Chapter 15

Question 1

A CGL covers injury to:

Select one:

a. an employee
b. a customer

Answer 1

The correct answer is: a customer

Question 2

Supplementary Payments:

Select one:

a. provides for defense costs.
b. has a deductible.

Answer 2

The correct answer is: provides for defense costs.

Question 3

A store sells food that is spoiled, injuring a customer. This is covered by which section of the Commercial Liability Policy?

Select one:

a. Completed Operations
b. Products Liability
c. Premises Liability
d. Operations Liability

Answer 3

Products liability covers the sale of a defective product, including spoiled food.

The correct answer is: Products Liability

Question 4

Under a CGL, covered mobile equipment includes:

Select one:

a. street cleaning vehicles
b. snow removal vehicles
c. tow trucks
d. bulldozers and forklifts

Answer 4

The correct answer is: bulldozers and forklifts

Question 5

Which is an Insured under a CGL?

Select one:

a. a part-time employee who accidentally drops a can of peaches on a customer’s foot.
b. a full-time employee who accidentally breaks a store window.
c. a customer who accidentally injures a store employee.
d. a full-time employee who is injured by falling on a slippery floor.

Answer 5

Under a CGL, the “Insured” includes employees who injure customers. It doesn’t include employees who are injured (Work Comp covers that), nor does it cover damage to the owner’s property.

The correct answer is: a part-time employee who accidentally drops a can of peaches on a customer’s foot.

Question 6

Under a Commercial General Liability Policy, the insurer is obligated to do which of the following?

Select one:

a. inspect the property regularly.
b. renew the policy.
c. notify the insured of cancellation by the insurer.
d. approve all assignments.

Answer 6

The Insurer is not required to renew, inspect the property, or approve an assignment (for example, if the Insurer feels that the assignee is too risky). But, an Insurer must always give prior written notice of cancellation.

The correct answer is: notify the insured of cancellation by the insurer.

Question 7

A business owner makes a mistake and accuses a customer of being a burglar. The owner’s liability is covered under:

Select one:

a. Personal and Advertising Injury Liability
b. Premises Liability
c. Medical Payments
d. Bodily Injury Liability

Answer 7

Libel, slander, false arrest, false imprisonment, and malicious prosecution are examples of Personal Injury claims which are covered by the Personal and Advertising Injury Liability section of a Commercial General Liability policy (CGL).

The correct answer is: Personal and Advertising Injury Liability

Question 8

A CGL provides coverage for:

Select one:

a. boats
b. auto
c. aircraft
d. contractual

Answer 8

Yes, the CGL will cover the obscure topic of “contractual liability.” That includes the agreement to indemnify another found in a Lease, Easement, Agreement to indemnify a municipality as required by ordinance, sidetrack, and Elevatory Maintenance Agreement. This topic will always be covered on our final exam.

The correct answer is: contractual

Question 9

A CGL covers:

Select one:

a. Operations and Boiler
b. Premises and Operations Liability
c. Pollution and Premises Liability
d. Contractual, Completed Operations and Auto

Answer 9

The correct answer is: Premises and Operations Liability

Question 10

An agreement to indemnify another by holding the person harmless may be insured by which section of the CGL?

Select one:

a. Premises
b. Contractual
c. Personal and Advertising Injury Liability
d. Products and Completed Operations

Answer 10

The CGL’s Contractual Liability coverage includes coverage for agreements with hold harmless provisions.

The correct answer is: Contractual

Question 11

Supplementary covers each of these EXCEPT:

Select one:

a. defense costs
b. bonds
c. costs of the insured in assisting the defense efforts
d. medical payments

Answer 11

Med Pay isn’t part of Supplementary. Med Pay is a separate part of the policy.

The correct answer is: medical payments

Question 12

A CGL covers medical expenses reported within a maximum of how many years after the occurrence?

Select one:

a. 1
b. 3
c. 5
d. 7

Answer 12

Compared to the $1,000 Med Pay under the HO policies (a Property Exam topic), the typical CGL provides rather large dollar coverage for Med Pay, such as $5,000 - $50,000. So, it is only reasonable to demand that the victim submit medical bills to the CGL Insurer within a relatively
short time, 1 year. If you did the Property Course, you will remember that the HO policy provides only a lowly $1,000 Med Pay coverage so it gives the victim 3 years to submit medical bills.

