Ch 11

Question 1

Who are usually the parties in a transportation loss?

Answer 1

Shipper (consign or), buyer (consignee), carrier.

Question 2

Who bears the loss?

A shipment of goods sold under FOB destination selling terms was destroyed while in transit between the seller’s warehouse and the buyer’s warehouse.

Answer 2

Seller

Question 3

Who bears the loss?

A shipment of goods sold under FOB origin selling terms was destroyed while on the seller’s warehouse dock awaiting loading onto a carrier’s truck for shipment to the buyer.

Answer 3

Seller

Question 4

Who bears the A shipment of goods sold under FOB destination selling terms was destroyed after it was unloaded from the carrier’s truck onto the buyer’s loading dock.

Answer 4

Buyer

Question 5

When does property cease to be “in transit?”

Answer 5

When goods are stopped to have something done to the goods or when property has been delivered to the destination.

Question 6

Identify five causes of loss that a carrier can use as a defense to relieve itself of responsibility for cargo loss.

Answer 6

Acts of God; acts of the public enemy; acts of public authorities; fault/neglect by shipper; inherent vice or nature of the property.

Question 7

How does the attachment of BMC 32 endorsement change an insurer’s responsibility to cover losses und r a motor truck cargo (MTC) liability policy?

Answer 7

Insurer is obligated to cover virtually any cargo loss for which the insured is legally liable even if other provisions in the MTC liability policy limit or exclude the loss.

Question 8

Distinguish between the liability needed to trigger a Bailee’s liability policy and a bailees’ customer policy.

Answer 8

Bailee policy requires legal liability.

Customers policy there is no need to show negligence.

Question 9

Why is it important to analyze the storage receipts in a warehouse legal liability claim?

Answer 9

They define the nature of the relationship between the depositor and the warehouse. The relationship could be any of the following:

Bailor-Bailee

Landlord-tenant

Carrier-shipper

Question 10

Identity two categories into which coverage purchased by bailees typically falls

Answer 10

Bailee liability.

Bailees’ customer policy.

Question 11

Identify the purpose of a floater.

Answer 11

Provide coverage for specific property beyond the coverage provided by built-in off-premises coverage.

Question 12

What types of property are commonly covered by builders’ risk policies?

Answer 12

Buildings or structures located at the premises described in the policy; foundations and underground pipes; materials and supplies that are intended to become a permanent part of an insured building; materials and supplies owned by others for which the insured is responsible; and forms , scaffolding, falsework, and other temporary structures used in the construction.

Question 13

What are “soft costs?”

Answer 13

Interest, real estate advertising, architect’s and engineer’s fees, and legal and accounting fees incurred when there is a delay in the completion of a project.

Question 14

Identify two types of property commonly excluded from a builders’ risk policy.

Answer 14

Any two of:

• lawn, trees, shrubs, and plants
• radio or TV antennas or towers
• detached signs

Question 15

When does coverage ordinarily end under a builders’ risk policy?

Answer 15

Policy expires/is canceled
Property is accepted by the purchaser
The insured’s interest in the property ceases
Any part of the construction project is put to its intended use or otherwise occupied.
The insured abandons the construction project with no intention of completing it.
The purchaser obtains property insurance on fh building.

Question 16

Six major categories of types of policies listed in the Nationwide Marine Definition.

Answer 16

Transportation; bridges, instrumentalities of transportation or communication; bailor/Bailee; commercial floaters; installment sales; contractors’ equipment; builders’ risk; dealers’ policies; misc; personal floaters.

Question 17

What does a condo owner actually own?

Answer 17

The mater deed or bylaws will determine what the condominium owner actually owns. Under the barewalls concept, a unit owner’s property consists of what is within the bare walls. Under the all-encompassing concept, the condo association owns all interior and exterior items within the unit at the time that it is sold to the unit owner.

Question 18

Identify the two types of unit owner’s coverage available.

Answer 18

Commercial and residential

Question 19

Describe the circumstances under which a unit owner’s loss assessment coverage applies.

