Casualty Insurance Section lll (Commercial)

Question 1

Which one of the following is NOT one of the components that are required in all Commercial Package policies?

Answer 1

Object Definitions Form.

**The Objects Definition form is found in the Boiler and Machinery policy

Question 2

The Surety Bond consists of three separate parties. Who is responsible for assuring that the work will be done?

Answer 2

Surety.

Question 3

Listed below are Commercial policies, which policy requires a deposit and determines the final payment by an assessment or audit?

Answer 3

General Liability.

Question 4

In a Builders Risk Policy form, which limit of liability specifies the amount of coverage when the building is completely finished?

Answer 4

Completed value basis

**The name gives it away, Completed Value basis. The policy is written for an amount equal to the building’s value upon completion.

Under the Reported Value basis, the insured reports periodically to the insurer the current value of the building.

Question 5

A commercial building has a Replacement Value of $200,000 and the property insurance is written with an 80% coinsurance clause. The insured carries $120,000 of coverage when a $40,000 loss occurs. How much will the policy pay?

Answer 5

$30,000

**[Coverage A /(.8 x Replacement Cost)] x Loss - Deductible

[120,000/(.8 x 200,000)] x 40,000 - 0

[120,000/160,000] x 40,000

[.75] x 40,000

30,000

Question 5

In North Carolina, employers have several options to choose from in purchasing Workers Compensation insurance, this is utilizing which method listed below?

Answer 5

Competitive

**Insurers in North Carolina compete against one another for customers (insureds).

Question 6

In a Commercial policy, once the building has been repaired there may be a lag time between completion of the building and the return of customers to the levels they were prior to the loss, which coverage would indemnify?

Answer 6

Extended Business Income form

** Extra expense coverage pays for the expense to set up a new location for the business temporarily while the original location is being repaired.
A commercial policy is the generic name for the policy while this question is seeking the specific coverage form name.

Extended Business Income form provides 30 days of coverage for the difference between net income before the loss and net income after the business has been restored. Once the business is open again, it will take some time for all previous customers to get the message that the business back in operation.

Question 7

Under the Claims Made form of the Commercial General Liability policy, how does the retroactive date apply?

Answer 7

Excludes claims that occurred before the retroactive date.

** The retroactive date establishes a point in time before which any occurrences that occur will not be covered. The retroactive date only deals with the occurrence date not the filing date.

Claims that occurred after the retroactive date will be covered.
Claims that are filed after the retroactive date could potentially be covered if the actual occurrence happened after the retroactive date.
Claims that occurred after policy inception don’t have to be filed within 90 days.

Question 8

A Businessowners policy is?

Answer 8

A self-contained complete package policy

**A Businessowners policy is a multi-line policy which offers Property coverage, Liability coverage, Business Income, Commercial Crime and whole host of other coverages.
It is like a Commercial Package.

Question 9

J walked into a restaurant with a gun and demands money or property. What type of crime coverage best describes the loss?

Answer 9

Robbery.

** Robbery is the taking of property by violence or the threat of violence. An employee confronted with a gun would be threatened with violence.

Question 10

The Benefits Section of the Workers Compensation policy include all of the following EXCEPT?

Answer 10

Liability benefits.

Question 11

When a businessowner wants protection against bodily injury claims caused by accidents on a vacant lot that she owns, she should purchase insurance. Which policy listed below is best?

Answer 11

Commercial General Liability.

Question 12

Each of the following classes of employment are exempt from the compulsory Workers Compensation requirement EXCEPT:

Answer 12

Clerical workers.

Question 13

When an insurer cancels a Commercial Package policy, it must give the insured:

Answer 13

10 days advance notice for nonpayment of premium, 30 days notice for other reasons

**This is rote memory.

10 days advance notice for nonpayment of premium, 30 days notice for other reasons

Question 14

Coverage against loss by some perils (vandalism, theft, etc.) under the Building and Personal Property coverage form is suspended if:

Answer 14

The insured building is vacant for over 60 days.

Question 15

In the addition to maximum floor space, the Businessowners eligibility rules limit eligible mercantile risks to a maximum of?

Answer 15

$1 million in annual sales.

** Eligibility for the Businessowners Policy is limited to $1 million in sales. The policy form is for smaller businesses.

Question 16

The claims made CGL form does not cover losses which occur:

Answer 16

Before any retroactive date specified.

**Occurrence based policy forms pay when an incident occurs during the policy period even if reported after the policy period.
Claims made policy forms pay when an incident occurs during the policy period and if reported during the policy period.
An extended reporting period gives the insured additional time after the policy period ends to report an occurrence to the insurer.

