Chapter 2 Flashcards by Chantal Hatch

What are four coverages provided under Section 1 - Coverages?

i) Coverage A - Bodily Injury and Property Damage Liability
ii) Coverage B - Personal Injury Liability
iii) Coverage C - Medical Payments
iv) Coerage D - Tenants’ Legal Liability

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Only certain types of losses are insured. What two types of losses are insured by Section?

i) Bodily Injury
ii) Property Damage

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What are the three components of bodily injury?

i) Actual physical injury to the body
ii) Sickness or disease
iii) Death resulting at any time, resulting from foregoing

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Identify three types of injuries not covered by the term bodily injury.

i) Mental anguish
ii) Nausea
iii) Hysteria

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What are two components of the definition of property damage? Also, provide an example of each.

i) Physical injury to tangible property
Example: Welder negligently starts fire in customer’s building
ii) Resulting loss of use of tangible property
Example: Resulting loss of use of tangible property

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What are three types of intangible property not insured by CGL’s?

i) Copyrights
ii) Patents
iii) Licenses

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When will CGLs respond to pay damages incurred by plaintiffs?

When clients are legally liable.

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What are three sources of liabilities business owners face? Provide an example of each.

i) Tort liabilities
Example: Negligent actions cause injury or damage
ii) Certain contractual liabilities
Example: Tenant assumes liability of landlord in lease
iii) Statutory Liability
Example: Liabilities incurred by Occupier’s Liability Acts

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Coverages are only provided for occurrences, there is no coverage for losses arising from accidents.

False

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Criminal acts are insured by CGLs.

False

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Coverage territory is defined as Canada and the USA (including its territories and possessions.)

True

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Your clients have a factory in Brazil. An explosion at this factory causes damage to nearby businesses. CGLs will insure lawsuits from this explosion.

False

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Losses must occur during the policy period to be insured

True

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Identify the coverage territory found in CGLs.

Canada, United States of America (including its territories and possessions)

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Losses arising from product liability claims may be insured when they occur outside the coverage territory. For them to be insured, two conditions must be met. Identify these conditions.

i) Product causing injury or damage was made or sold within coverage territory
ii) Suit for damages must be brought with coverage territory

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Losses arising from business operations may be insured when they occur outside the coverage territory. For them to be insured, three conditions must be present. Identify these conditions.

i) Person causing loss has home within coverage territory
ii) Person causing loss was only away for a short time on insured’s business
iii) Suit for damages must be brought within coverage territory

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Why do insurers have the right to defend?

Insurers must insure all facts are presented to court so proper defense is provided and proper judgement rendered.

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Insurers have the duty to defend when claim is groundless, false, or fraudulent.

True

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Insurers have the duty to defend when occurrence giving rise to the claim falls outside coverage.

False

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When does insurer’s duty to defend end?

Insurer’s duty to defend ends when policy limits have been expended.

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How does the right to investigate claims benefit insurers?

This allows insurers to gather information from witnesses and compile first-hand information.

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How does the right to settle benefit insurers?

This allows insurers to save money by settling with plaintiffs by avoiding expense of going to court.

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When will changes to existing businesses be insured by CGLs?

i) When clients acquire or form new organizations during policy term
ii) Coverage is provided for 90 days from date of acquisition or until policy expires whichever first occurs

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When bodily injury losses result from force, what conditions must be present for these losses to be covered?

i) Force must be reasonable
ii) Force must be used to protect persons or property

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Identify five insured contracts found in CGLs.

i) Lease of premises agreements ii) Sidetrack agreements iii) Easement agreements iv) Indemnification resulting from municipal ordinance v) Elevator maintenance agreements

What are three responsibilities imposed by elevator maintenance agreements?

i) Make all necessary adjustments ii) Apply lubricants as required iii) Inform building owner when repairs or replacement required

CGLs also insure contracts where the tort liability of another has been assumed. When must this assumption of liability occur before coverage is available on CGLs.

Assumption must occur prior to any injury or damage.

Are oral contracts insured by CGLs?

Yes

Are all liabilities assumed in contracts covered by CGLs? If not, what types of liabilities are not covered?

CGLs will not insure assumptions made regarding breach of contract

Will CGLs insure fines levied by governments because of the employer’s breach of Workers’ Compensation legislation.

