed Operations applies.

The occurrence form provides for the defense and payment of claims for damages that occur: a. After the policy period b. During the policy period c. During the extended reporting period d. Before the policy period

B. During the policy period Explanation The occurrence form provides for the defense and payment of claims for damages that occur during the policy period, regardless of when a claim is made. The occurrence form does not include an extended reporting period.

What are the territorial limits of the Commercial General Liability Coverage Part of the Commercial Package Policy? a. The United States, Puerto Rico, and Mexico b. United States, its territories and possessions, Puerto Rico and Canada c. United States, its territories and possessions, Canada, and Mexico d. Only the United States, its territories and possessions

B. United States, its territories and possessions, Puerto Rico and Canada Explanation Coverage applies to occurrences that take place in the coverage territory, or if the products were made in the coverage territory and the suit is brought in the coverage territory.

All of the following are true of Supplementary Payments under the Commercial General Liability Coverage Forms, except: a. They do not reduce the Limit of Liability b. Insurer's claim-related expenses are included c. Supplementary Payments apply to all Section 1 coverage d. The cost of bail bonds is included up to $250

C. Supplementary Payments apply to all Section 1 coverage Explanation Supplementary Payments only apply to Coverages A and B ; not C

Choose the false statement about the CGL policy. a. The General Aggregate Limit will be reduced by a medical payment b. Changes to a CGL policy may be made only by endorsement issued by the insurer c. A bodily injury claim must be caused by an occurrence and it must have taken place in covered territory d. A Products and Completed Operations Liability claim will reduce the General Aggregate Limit

D. A Products and Completed Operations Liability claim will reduce the General Aggregate Limit Explanation Products & Completed Operations claims have their own aggregate limit and these claims do not reduce the General Aggregate.

At what point in time is the earned premium used to compute the final premium determined for the premium audit? a. At the beginning of the policy period b. At the time the premium deposit is made c. Monthly d. At the end of the policy period

D. At the end of the policy period Explanation An additional premium is required if the earned premium is greater than the premium deposit. A premium credit (or refund) may apply if the deposit was greater than the minimum premium required by the audit.

All of the following are true of Supplementary Payments under the Commercial General Liability Coverage Forms, except: a. They are costs of the defense and investigation incurred by the insurer b. They apply to bodily injury and property damage liability c. They include the cost of bail bonds up to $250 d. They reduce the limits of insurance

D. They reduce the limits of insurance Explanation Supplementary Payments do not reduce the limits of insurance

Medical payments coverage under the Commercial General Liability Coverage Forms includes reasonable medical expenses if they are incurred and reported within a maximum of _____ years from an accident. a. 1 b. 2 c. 5 d. 3

A. 1 Explanation The time to incur and report medical expenses is limited to 1 year.

Which of the following is not covered in the Limited Pollution Liability coverage and Pollution Extension endorsement. a. Clean up costs b. Escape of pollutants c. Waste disposal leaks d. Threatened discharge of pollutants

A. Clean up costs Explanation Government imposed clean-up costs incurred from environmental damage caused by a pollution incident are covered under the Pollution Liability Coverage Form.

Manufacturers, wholesalers, or retailers all have potential legal liability associated with a product, that may arise from each of the following, except: a. Expected or intended injury b. Breach of warranty c. Negligence d. Strict liability

A. Expected or intended injury Explanation Legal liability to those associated with the manufacturing, wholesaling, or retailing of a product may arise from negligence, breach of warranty, or strict liability. Liability arising out of expected or intended injury is not covered.

Which of the following is true about Commercial General Liability Medical Expenses? a. Medical expenses do not pay for injury to the insured b. First aid is not included c. Medical expenses will pay for an injury to the insured's tenant d. Any expenses reported within 3 years of the accident will be covered

A. Medical expenses do not pay for injury to the insured Explanation The policy will not pay for bodily injury to the insured. First aid is included. Expenses must be reported within 1 year. Any regular resident of the premises such as a tenant would not be eligible for this coverage.

Which statement is false regarding Supplementary Payments under the Commercial General Liability policy? a. Payments made under this section reduce the limits of the policy b. Claim related expenses are included c. Coverage only applies to Coverages A and B d. The cost of bail bonds is included up to $250

A. Payments made under this section reduce the limits of the policy Explanation Supplementary Payments are made in addition to the applicable limits of the policy.

