Chapter 6

Question 1

1-1 What are two broad categories of liability loss insured under Coverage A and Coverage B of the CGL form?

Answer 1

1) BI and PD, 2) Personal and advertising injury liability.

Question 2

1-2 What is the premises and operations liability exposure?

Answer 2

The possibility that an organization will be held liable because of BI or PD caused by an accident that either occurs on the organization’s premises or arises out of the organization’s ongoing (as opposed to completed) operations on or off those premises.

Question 3

1-3 What is the products and completed operations liability exposure?

Answer 3

The possibility that an organization will be held liable because of BI or PD caused by an accident arising out of products manufactured, sold, or distributed by the organization and occurring after the products are no longer on the organization’s premises or in the organization’s possession or by an accident arising out of the organization’s completed work, including defective parts or materials furnished with the work.

Question 4

1-4 Give 3 examples of personal and advertising liability offenses covered by the CGL form.

Answer 4

False arrest, wrongful eviction, libel, slander, infringement upon another’s copyright in the insured’s advertisement.

Question 5

1-5 Under Coverage C– Medical Payments of the CGL form, what must occur for medical expenses to be covered?

Answer 5

Must result from BI due to an accident occurring on the insured’s premises or arising out of the insured’s operations (other than completed operations) anywhere in the coverage territory.

Question 6

1-6 What are the components of general liability coverage in a CPP?

Answer 6

One or more general liability declarations forms; One or more general liability forms; any applicable endorsements.

Question 7

2-1 Identify the 7 conditions the occurrence version of the CGL policy insuring agreement imposes on the insurer’s duty to pay damages.

Answer 7

1) insured must be legally obligated (liable) to pay damages, 2) The damages must result from BI or PD as defined in the policy, 3) The policy must apply to the BI or PD, 4) The BI or PD must be caused by an occurrence, 5) The occurrence must take place in the coverage territory, 6) The BI or PD must occur during the policy period (The claims-made form contains a different provision in this regard, 7) The BI or PD must not be known to the named insured or certain other persons before the policy period.

Question 8

2-2 Identify and describe the 3 basic types of damages a court might award.

Answer 8

Special (medical bills), General damages (pain & suffering), Punitive damages (punish/make example of)

Question 9

2-3 Identify both elements included in the CGL policy’s definition of property damage.

Answer 9

Physical injury to tangible property, including resulting loss of use of that property; Loss of use of tangible property that is not physically injured.

Question 10

2-4 Identify the CGL policy’s coverage territory.

Answer 10

US (and territories/possessions), PR, Canada. Other international waters and airspace are included in the coverage territory if the injury or damage occurs in the course of travel or transportation to or from places included in the basic coverage territory.

Question 11

2-5 Explain what proceedings, other than formal lawsuits, are included in the CGL definition of “suit.”

Answer 11

The insurer has the right and duty to defend the insured against any suit that seeks damages for BI or PD to which the insurance applies. The policy defines suit to include arbitration or other ADR proceedings as well as formal lawsuits.

Question 12

3-1 Explain how coverage A of the CGL Coverage Form would cover BI resulting from the use of reasonable force to protect persons or property.

Answer 12

Exclusion A eliminates coverage for BI or PD that is expected or intended by the insured. However, the exclusion does not apply to both BI resulting from the use of reasonable force to protect persons or property. An act of protection property would bee covered despite the intentional use of force.

Question 13

3-2 Explain why the CGL policy’s Pollution exclusion is worded broadly .

Answer 13

To encompass the many ways pollutants may enter the environment.

Question 14

3-3 Identify the two general categories of loss for which the CGL’s Mobile Equipment exclusion eliminates coverage.

Answer 14

The transportation of mobile equipment by an auto that is owned, operated, rented, or borrowed by an insured. 2) The use of mobile equipment in a prearranged racing, speed, or demolition contest or stunting activity.

Question 15

3-4 Identify examples of items for which the CGL policy’s Damage to Property exclusion eliminates coverage.

Answer 15

1) Property owned, rented, or occupied by the named insured, 2) Premises the named insured has sold, given away, or abandoned, if the damage arises out of any part of such premises, 3) Property loaned to the named insured, 4) Personal property in the CCC of an insured, 5) The particular part of any real property on which work is being done by the named insured or any contractor or subcontractor working for the named insured if the damage arises from the work, 6) The particular part of any property that must be restored, repaired, or replaced because the named insured’s work was incorrectly performed on it.