The correct answer is: 1

Question 13

The insured’s reasonable expenses incurred while assisting the insurer with defense efforts are covered by:

Select one:

a. property damage liability
b. bodily injury liability
c. medical payments
d. supplementary

Answer 13

The Insurer wants the Insured to assist the insurance company’s lawyers. So, Supplementary will cover the Insured’s costs of assisting in the defense efforts. This adds to the policy’s limit of liability (pays over and above the policy limit).

The correct answer is: supplementary

Question 14

If the insured desires to cancel a CGL:

Select one:

a. delivery of written notice by email is acceptable.
b. the insured may cancel by telephone.

Answer 14

The correct answer is: delivery of written notice by email is acceptable.

Question 15

If the insured desires to cancel a CGL:

Select one:

a. the insured may do so by giving written notice to the insurer.
b. the insured may only cancel on the anniversary date.

Answer 15

The correct answer is: the insured may do so by giving written notice to the insurer.

Question 16

To cover a customer slip and fall accident, a store owner should purchase:

Select one:

a. Premises and Operations Liability
b. Personal and Advertising Injury Liability

Answer 16

The correct answer is: Premises and Operations Liability

Question 17

A CGL’s medical payments covers:

Select one:

a. a contestant in an athletic event
b. an employee
c. a customer
d. the insured

Answer 17

The primary purpose of med pay is to cover customers. Med pay specifically excludes injuries to employees (get Work Comp for that), the Insured (get a Health Insurance policy), and contestants in an athletic event.

The correct answer is: a customer

Question 18

The insured’s guard dog bites a customer. This is covered by:

Select one:

a. contractual liability
b. property damage
c. personal injury
d. bodily injury

Answer 18

“Bodily injury” and “bodily injury liability” are terms that are used interchangeably in the insurance world.

The correct answer is: bodily injury

Question 19

The CGL’s medical payments covers the:

Select one:

a. Insurer.
b. Insured’s customer.
c. Insured’s employees.
d. Insured.

Answer 19

The primary reason for a business to purchase a CGL is protect against injuries to customers. The Insured isn’t covered at all and employees are better covered under Work Comp. Although the policy will cover almost any other person who enters the premises, that person is usually a customer.

The correct answer is: Insured’s customer.

Question 20

A grocery store customer accidentally injures another customer while placing a large bag of dog food into a shopping cart. The store’s CGL will:

Select one:

a. cover this under the CGL’s liability section.
b. cover this under the CGL’s med pay section.
c. cover this under work comp.
d. not cover this at all.

Answer 20

The correct answer is: cover this under the CGL’s med pay section.

Question 21

Which is NOT covered by a CGL’s medical payments?

Select one:

a. a company employee
b. a customer
c. a real estate agent discussing a lease
d. a solicitor for a charity

Answer 21

The CGL’s med pay section excludes injuries to the Insured’s workers. However, workers employed by other businesses are covered. So, the real estate agent, solicitor, and customer may all be covered by some other employer’s work comp policy, but they are also covered by our
Insured’s med pay. The injured person can’t “stack” the policies but will be indemnified (made whole) by having the work comp and the med pay proportionally pay for the medical expenses.

The correct answer is: a company employee

Question 21

A CGL Insurer may use an audit to establish:

Select one:

a. the Insured’s solvency.
b. whether a claim is covered by the policy.
c. the appropriate premium.
d. whether the Insured was negligent.

Answer 21

The purpose of the audit to calculate the true earned premium based on the amount of the Insured’s business activity. The liability premium is usually based on an estimate of business activity. Don’t confuse this with the Insurer’s right to inspect the property at any time.

The correct answer is: the appropriate premium.

Question 22

A company is issued a liability policy and pays using a deposit premium. Consequently:

Select one:

a. the policy is nonrefundable.
b. an audit may be conducted to compute the actual premium.

Answer 22

See page 15-23, lines 24-28.

The correct answer is: an audit may be conducted to compute the actual premium.