Which of the following is provided by Coverage B of the CGL? a. Personal Injury b. Medical Expenses c. Bodily Injury d. Property Damage

A. Personal Injury Explanation Coverage B of the CGL provides coverage for Personal and Advertising Injury.

Which of the following is not a coverage of the CGL policy? a. Professional liability b. Medical payments c. Personal and advertising injury d. Bodily injury and property damage

A. Professional liability Explanation BI and PD are covered under Coverage A. Medical payments are covered under Coverage C. Professional Liability coverage is not provided by the CGL.

What is the main difference between the Occurrence Form and the Claims-Made Form of the Commercial General Liability Coverage Part to the Commercial Package Part to the Commercial Package Policy? a. The coverage trigger b. The Occurrence Form covers occurrences and the Claims-Made Form covers accidents c. The Occurrence Form contains a deductible on both bodily injury and property damage coverages d. The Claims-Made Form contains a deductible on both bodily injury and property damage coverages

A. The Coverage Trigger Explanation In Liability Insurance, the trigger is the event that brings coverage into play. It may be an occurrence either of bodily injury or property damage; or, in a form with a Claims-Made trigger, the formal making of a claim.

All of the following about Products Liability Coverage are correct, except: a. Coverage applies to bodily injury the product causes b. Damage to the product itself is covered c. Coverage applies to bodily injury occurring away from premises the insured owns or rents d. Coverage applies to property damage the product causes

B. Damage to the product itself is covered Explanation Products Liability Coverage as relates to Commercial General Liability Insurance covers damage or injuries caused by the product, but does not include damage to the product itself.

Which of the following forms responds to losses that occur while the policy is in force and provides a defense and payment of claims for which the insured is legally liable, regardless of when the claim is made against the insured as long as the loss occurred during a policy period? a. Premises and Operations Form b. Occurrence Form c. Claims-Made Form d. Products Form

B. Occurrence Form Explanation An Occurrence From provides protection regardless of when the claim is made, as long as the injury or damage claimed occurred during a period when coverage was in force.

An optional reporting period of unlimited duration that may be purchased by endorsement to a Claims-Made Form, if requested within 60 days of the end of the policy term, is called: a. Mini-tail b. Supplemental Extended Reporting Period c. Basic Extended Reporting Period d. Midi-Tail

B. Supplemental Extended Reporting Period Explanation The Supplemental Extended Reporting Period is purchased whenever the insured is discontinuing liability insurance coverage for any reason, such as when the insured changes to an Occurrence Form, goes out of business, or discontinues certain operations.

Which of the following describes a date indicated on the Declarations Page after which an occurrence can take place and be covered under the Claims-Made Form, even though the claim is made during the policy period? a. The Countersignature Date b. The Retroactive Date c. The Expiration Date d. The Effective Date

B. The Retroactive Date Explanation The Retroactive Date is the date that defines the extent of coverage in time under a Claims-Made Form. Claims resulting from occurrences prior to the policy's stated retroactive date are excluded.

Which of the following is true concerning the condition of Premium Audit of the Commercial General Coverage Part to the Commercial Package Policy? a. Premium Audit refers to the right of the insured to contest the premium after policy issuance b. The advance premium is only a premium deposit, and the earned premium will be based on an audit at the end of the policy period c. Premium Audit is the action taken by the insurer to see that the insured's rating is properly classified d. Premium Audit is the comparison of the insured's premium with the average premium in the insured's rating classification

B. The advance premium is only a premium deposit, and the earned premium will be based on an audit at the end of the policy period Explanation The insured must keep records sufficient for the insurer to compute premiums based upon sales, receipts, or payroll. After an audit, an additional premium is required if these records show that these items are greater than the estimates that developed the deposit premium.