Answer 19

When the assessment results from direct physical loss or damage by a covered peril to common property in which all unit owner’s have an interest.

Question 20

Explain why most businesses with crime exposures need coverage beyond that provided in the BPP with a causes of loss -/ special form.

Answer 20

The special form has significant exclusions. It does not cover money, notes, securities, and other evidences of debt. It does not apply to employee dishonesty or loss caused by trick or false pretenses. Further, the Special Form has sublimits that apply to theft of certain types of property.

Question 21

Explain the three definitions of “occurrence” in crime coverage.

Answer 21

Employee theft: encompasses all losses caused by one or more employees in a single act or through several acts

Forgery and alteration: all losses caused by any person, regardless of the number of instruments involved.

All other insuring agreements: act or series of reacted acts involving on it more persons or an act or event or series of related acts or events not involving any other person.

Question 22

Which ISO Crime Program coverage option would apply to $350 missing from cash register.

Answer 22

Inside the premises – theft of money and securities.

Question 23

Which ISO Crime Program coverage option would apply to the insured’s store being robbed of jewelry at gunpoint.

Answer 23

Inside the premises - robbery of safe burglary of other property.

Question 24

Which ISO Crime Program coverage option would apply to pickpockets striking the insured’s salesperson on the road.

Answer 24

Outside the premises.

Question 25

Which ISO Crime Program coverage option would apply if the insured’s bookkeeper deposits the insured’s money into an account bearing the bookkeeper’s name.

Answer 25

Employee theft

Question 26

Which ISO Crime Program coverage option would apply if the insured accepts a counterfeit $100 bill during a sales transaction.

Answer 26

Money orders and counterfeit paper currency

Question 27

How does heat affect computer hardware, programs, or media?

Answer 27

Damages electrical connections, plastic parts, and conductivity of hardware.

Question 28

How does water/humidity affect computer hardware, programs, or media?

Answer 28

Damage electrical connections.

Question 29

How does smoke affect computer hardware, programs, or media?

Answer 29

Damage connections, etch metallic surfaces, and cause read/write crashes

Question 30

How does contamination affect computer hardware, programs, or media?

Answer 30

Can cause same damages as smoke or water

Question 31

How does impact or crushing affect computer hardware, programs, or media?

Answer 31

Occur to a unit in transit

Question 32

How does voltage variation affect computer hardware, programs, or media?

Answer 32

Wires melt

Question 33

How does magnetic field intrusion affect computer hardware, programs, or media?

Answer 33

Could be erased or damage by exposure to magnetic fields

Question 34

Identify the issue that arises concerning the valuation of computer hardware and software.

Answer 34

Valuation. ACV may be tough to calculate due to obsolescence.

Question 35

Describe the coverage provided under an electronic data processing (EDP) endorsement.

Answer 35

Coverage for business income loss that results from direct loss to computer equipment. It is usually written as direct physical loss caused by a cover peril to covered property while on the premises described on the declarations, subject to a list of exclusions.

Question 36

Identify the adjuster’s first obligation at the site of a computer loss.

Answer 36

Abe sure that the entire system is shut down and that it stays shut down until a full analysis of the loss is made and a qualified repair person is on site to monitor and initiate any restart.

Question 37

Describe the coverage provided by equipment breakdown insurance.

Answer 37

Pays for loss that results from the accidental breakdown of equipment that operates under pressure or that controls, transmits, transforms, or uses mechanical or electrical power.

Question 38

How does superfund apply to past property owners?

Answer 38

Any past owner who allowed dumping while owning property is liable under Superfund for cleanup costs.

Question 39

How does superfund apply to current property owners

Answer 39

Current owners are liable for cleanup of any existing contamination, regardless of when it was introduced.

Question 40

Superfund imposes what type of liability for the costs of response, removal, and remediation of hazardous sites.

Answer 40

Strict, joint and several, and retroactive liability for the costs of response, removal, and remediation of hazardous sites.