Question 23

Personal and Advertising Injury Liability covers each of these EXCEPT:

Select one:

a. Unfair competition
b. Malicious prosecution
c. False arrest
d. Errors and Omissions

Answer 23

The correct answer is: Errors and Omissions

Question 24

A plumber negligently repaired a store’s water pipe. Several days after the repairs were completed, the pipe burst damaging goods in the store. This would be covered under which section of the CGL?

Select one:

a. Products and Completed Operations
b. Contractual
c. E&O
d. Premises

Answer 24

This is a classic Completed Operations coverage.

The correct answer is: Products and Completed Operations

Question 25

Which is NOT an insured contract?

Select one:

a. an easement
b. a lease
c. an agreement to indemnify a municipality
d. an agreement to indemnify an architect, engineer or surveyor

Answer 25

I think you have this memorized by now, right? The insured contracts listed in the CGL are the Lease, Easement, Agreement to indemnify a municipality as required by ordinance, Sidetrack, and Elevator maintenance. (LEASE)

The correct answer is: an agreement to indemnify an architect, engineer or surveyor

Question 26

Each of the following is automatically insured under a CGL EXCEPT:

Select one:

a. executor or property manager
b. the partner’s spouse
c. employees, corporate officers, shareholders and directors
d. corporate officer’s spouse

Answer 26

The correct answer is: corporate officer’s spouse

Question 27

Products Liability covers:

Select one:

a. personal injury liability.
b. product recall.
c. injuries from defective products sold to the public.
d. repair of defective products.

Answer 27

The correct answer is: injuries from defective products sold to the public.

Question 28

The initial premium at the policy period’s beginning is the:

Select one:

a. initial premium
b. deposit premium

Answer 28

The correct answer is: deposit premium

Question 29

Personal and Advertising Injury Liability covers:

Select one:

a. illegal activities
b. breach of contract
c. wrongful eviction
d. pollution

Answer 29

The correct answer is: wrongful eviction

Question 30

Supplementary Payments:

Select one:

a. reduces the policy limits.
b. pays above the policy limits.

Answer 30

The correct answer is: pays above the policy limits.

Question 31

A, B and C as partners own a business. They have a CGL providing a $100,000 occurrence limit. An injured customer sued after an accident and obtained three judgments; one against A for $50,000, a second against B for $50,000 and a third against C for $50,000. The CGL will pay:

Select one:

a. only $100,000.
b. all three judgments in full because neither exceeds the occurrence limit.

Answer 31

The correct answer is: only $100,000.

Question 32

Products and Completed Operations covers:

Select one:

a. defective merchandise sold by the insured.
b. merchandise held for sale by the insured.

Answer 32

The correct answer is: defective merchandise sold by the insured.

Question 33

The advance premium is also referred to as the:

Select one:

a. up-front premium
b. initial premium
c. deposit premium
d. preliminary premium

Answer 33

The correct answer is: deposit premium

Question 34

A CGL covers:

Select one:

a. aircraft liability
b. automotive liability
c. professional liability
d. contractual liability

Answer 34

The correct answer is: contractual liability

Question 35

A tenant agrees to keep the leased premises in a clean and tidy condition. A pedestrian was injured by junk and debris on the sidewalk. This injury to the pedestrian would be covered by which section of a commercial liability policy?

Select one:

a. Owner’s and Contractor’s Protective
b. Independent Contractors Liability
c. Premises and Operations
d. Contractual Liability

Answer 35

This is plain old liability because the owner is responsible for the sidewalks. Of course the tenant won’t do what the tenant promises. The Insurer will cover this under the owner’s liability portion of the CGL and then subrogate against the tenant for breach of contract.

The correct answer is: Premises and Operations

Question 36

Which policy section contains information about the defense of lawsuits covered by the policy?

Select one:

a. obligations of the insurer
b. exclusions
c. obligations of the insured
d. definitions

Answer 36

We are all looking for “Supplementary Payments” as the answer. When my “expected answer” isn’t there, I usually panic. Don’t make my mistake. On the Casualty Exam, expect the unexpected. There are often multiple correct answers to a question. We expect the obvious answer to be there but the test writers love to throw in vague but correct answers, such as “Insuring Agreement,” or, in this case, “Obligations of the Insurer.” You are right, many of the questions are trick questions. Well, at least they aren’t as straight-forward as they could be.

