Chapter 9

Question 1

List the information the declarations page contains.

Answer 1

1 - Name of the insurer and the agent or broker
2 - The named insured
3 - The policy period
4 - The limits of insurance
5 - Form of business (individual, corporation, etc)
6 - Description of business
7 - Premises owned, rented, or occupied by insured
8 - Premium base and rate
9 - Premium
10 - Minimum retained premium
11 - Endorsements
12 - Countersignature

Question 2

Advance Premium

Answer 2

Deposit premium payable in advance of the policy term.

Question 3

Total Premium

Answer 3

Includes any applicable taxes.

Question 4

Countersignature

Answer 4

A secondary confirmation that the policy document is authentic. Signed by the broker or other authorized representative of the insurer.

Question 5

What risks is a garage operator exposed to and how is coverage provided?

Answer 5

A - Care of customer vehicles, premises, products, completed ops, elevators, and contractual liability

B - Covered by garage automobile insurance (SPF 4) and general liability insurance.

Question 6

What are the two principal methods used to protect employers against costs arising from employee injuries?

Answer 6

1 - Workers’ compensation statutes

2 - Employers’ liability (with or without voluntary compensation) coverage

Question 7

What activities are carried out by workers’ compensation boards?

Answer 7

A - Financial benefits to injured employees
B - Rehabilitation programs
C - Accident prevention
D - Compensation for occupational diseases

Question 8

What benefits do workers’ compensation boards make available to injured employees?

Answer 8

1 - Medical expenses without limit

2 - Percentage of earnings for total disability, limited to a maximum amount

3 - Funeral expenses to a specified amount

4 - Widow or invalid widower receives a lump sump plus a monthly payment (duration varies)

Question 9

What endorsement can be added to a policy to cover injured employees even when negligence was not a factor, and why would an employer purchase it?

Answer 9

1 - Voluntary Compensation for Employees Endorsement

2 - Employers may feel a moral obligation to compensate injured employees even if the employer is not legally liable (only needed when employees are not covered under workers’ compensation legislation)

Question 10

What must an employee do to collect under the voluntary compensation for employees?

Answer 10

Release the employer from any legal liability claims under common law.

Question 11

When might Contingent Employers’ Liability Coverage be needed?

Answer 11

1 - Employee working outside home jurisdiction
2 - Liabilities assumed under contract
3 - When benefits denied by the Board

Question 12

What is bailees’ coverage and how is it handled?

Answer 12

1. Coverage for damage to property of others in the insured’s possession or custody.

A. Special insurance policies are available to cover the insured’s liability for damage to the property of others from specified perils.

Question 13

Why would an employer purchase a non-owned automobile liability policy?

Answer 13

i. When employees, on behalf of the employer, operate non-owned automobiles.
ii. When an employee has an automobile accident while on company business.

Question 14

What two main questions are asked when an employee is involved in an automobile accident?

Answer 14

1 - Was the (employee) driver on company business at the time of the accident?

2 - Was the (employee) driver acting as an “employee” rather than as an “independent contractor”?

Question 15

What are the four categories of vehicles that represent a non-owned exposure to employers?

Answer 15

A - Hired or rented automobiles

B - Employees’ automobiles

C - Independent contractors’ automobiles

D - Other automobiles

Question 16

Personal Liability Insurance

Answer 16

Pays for compensatory damages or legal defence for bodily injury or property damage arising out of the insured’s status as private citizens.

Question 17

How is personal liability insurance generally sold?

Answer 17

As part of a residential package policy, such as:

1. a Homeowners,
2. Condominium Unit Owners’, or
3. Tenants’ Policy.

Question 18

What are the main areas in which one is likely to be found negligent under personal liability?

Answer 18

A- Ownership or occupancy of a dwelling
B- Actions of the insured and members of the family or household
C- Activities of pets

Question 19

What are the four sections personal liability coverage is provided?

Answer 19

1 - Personal liability (personal actions)
2 - Premises liability
3 - Tenants’ legal liability
4 - Employers’ liability (residence employees)

Question 20

What two extensions of coverage are offered under the personal liability policy?

Answer 20

i - Voluntary medical payments

ii - Voluntary payment for damage to property

Question 21

What type of vehicles are covered under the personal liability policy?

Answer 21

A - Self-propelled lawn mowers, snow blowers, garden-type tractors of not more than 25 HP, used mainly on your property and not for hire

B - Motorized golf carts while used on a golf course and motorized wheelchairs

Question 22

What is the farmers’ personal liability policy designed to cover?

Answer 22

The exposure of a farm in addition to personal activities.

1. personal liability insurance for the farmer 2. insurance for legal liability arising out of the farming operations and
2. employers’ liability coverage for domestic servants.

Question 23

How are farmers personal liability policies rated?

Answer 23

A. According to a rate schedule for different classifications.

B. Could be a fixed premium up to a certain number of acres, and then

C. a specified rate per acre for the remaining land.

Question 24

Business

Answer 24

Any continuous or regular pursuit undertaken for financial gain including a trade, profession, or occupation other than farming.

Question 25

Business Property

Answer 25

Property on which a business is conducted, property rented in whole or in part to others or held for rental, other than a farm.

Question 26

Farming

Answer 26

Includes the operation of roadside stands maintained solely for the sale of farm products principally produced by the insured.

Question 27

How does excess liability coverage operate?

Answer 27

To supplement limits of liability that are available at the primary level of a particular underlying policy.

Question 28

Follow Form Policy

Answer 28

1. Relies on the wording as it exists at the primary level.

2. The coverage is precisely the same as the primary policy.

Question 29

Stand Alone Policy

Answer 29

Wordings are complete as to conditions, exclusions, insuring agreement, extensions, and all the other parts that make up a policy wording. Coverage may be identical to the primary policy in force or it may be more restrictive.

Question 30

What is an umbrella policy?

Answer 30

A broad blanket insurance providing extra liability protection. It operates in excess of underlying liability policies and it provides primary level insurance for the broader coverage it provides. It fills in gaps of coverage that may exist at primary levels and adds another layer of limits.

Question 31

What are the three main functions of an umbrella policy?

Answer 31

a - Provides excess limits of insurance over underlying policies.

b - Provides additional coverage beyond underlying policies which is often subject to a self-insured retention (SIR).

c - Provides an aggregate drop-down feature which drops down to cover losses when the underlying policy aggregate has been exhausted (not usually subject to an SIR)

Question 32

Self-Insured Retention

Answer 32

i. An amount payable by the insured where the drop-down feature has been activated.
ii. In this instance the insured will pay the SIR amount and the insurer will pay the balance.

Question 33

Drop-Down Provisions

Answer 33

Outline when the policy becomes primary insurance for defence costs and settlement awards.

Question 34

How does a drop-down provision work?

Answer 34

1. The drop-down feature of an umbrella policy comes into effect when a loss is excluded by the primary policy but covered under the umbrella policy.
2. The umbrella policy drops down, becomes the primary coverage and generally includes a commitment to defend the insured (based on policy provisions).
3. It will also drop down when aggregate policy limits are exhausted.