Do CGLs cover injuries to employees?

When employee’s injuries occur on the job, how are they usually compensated?

Workers’ compensation plans generally pay benefits to injured workers

What common law right do employees waive when eligible for benefits under Workers’ Compensation laws?

Employees eligible for benefits under workers’ compensation laws give up their common law right to sue employer

When employees are not covered by Workers’ Compensation laws, what two recommendations should brokerages suggest?

i) Client should purchase Employers Liability Coverage ii) Clients should enroll staff in workers' compensation plans

Loss arising from automobile owned by business

Not Covered

Loss arising from tow truck used by business to tow customers’ automobiles to service station

Not Covered

Loss arising from unlicensed van used exclusively on insured’s premises

Covered

Loss resulting from snowmobiles

Not Covered

Loss caused when insured’s fork lift damages customer’s automobile in parking lot on insured’s premises

Covered

Loss caused by front-end loader owned by insured when being operated at work site

Covered

Loss caused by cherry picker attached to insured’s truck. The cherry picker damaged an underpass while traveling to a job site

Not Covered

Loss caused by drill rig attached to insured’s truck while at the job site during drilling operations

Covered

Identify extent of coverage provided by CGLs for attached machinery.

CGLs insure losses arising from use of attached machinery while at the site of use or operation.

When is coverage provided for owned watercraft?

CGLs insure losses arising from owned watercraft while ashore owned or rented premises.

Your client is a roofing contractor installing a new roof on a school that is being built. The roofing job is valued at 200,000. If this work causes damage to this new school and its contents, what limitation would their CGL impose?

CGLs would not respond to pay for damage caused to work done by client. In this loss, no coverage would be provided for the $200,000 roofing job.

CGL’s do not insure damage to property in the care, custody or control of insureds. CGL’s will insure damage to other property damaged which results from losses sustained to property in insureds care custody or control. Your client installs overhead doors for commercial businesses. Yesterday while welding a support bracket onto a door at a customer’s building, a fire ensued. Indicate if the following property would be covered or not covered. Fire damage to the support bracket

Not Covered

Covered

Indicate if the following losses would be insured by CGLs. Indicate covered or not covered. Breakdown of dryer sold by insured’s store

Not Covered

Indicate if the following losses would be insured by CGLs. Indicate covered or not covered. Damage to clothes in dryer resulting from breakdown of thermostat in dryer

Covered

Indicate if the following losses would be insured by CGLs. Indicate covered or not covered. Expenses incurred by insured to replace faulty thermostat in above dryer

Not Covered

What limitations of coverage apply to non-owned watercraft?

i) Non-owned watercraft must be less than 8 meters (26 feet) in length ii) Non-owned watercraft cannot be used for carrying passengers or property for a charge

State the conditions imposed by the Canadian Currency clause.

All premiums are paid in Canadian dollars, and all losses are paid in Canadian dollars.

What benefits are enjoyed by the first named insured?

i) Cancellations requests can only be made by first named insureds ii) Refunds are payable to first named insureds iii) Notice of termination is sent only to first named insureds

Explain the condition “Premium Audit”.

Insurers reserve the right to review client’s books and records to ensure proper premium was charged. Premium on policy is deposit premium only.

How is coverage affected by the Separation of Insureds, Cross Liability Clause?

i) When one insured causes injury or damage which is excluded by CGL, coverage may still be available for other insureds ii) When one insured breaches policy condition thereby negating coverage, this breach may not affect other insureds

What are three components of the definition of “Products”?

i) Product sold or distributed ii) Containers and other equipment furnished along with product iii) Warranties and representations made regarding product

What are four components of the definition of “Work”?

i) Work done by insured ii) Work done on behalf of insured by subcontractors iii) Materials, parts and equipment used in connection with work iv) Warranties and representations made regarding work

What are three factors that should be considered when advising your insured on proper limits of coverage?

i) Amounts of previous awards incurred by similar businesses ii) Inflation iii) Existence of insurance

What types of contractors are not affected by the exclusion relating to “your work”?

General contractors would not be affected by this exclusion because work done on behalf of insured by contractors is not excluded.