Question 41

Sam operated a paint shop. One night, several vandals broke into his shop and opened a valve, which allowed hazardous pollutants to escape a large vat and soak into the ground. The EPA has sued Sam for reimbursement of the cleanup costs it incurred. Does Sam have any defenses against EPA’s claim? Explain your answer.

Answer 41

Yes. The act of an unrelated third party could serve as a defense, provided that the negligence could not be foreseen. Additionally, the parties have no contractual relationship, not even by deed.

Question 42

What is the most significant type of property not covered in a first-party pollution claim?

Answer 42

Land itself.

Question 43

The additional coverage for debris removal requires what two conditions to be satisfied?

Answer 43

Only covers re Novak of debris of covered property by a covered cause of loss. Any debris that does not satisfy both of these conditions is not included under this coverage.

Question 44

What are the rules some jurisdictions use if they do not hold the insured in compliance with the one-year time limit of the suit limitation clause for first-party pollution claims?

Answer 44

Special rules that the time limit does not begin until the insured has become aware of the loss or has sufficient knowledge that the insured should have been aware of the loss. Other jurisdictions have ruled that the suit limitation period does not begin until the Indy and is has actually denied coverage.

Question 45

What are the 4 basic types of contractors’ equipment? Give an example of each

Answer 45

Earth moving
Site-improvement
Material handling
Miscellaneous

Question 46

What is the most frequent cause of fire loss when using earth-moving equipment?

Answer 46

Breaking of hydraulic lines. Ignites of contacts hot engine parts.

Question 47

Describe the difference in how the two basic types of friction and hydraulic, are assembled.

Answer 47

Friction Crain uses an open or lattice boom that is made up of several sections. The sections are usually trucked to the worksite and assembled there.

A hydraulic crane has a telescoping boom that does not require assembly.

Question 48

Distinguish contractors’ equipment coverage written on a schedule from contractors’ equipment coverage written on a blanket basis.

Answer 48

On a scheduled basis, each item of insured property is insured individually described in the policy declarations or schedule, and a limit of liability is assigned to each item. When the policy is written on a blanket basis, it is written got a single amount of insurance covering all items.

Question 49

What are the two most common types of property exclusions found in contractors’ equipment policies.

Answer 49

Property in high-risk or uncontrolled working environments.

Property more suitably covered by other types of insurance.

Question 50

Summarize two contractors’ equipment policy exclusions that address boom collapse.

Answer 50

Weight-of-load

Boom operator exclusion.

Question 51

Why do most contractors need rental reimbursement coverage rather than business income coverage?

Answer 51

Continue operations by renting substitute equipment

Question 52

Covered loss? Construction company deactivated and old bulldozers that was laid up. It was removed from the schedule two years ago and they didn’t tell the insurer. Fuel line ruptured and spare was destroyed. ACV $15k.

Answer 52

Not covered. Not newly acquired.

Question 53

Loader listed on schedule overturned and fell into a river when the operator negligently ventured too close to the water while clearing the riverbank. Covered?

Answer 53

Covered. No water exclusion or operator’s negligence exclusion. Wasn’t being used underwater so that exclusion doesn’t apply.

Question 54

Bulldozer working in pile of wood chips. Fuel line ruptured and dozed caught fire damaging machine. Covered?

Answer 54

Covered. Most policies have a mechanical breakdown exclusion but it doesn’t apply to physical loss resulting from the breakdown as long as the resulting loss is caused by a covered peril.

Question 55

An excavator was damaged at a work site. Repairs will take 15 days. They rented a comparable unit for $250/day. Company didn’t have idle equipment available. Assume they had rental reimbursement.

Covered?

Answer 55

12 days of rental. 72 hour waiting period.

Question 56

Identify the factors that affect the ACV of a piece of covered equipment.

Answer 56

Accessories 
Age
Hours and use and type of use.
Local market demand 
Maintenance
Manufacturer
Prior unrepaired damage 
Salvage
Type and size

Question 57

Describe how an adjuster calculates the loss of use of a covered piece of equipment.

Answer 57

Calculating the net income per day for the period of restoration, much like it is calculated for a business loss.