The correct answer is: obligations of the insurer

Question 37

A manufacturer who is sued for a defective toy would be covered by:

Select one:

a. errors and omissions
b. products and completed operations

Answer 37

The correct answer is: products and completed operations

Question 38

The CGL provision regarding property of others that is in the insured’s care, custody and control is found in the:

Select one:

a. Insuring Agreement
b. Declarations
c. Conditions
d. Exclusions

Answer 38

This is in the Exclusions because the CGL doesn’t cover damage to property of others in the Insured’s care, custody, and control. Some of the Property Insurance Policies provide this coverage but the CGL won’t.

The correct answer is: Exclusions

Question 39

An insured can get a lower premium by:

Select one:

a. waiving coverage for defense costs.
b. taking a per-loss deductible.

Answer 39

The correct answer is: taking a per-loss deductible.

Question 40

Defense costs:

Select one:

a. apply in addition to the limits of liability.
b. are shared equally by the insurer and insured.

Answer 40

The correct answer is: apply in addition to the limits of liability.

Question 41

Supplementary covers each of the following EXCEPT?

Select one:

a. costs to assist the insurer with defense efforts
b. defense and investigatory costs
c. bodily injury
d. bonds

Answer 41

Bodily Injury is covered in the Liability section of the policy. The remaining answers are all part of Supplementary.

The correct answer is: bodily injury

Question 42

Which section of the CGL pays without regard to fault?

Select one:

a. bodily injury.
b. medical payments.

Answer 42

The correct answer is: medical payments.

Question 43

Advertising injury covers:

Select one:

a. medical payments
b. bodily injury
c. intentional acts
d. copyright infringement

Answer 43

The correct answer is: copyright infringement

Question 44

Under a CGL’s “Other Insurance” clause, the two insurers will share the loss:

Select one:

a. equally
b. pro rata

Answer 44

The correct answer is: equally

Question 45

Vicarious liability refers to liability for:

Select one:

a. future acts
b. the acts of another
c. punitive damages
d. pollution

Answer 45

Vicarious liability refers to liability for the acts of another. For example:

An employer will often be held liable for the negligence of employees; or

A retailer may be held liable for injuries caused by a defective product manufactured in Brazil even if the retailer wasn’t negligent in any way; or

Each partner in a partnership is “vicariously liable” for the business related accidents caused by the other partners.

The correct answer is: the acts of another

Question 46

Which section of a commercial liability policy covers defense costs?

Select one:

a. Exclusions
b. Conditions
c. Insuring Agreement
d. Definitions

Answer 46

The correct answer is: Insuring Agreement

Question 47

A CGL covers each of the following EXCEPT:

Select one:

a. property damage
b. personal injury
c. bodily injury
d. employers liability

Answer 47

The correct answer is: employers liability

Question 48

Under a CGL, the definition of insured includes:

Select one:

a. employees for acts beyond the scope of employment
b. partners

Answer 48

The correct answer is: partners

Question 49

Under the CGL, the insured is:

Select one:

a. the person listed on the declarations sheet.
b. the property.

Answer 49

The correct answer is: the person listed on the declarations sheet.

Question 50

Personal and Advertising Injury Liability cover each of these EXCEPT:

Select one:

a. Unfair competition
b. Battery
c. Malicious prosecution
d. Wrongful entry and eviction

Answer 50

Liability insurance won’t cover an intentional act. Battery is an intentional act.

The correct answer is: Battery

Question 51

Which covers an insured for damages caused by a crane at the insured’s construction location?

Select one:

a. Premises and Operations
b. Products Liability

Answer 51

The correct answer is: Premises and Operations

Question 52

Advertising Injury won’t cover:

Select one:

a. incorrect price quote
b. copyright infringement and slander

Answer 52

The correct answer is: incorrect price quote

Question 53

Infringement is covered by:

Select one:

a. Premises and Operations Liability
b. Personal Injury and Advertising Liability

Answer 53

The correct answer is: Personal Injury and Advertising Liability

Question 54

A CGL has a $200,000 Occurrence limit and $400,000 Aggregate Limit. The Insured’s negligence during one event results in $192,000 Property Damage Liability, $3,000 Medical Payments, $32,000 Bodily Injury Liability, and $38,000 Fire Legal Liability. How much will the
policy pay?