Question 16

3-5 Identify the purpose of the CGL policy’s exclusions related to the insured’s product and work.

Answer 16

Prevent the insurer from having to pay for failures of the insured’s products and work – other than BI or damage to property that is not the insured’s own product or work.

Question 17

4-1 Identify examples of the offenses that the CGL Coverage Form describes as personal and advertising injury.

Answer 17

False arrest, detention, or imprisonment; malicious prosecution; wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies, committed by or on behalf of its owner, landlord, or lessor; oral or written publication, in any manner, of material that slanders or libels a person or organization’s goods, products, or services; oral or written publication, in any manner, of material that violates a person’s right of privacy; The use of another’s advertising idea in an advertisement; infringement on another’s copyright, trade dress, or slogan in an advertisement.

Question 18

4-2 Identify the CGL exclusion that would apply if an insured knowingly uses a competitor’s advertising ideas in his or her own advertisements.

Answer 18

Knowing violation of rights of another.

Question 19

4-3 Describe the CGL policy’s Contractual Liability Exclusion

Answer 19

Applies to any injury for which the insured has assumed liability in a contract or agreement except for liability that the insured would have in the absence of the contract.

Question 20

4-4 An insured who is an auto dealer advertises a new car for $3,399 instead of it’s actual price of $33,999. When the insured refuses to sell the car for the advertised price, several potential buyers sue for the $30,600 difference between the actual price and the advertised price. Identify the CGL exclusions that applies in this circumstance.

Answer 20

Wrong Description of Prices

Question 21

4-5 Identify the primary difference between the CGL Coverage A and Coverage B Pollution exclusions.

Answer 21

Coverage B has no exceptions

Question 22

5-1 What does the insurer agree to pay under the CGL Coverage Form C insuring agreement?

Answer 22

Medical expenses (including by definition, funeral expenses) for BI caused by an accident.

Question 23

5-2 Identify the categories of persons excluded from the CGL policy’s medical payments coverage.

Answer 23

Any insured (besides a volunteer worker); anyone hired to do work for an insured or for a tenant of the insured; a person injured on that part of the named insured’s premises that the person normally occupies; a person entitled to workers comp benefits for the injury; a person injured while taking part in any physical exercises, games, sports, or athletic contests.

Question 24

5-3 Explain why the med pay coverage provided by the CGL’s policy Coverage C is not considered liability insurance.

Answer 24

Coverage is provided regardless of liability.

Question 25

6-1 Which CGL policy insuring agreements are supplemented by the supplementary payments section?

Answer 25

Coverage A & B

Question 26

6-2 Are the supplementary payments subject to the limits of insurance that apply to CGL coverage?

Answer 26

No; they are paid in addition. However, the insurer’s obligation to pay for these supplemental payments ends as soon as the applicable limit of insurance has been exhausted in paying damages for judgments or settlements.

Question 27

6-3 Identify 3 supplemental payments included in the CGL coverage form.

Answer 27

All expenses incurred by the insurer; $250 for bail bonds required due to traffic accidents or traffic law violations involving any covered vehicle (typically mobile equipment); the cost of bonds to release any property belonging to the insured held by the plaintiff to ensure payment of any judgment that may be rendered against the insured. The insurer is not required to provide either of the bonds previously described; its only obligation is to pay the premium; reasonable expenses incurred by the insured at the insurer’s request, including loss of earnings for missing work to testify, attend court, or assist in the defense; court costs or other costs (excluding actual damages) assessed against the insured in a suit; interest on judgments awarded against the insured.

Question 28

6-4 Amelia owns a tattoo parlor and insures her business with a CGL policy. Recently, Amelia was sued by a customer who developed a skin infection after receiving a new tattoo. The case went to court , and Amelia’s insurer asked her to testify. Amelia missed 3 days of work for the trial and suffered lost income as a result. How much will Amelia’s CGL policy compensate her, if at all, for loss of earnings?

Answer 28

Supplementary payments will pay reasonable expenses incurred by Amelia at the insurer’s request, including loss of earnings (up to $250/day) when she must miss work to testify, attend court, or otherwise assist in the defense.