A retroactive date established in a claims made policy specifies a point in time before which any occurrences that occur will not be covered even if the claim is filed during the claims made policy period.

Question 17

Which Builder’s Risk policy has a specialized contract whereby there is an increase in the limit of liability on the policy as more construction is reported on the project?

Answer 17

Reported Value Basis

Question 18

Which one of the following policies covers liability for loss to merchandise while being transported?

Answer 18

Motor Truck Cargo policy.

Question 19

A Crime policy covers against losses due to employee dishonesty, all of the following are covered under employee dishonesty EXCEPT?

Answer 19

Other employee’s personal stuff.

Question 20

Which of the following is eligible to receive CGL payments for medical expenses in the event of injury at the insured’s premises?

Answer 20

A customer who attended a promotional dinner party.

** The Commercial General Liability policy (CGL) is for third parties.

It will not cover medical expenses of the insured.
The insured would need workers compensation to cover employee medical expenses.
A contractor’s medical expenses would not be covered by the CGL.

A customer’s medical expenses due to injury will on the insured’s premises would be covered under the Premises subline.

Question 21

Which of the following situations would be covered by the products-completed operations sublines?

Answer 21

Bodily injury caused by a defect in a product.

**There are 5 insured contracts covered by the CGL.
Contractual liability assumed under contract would include LEASE.
L ease
E asement
A greement to indemnify a municipality
S idetrack agreement
E levator maintenance agreement

Property damage to the insured property wpuld not be covered by the CGL.
Defective products would not be covered by the CGL.

Bodily injury caused by a defective product is Products/Completed Operations coverage.

Question 22

Boiler and machinery coverage is?

Answer 22

An optional BOP coverage, affected by endorsement.

** Businessowners Policy does allow a Boiler to be added by endorsement.

Question 23

Which of the following situations would be covered by the products-completed operations sublines in the Commercial General Liability policy (CGL)?

Answer 23

Bodily injury caused by a defect in a product.

**Contractual liability assumed by the insured includes 5 insured contracts, LEASE which is covered by the Operations subline.
L ease
E asement
A greement to indemnify a municipality
S idetrack agreement
E levator maintenance agreement

Property damage to the named insured’s property is a first party claim and would not be covered by a CGL policy which is a third party policy.

Replacement of a defective product is the insured’s responsibility and would not be covered by a CGL policy.

Bodily injury caused by a defect in a product would be a Products claim under a CGL policy.

Question 24

All of the following are considered to be supplementary payments under a CGL policy EXCEPT?

Answer 24

Medical payments for an injured customer.

**Supplementary Payments covers defense costs, bail bonds, appeal bonds, lost wages, parking deck fees. If the insured request that the insured spend money to help defend against the claim, the money will be reimbursed by the insurer. There is no limit on supplementary payments.

Medical Payments does not come out of supplementary payments. Medical Payments is a separate coverage part. It is no-fault third party liability coverage. It will not cover bodily injury sustained by the insured or employees of the insured.

Question 25

What is the maximum amount payable for bail bonds under the supplementary payments provided by the Personal Auto policy?

Answer 25

$250

**This is rote memory

$250

Question 25

The benefits section of the Workers Compensation policy include all of the following EXCEPT?

Answer 25

Liability Benefits.

**The statutory benefits required by state law under Part 1 of a workers compensation policy are

1. Medical expenses
2. Disability benefits (loss of income)
3. Death benefits
4. Rehabilitation benefits

Question 26

Workers’ Compensation has a Disability Section and a Liability Section. If an employee returns to work and is temporarily unable to earn the same compensation as he earned prior to the injury, which disability listed below meets this definition?

Answer 26

Temporary partial.

Question 27

Under the Commercial Package policy, the person whose name is listed first in the declarations and is assigned certain responsibilities and obligations is the?

Answer 27

First named insured.

** The name gives it away.

The first named insured is the one listed first on the declarations page.

Question 28

A Crime policy covers against losses due to employee dishonesty, all of the following are covered under employee dishonesty EXCEPT?

Answer 28

Other employee’s personal stuff.

Question 29

In a Workers’ Compensation policy, which of the following is correct about the policy?

Answer 29

Employers must have 3 or more employees.

Question 29

General Liability policies provide coverage for damage to:

Answer 29

Property of third parties when caused by negligence of an insured.

**General Liability is for third parties.
If an insured causes bodily injury or property damage to someone else’s body or property, a commercial general liability policy will indemnify for the loss.

Question 30

In a Commercial Crime policy, which of the following listed below is the primary coverage?

Answer 30

Employee dishonesty

Question 31

Jane is unable to work for 7 weeks due to a work related injury, under Worker’s Compensation, how many weeks will she get paid?

Answer 31

7 weeks.