Select one:

a. $192,000
b. $195,000
c. $200,000
d. $233,000

Answer 54

The policy covers a single event up to the policy’s $200,000 Occurrence Limit. The Aggregate Limit of $400,000 would only apply if there were several distinct negligent acts. It is worth noting that Products & Completed Operation Liability has its own Occurrence and Aggregate limits that are separate and independent from the policy’s normal Occurrence and Aggregate limits (although that doesn’t change our answer to this question).

The correct answer is: $200,000

Question 55

A real estate agent desiring coverage for accidents occurring on a developable commercial lot should purchase:

Select one:

a. Personal Injury Liability
b. Commercial General Liability

Answer 55

The correct answer is: Commercial General Liability

Question 56

An exclusion in a CGL is:

Select one:

a. Automobile liability.
b. Theft of money.
c. Yacht coverage.
d. Flood loss.

Answer 56

Ugly question! None of these are covered by a CGL. However, the only one that is stated in the policy as an exclusion is automobile liability. The yacht, flood, and theft are all property issues not covered by a liability policy, so they aren’t even mentioned in the policy as exclusions. But, the CGL does specifically list automobile liability as an exclusion.

The correct answer is: Automobile liability.

Question 57

A CGL covers:

Select one:

a. slander
b. pollution coverage

Answer 57

Assume that the typical policy won’t cover pollution. However, the CGL will cover personal injury. If you aren’t familiar with the list of personal injury coverages, be sure to check those. (libel, slander, false arrest, etc.)

The correct answer is: slander

Question 58

The CGL’s Contractual Liability coverage does not apply to:

Select one:

a. agreements to indemnify a municipality as required by ordinance
b. lease agreements
c. sidetrack agreements
d. an agreement to indemnify an appraiser

Answer 58

Be sure to memorize that standard list of Contractual Liability coverages: (1) Lease Agreements, (2) Easement Agreements, (3) Agreements to indemnify a municipality as required by ordinance, (4) Sidetrack Agreements, and (5) Elevator Maintenance Agreements. Remember the acronym LEASE.

The correct answer is: an agreement to indemnify an appraiser

Question 59

Each of the following is an insured under a CGL EXCEPT?

Select one:

a. a customer
b. the company’s production supervisor
c. the company president
d. the company’s majority shareholder

Answer 59

A customer is not an “Insured” under the CGL.

The correct answer is: a customer

Question 60

Contractual Liability Coverage covers liability:

Select one:

a. assumed by contract.
b. implied by contract.

Answer 60

For Contractual Liability to apply, the Insured must expressly assume liability of another - this can’t be done by mere implication. I know, I know, lame question. I agree.

The correct answer is: assumed by contract.

Question 61

The publication of false information about a competitor is covered under:

Select one:

a. Personal Injury Liability
b. Errors and Omissions
c. Bodily Injury Liability
d. Property Damage Liability

Answer 61

This is covered under Advertising Injury which covers personal injury (libel, slander).

The correct answer is: Personal Injury Liability

Question 62

Which of the following is NOT an insured contract?

Select one:

a. a sidetrack agreement
b. an easement
c. a warranty covering a product’s fitness
d. a lease

Answer 62

The product warranty is the only item not listed by the CGL as an “Insured Contract.” The listed insured contracts are the Lease, Easement, Agreement to indemnify a municipality as required by ordinance, Sidetrack, and Elevator maintenance. (LEASE)

The correct answer is: a warranty covering a product’s fitness

Question 63

Products Liability covers a store when:

a. a child’s hand is injured by a store’s vending machine
b. a child is injured when a bike wheel at a school playground falls off

Answer 63

The correct answer is: a child is injured when a bike wheel at a school playground falls off

Question 64

Products Liability covers:

Select one:

a. products sold to customers.
b. products in production.

Answer 64

The correct answer is: products sold to customers.

Question 65

While installing a new computer, a computer store employee damages the customer’s new computer, wall, floor and couch. Which is NOT covered by the CGL?