What are three expenses not insured by CGLs which businesses may incur when they become aware of deficiencies in their product?

i) Withdrawing product or work from market ii) Recall expenses iii) Inspection expenses

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability When a store owner throws a threatening nine year old 20 feet through the air. The child is injured when he lands in the path of oncoming automobiles

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability A store owner is escorting a shoplifter out of his store. While doing so the shoplifter struggles to get free and stumbles and hits their head on the door frame.

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Losses arising from the assumption of landlord's liability in a lease

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Liability assumed in an easement agreement

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Tort liability assumed in contract prior to occurrence of any tort

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Assumption of all liabilities of contractor hired to repair insured's roof

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Bodily injury to employees arising from the course of their employment

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Damage to customer's car by forklift used exclusively on insured's premises

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Bodily injury to customer injured by insured's unlicensed half ton truck. This truck is used exclusively on insured's premises.

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Drill rig attached to insured's truck caused extensive damage to passing automobiles as it swayed back and forth. It seems the insured did not secure the drill rig prior to driving down the highway.

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability While at the job site, the above insured damages an underground natural gas line while using drill rig attached to his truck.

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability While taking customers on a weekend fishing trip the insured turns his boat sharply ejecting two customers overboard. One of the customers drowns.

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability An employee starts a fire in his employer's rented store. The landlord is suing for damages.

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability While installing a toilet in a customer's home the insured over tightens the anchor bolts causing the toilet to crack.

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability The crack in the previous toilet goes unnoticed and resulting water damage is discovered two weeks later

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability An electrician crosses two wires and blows a switch he was installing. Damage was confined to the switch.

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability In the previous loss a small fire breaks out and causes damage to building.

Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability Your insured sold a lawnmower to a customer. The day after the sale the customer informs your insured that the lawnmower broke down last night.

Not Covered

Indicate whether the following loss would be Covered or Not Covered by Coverage A - Bodily Injury or Property Damage Liability An electrician was awarded a $50,000 job to do the wiring in a office building under construction. Three months after job completion a switch malfunctioned due to faulty installation. The insurer is prepared to pay damage to the building caused by the fire. Is the cost of re-wiring the building insured?

Not Covered

Describe false imprisonment.

False imprisonment involves holding persons against their will without legal cause or justification.

Describe false arrest.

False arrest includes components of false imprisonment, however, also includes holding persons to turn them over to police for prosecution.

What two conditions must exist for a suit alleging malicious prosecution to succeed?

i) Victim was arrested and then released ii) Facts showed that person making allegation did not really believe that crime was committed, but was motivated by other improper motives

What is an example of a claim involving wrongful entry?

Landlord uses pass key to enter tenant’s apartment without providing proper notice to tenant.

What type of claims have the longest tails?

Losses involving latent bodily injury losses often have long tails.

Identify the three theories used by courts to determine when occurrences take place.

i) Exposure theory ii) Exposure in resident theory iii) Manifestation theory

Describe two key features of Claims Made liability policies.

i) Coverage is triggered by reporting of losses during policy term. This ensures only policy in effect when loss reported will respond to loss ii) Claims made policies contain retroactive dates. Retroactive dates are the first day of the policy of the first claims made policy issued by insurer. These ensure claims made policy do not respond to losses occurring prior to retroactive date.

What endorsement would you recommend to insureds when replacing an existing Claims Made policy with another?

Extended Reporting Period Endorsement should be purchased when replacing one Claims Made policy with another Claims Made policy with different insurer. This would eliminate problems of potential coverage gaps.

To which policy is this endorsement attached?

These endorsements are attached to expiring Claims Made policies.

What are two advantages of Umbrella policies?

i) Provide coverage when primary (underlying) policies provide inadequate limits of coverage ii) Provide coverage when primary (underlying) policies exclude losses

Which policy responds first when losses are covered by both policies?

Underlying policies respond first when both policies insure loss.

What is a SIR?

Self Insured Retention (SIR)

When is SIR applied to losses?

SIRs are applied when underlying policies exclude loss and Umbrella Policy “drops down” to provide coverage.

What are two functions of SIRs?

i) Act as deductible for losses not expected ii) Encourages client to purchase underlying coverage for known exposures

4 factors In the CGL form development

1. high court case awards In the US 2. Latent Bodily injury (pro-longed exposure) 3. Environment disasters 4. Aviation Disasters