Which of the following is true regarding Completed Operations Coverage? a. Bodily injury arising from negligent or faulty work of the insured is not covered if it occurs after the work is completed and turned over to its owner b. The coverage will pay for bodily injury and/or property damage caused by negligent or faulty work by the insured, but will not pay for the cost of replacing the work that caused the loss c. It pays for the resulting bodily injury and/or property damage resulting from the negligent or faulty work. Completed Operations Coverage does not pay for the work that was faultily performed. d. Coverage applies only during the period that the insured has custody and control of the work deemed faulty or inadequately performed

B. The coverage will pay for bodily injury and/or property damage caused by negligent or faulty work by the insured, but will not pay for the cost of replacing the work that caused the loss Explanation It pays for the resulting bodily injury and/or property damage resulting from the negligent or faulty work. Completed Operations Coverage does not pay for the work that was faultily performed.

Which of the following is not considered a wrongful act under the EPLI? a. Discrimination b. Workers strike c. Sexual harassment d. Wrongful termination

B. Workers strike Explanation Strikes and large scale layoffs are excluded under the policy.

A Commercial Package Policy has a Products and Completed Operations Aggregate Limit of $100,000 with a $20,000 limit for each occurrence. There is an occurrence that results in $25,000 in damages and another occurrence that resulted in $15,000. How much of the aggregate remains for future occurrences? a. $100,000 b. $20,000 c. $65,000 d. $60,000

C. $65,000 Explanation $20,000 is paid by the policy on the $25,000 occurrence because the occurrence limit is $20,000. This reduces the Aggregate Limit to $80,000. $15,000 is paid on the $15,000 occurrence. This payment further reduces the Aggregate Limit to $65,000.

Advertising Injury Liability Insurance includes all of the following, except: a. Misappropriation of advertising ideas or style of doing business b. Infringement of copyright c. An incorrect price quote d. Violation of copyright, title, or slogan

C. An incorrect price quote Explanation Advertising injury arises out of slander, libel, copyright infringement, or misappropriation of advertising ideas.

Choose the peril that is not covered under Personal Injury Coverage. a. Libel and Slander b. False Arrest c. Bodily Injury sustained during an eviction d. Malicious prosecution

C. Bodily Injury sustained during an eviction Explanation Personal Injury, as distinguished from Bodily Injury, includes false arrest, invasion of privacy, malicious prosecution, and so on.

Which of the following is true regarding Products Liability Coverage? a. Products Liability Coverage includes Liquor Liability and Dram Shop Liability insurance b. Products Liability Coverage commences immediately upon sale of the product to the purchaser c. Coverage applies to the bodily injury (BI) and property damage (PD) the product causes, but not to the product itself d. Coverage applies to BI and PD caused by the product, and to damage to the Product itself if the purchaser has put it into service

C. Coverage applies to the bodily injury (BI) and property damage (PD) the product causes, but not to the product itself Explanation Products Liability Coverage under Commercial General Liability Insurance covers damage or injuries caused by the product, but does not include damage to the product itself.

In explaining Medical Payments under Commercial General Liability Insurance, which statement should not be used? a. Medical expenses for bodily injury suffered in an accident on the insured's premises or because of the insured's operations are covered b. Payments are made for expenses incurred and reported within one year of the accident c. Payments are made only if the insured is determined to be legally liable d. Payments are made regardless of fault

C. Payments are made only if the insured is determined to be legally liable Explanation Medical Payments coverage does not require the insured to be found legally liable. Payments are made regardless of the insured's negligence and are not seen as an admission of guilt.

All of the following are correct concerning Medical Payments under Commercial General Liability Insurance, except: a. Payments are made regardless of fault b. Covered is medical expense for bodily injury caused by an accident on the insured's premises or because of the insured's operations c. Payments are made only if the insured is determined to be legally liable d. Payments are made for expenses incurred and reported within one year of the accident

C. Payments are made only if the insured is determined to be legally liable Explanation Medical Payments provides coverage for the insured's customers and members of the public. Excluded from coverage are the insured and the insured's employees.

Which of the following is not covered by Supplementary payments? a. Bail bonds b. The insurer's claim-related expenses c. Loss of income d. First aid

D. First Aid Explanation First aid expenses are included in Medical Expenses coverage.

False arrest is a type of: a. Advertising Injury b. Property damage c. Bodily injury d. Personal injury

D. Personal Injury Explanation Personal Injury, as distinguished from Bodily Injury, includes false arrest, invasion of privacy, and malicious prosecution.