Select one:

a. customer’s new computer
b. customer’s floor
c. customer’s wall
d. customer’s couch

Answer 65

The CGL excludes damage to property of others in the Insured’s care custody and control.

The correct answer is: customer’s new computer

Question 66

Which is covered as an insured contract?

Select one:

a. an agreement to indemnify a municipality, as required by law.
b. the insured assumes liability for an act prior to the issuance of the policy.
c. the insured assumes liability for a criminal act.
d. an agreement to indemnify an architectural firm.

Answer 66

The correct answer is: an agreement to indemnify a municipality, as required by law.

Question 67

A CGL covers:

Select one:

a. Auto accidents.
b. Earthquake coverage.
c. Injuries to the Insured’s employees.
d. Liability assumed through a sidetrack agreement.

Answer 67

The correct answer is: Liability assumed through a sidetrack agreement.

Question 68

Under a CGL, first aid expenses are covered by:

Select one:

a. property damage
b. supplementary
c. medical payment
d. bodily injury

Answer 68

First aid expenses are covered without regard to fault by Med Pay.

The correct answer is: medical payment

Question 69

A CGL provides liability coverage for:

Select one:

a. False statements about a competitor made before the policy was issued.
b. A person whose reputation is harmed by the insured’s innocent dissemination of information.
c. A radio station held liable for statements made by a talk-show announcer.
d. The quality of a service does not meet advertised standards.

Answer 69

The correct answer is: A person whose reputation is harmed by the insured’s innocent dissemination of information.

Question 70

A liability policy will pay which of the following ONLY if the insured is liable?

Select one:

a. medical payments
b. bodily injury
c. supplementary
d. bonds

Answer 70

The correct answer is: bodily injury

Question 71

Medical payments covers a tenant injured:

Select one:

a. in the unit occupied by the landlord.
b. in the tenant’s unit.

Answer 71

The correct answer is: in the unit occupied by the landlord.

Question 72

A store’s CGL will cover damage the store negligently causes to customer’s goods in the store’s possession unless the CGL contains which exclusion?

Select one:

a. Contractual
b. Products
c. Completed Operations
d. Property damages to goods in the Insured’s custody

Answer 72

I know, I know. This a bit of a cheap-question. The CGL won’t cover “property of others in the Insured’s care, custody, and control” because that is excluded in the policy. However, if it wasn’t a policy exclusion, it would be covered. So, be sure to read your policy to see if the usual exclusions are there.

The correct answer is: Property damages to goods in the Insured’s custody

Question 73

Which best covers an injury to a customer during an in-store product demonstration?

Select one:

a. Products
b. Premises

Answer 73

The correct answer is: Premises

Question 74

A customer is accidentally injured by an appliance store employee. Under a commercial liability policy, the customer’s bodily injury is:

Select one:

a. covered under Premises and Operations
b. covered under Directors and Officers Liability
c. covered under Completed Operations
d. not covered

Answer 74

Customers may be paid as victims if they are injured by the negligence of an Insured (the store owner or the store employees). But, customers are not insureds if they injure another customer. The injured customer can probably recover under the other customer's Homeowner Personal
Liability policy (a topic covered on the Property Exam).

The correct answer is: covered under Premises and Operations

Question 75

A comprehensive Commercial General Liability Coverage Form:

Select one:

a. has a $500 limit for defense costs
b. covers loss of earnings up to $250 per day

Answer 75

The correct answer is: covers loss of earnings up to $250 per day

Question 76

A repair shop’s CGL covers which of the following situations?

Select one:

a. An employee is injured while on vacation.
b. An employee is injured while on the job.
c. A dry cleaner’s boiler explodes after being repaired by the insured.
d. The insured’s employee accidentally damages a copy machine leased to the insured.

Answer 76

The correct answer is: A dry cleaner’s boiler explodes after being repaired by the insured.

Question 77

A store sold a swing set which had been assembled in the store. The swing later collapsed causing injury. This would be covered by the CGL’s:

Select one:

a. Products and Completed Operations Liability
b. Premises Liability

Answer 77

Products and Completed Operations covers accidents that involve injury after product leaves the store. If the injury had occurred on the store’s premises, Premises Liability would have covered the claim.

The correct answer is: Products and Completed Operations Liability