chapter nine - commercial general liability coverage Flashcards
Which of the following legal liability exposures is covered if the employee of a business causes bodily injury to another person while working at the insured’s business location?
Completed operations
Products
Premises and Operations
Contingent liability
Premises and Operations
Which of the following is not considered a product liability exposure?
Goods stored on the insured premises
Goods manufactured and sold to customers
Product distributed to customers
Product consumed by a person at a restaurant
Goods stored on the insured premises.
(A product exposure involves the manufacture, sale, handling, distribution, or disposal of insured property away from the insured premises.)
Which of the following legal liability exposures is covered if bodily injury or property damage is caused by the insured’s negligent or faulty work?
Completed operations
Premises and Operations
Products
Contingent liability
Completed operations
(Coverage is for the bodily injury or property damage caused by negligent work by the insured, but this policy does not cover the actual work.)
Which of the following legal liability exposures is covered if a business employs an independent contractor?
Premises and Operations
Completed operations
Products
Contingent liability
Contingent liability
(This legal liability occurs when a business is held responsible for the actions or failures of others through a binding contract or agreement.)
A large department store leases space from a shopping mall and is responsible for the actions of parties as specified in the language of the lease.
Contractual Liability.
A home remodeling company that hires subcontractors to perform its installations is responsible for the actions or work of a subcontractor.
Contingent Liability.
The owner of a discount tire store was demonstrating how to rotate tires to a small crowd of people attending an outdoor vendor fair when a tire iron slipped and smashed the window of a nearby parked car.
Operations.
2 days after a company installed new kitchen cabinets in a customer’s home, but cabinets fell and caused damage to the walls, countertop, and kitchen sink.
Completed operations.
While shopping at a discount tire store, a customer suffered a head injury when a large tire display crashed into the aisle.
Premises.
Due to faulty design, a chair was manufactured with uneven legs, causing a customer who purchased the chair to sustain an injury after falling out of the chair.
Products.
In the _____ form, insurance covered is triggered when an “occurrence” takes place during the policy period and within the coverage territory.
Occurrence Form.
In a ____ form, covered is triggered if an “occurrence” takes place AFTER the retroactive date and is REPORTED within the policy period.
Claims-Made Form.
Which form provides coverage for a loss that takes place during the policy period and is not required to be reported within a certain time frame?
Claims-Made Form
CGL
Occurrence Form
Special Coverage Form
Occurrence Form.
(The occurrence form is appropriate when the insured knows that the loss occurred during the policy period, but not necessarily when it was reported.)
Coverage A
Bodily Injury and Property Damage Liability
Which of the following is NOT an exclusion in the CGL policy?
Insured’s Work
Host Liquor Liability for those with incidental exposure
Impaired Products
Insured’s Product
Host Liquor Liability for those with incidental exposure.
(Host Liquor Liability is provided for those who only have incidental exposure. For example, if the insured is an insurance agency and is hosting its annual Christmas party, the exclusion won’t apply. However, if the insured is a restaurant that serves alcohol and is hosting its annual Christmas party, the exclusion WILL apply.)
Which of the following is not a peril covered by personal injury?
Malicious prosecution
Libel
Breach of contract
Wrongful eviction
Breach of contract
(Libel, slander, misappropriation of advertising ideas or style of business, infringement of copyright, title, or slogan in the insured’s advertisement, and violation of privacy are also personal injury perils.)
Coverage B
Personal and Advertising Injury
Coverage C
Medical Payments
Supplementary Payments only apply to Coverages ___ and ___, are paid in addition to any applicable limit of liability.
A and B.
Provides protection for liability arising from false arrest, malicious prosecution, wrongful eviction, invasion of privacy, libel or slander, use of another’s ideas in the advertisement, infringement of copyright or slag in the insured’s advertisement.
Personal and Advertising Injury
The insurer will pay losses the insured becomes legally obligated to pay because of bodily injury or property damage provided the occurrence took place during the policy period and in the US, any of its territories/possessions, Puerto Rico, or Canada.
Bodily Injury and Property Damage
All of the following are insured under the CGL, except:
A person participating in an athletic event
A volunteer worker acting on behalf of the insured
A partner
A stockholder
A person participating in an athletic event.
The most the insurer will pay during the policy period for medical expenses under Coverages A, B, and C is which of the following limits of liability?
Personal and Advertising Injury Limit
General Aggregate Limit
Medical Expense Limit
Per Occurrence Limit
General Aggregate Limit
(The Products-Completed Operations is another limit, and all the limits pay regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits)
The Condition that states that the insurance applies separately to each insured is called __________________.
Legal Action
Other Insurance
Severability
Insured’s Right
Severability
Several suits against several insureds do not increase the insurance for that occurrence or policy period.
Which of the following is not included in the definition of an insured contract?
Sidetrack agreement
Tenant agreement
Easement agreement
Contract for lease of premises
Tenant Agreement.
(The insured contract describes the liability assumed by the insured and also includes an obligation to indemnify a municipality, an elevator maintenance agreement, and an agreement in which an insured assumes tort liability.)
Describes where the occurrence must take place to be insured and must be within the US, its territories and possessions, Puerto Rico, and Canada.
Coverage Territory
Tangible property, other than an insured’s product or work, which cannot be used because it is thought or known to be defective, inadequate, deficient, or dangerous.
Impaired property
Any goods or products that are manufactured, sold, handled, distributed, or disposed of by the named insured.
Your Product.
Operations performed by the named insured including materials, parts, or equipment furnished in connection with the operations.
Your work.
A contract in which if the insured assumes liability the liability will be transferred to the insurance contract.
Insured Contract
Each of the following provides buy back coverage for the insured, except:
Pollution extension endorsement
Modified pollution extension endorsement
Limited pollution liability coverage
Pollution liability coverage for designated sites
Modified pollution extension endorsement.
(The CGL policy excludes bodily injury or property damage arising from discharge, dispersal, seepage, migration, and release or escape of pollutants, and these three coverages are bought back for coverage on an individual account basis.)
Damages from which of the following would apply to the per occurrence limit under a Commercial General Liability policy?
Invasion of privacy
Medical payments
Libel and slander
False arrest
Medical Payments.
(The Per Occurrence Limit only applies to certain damages under Coverages A and C. The three wrong options are examples of Personal Injury, which is under Coverage B and counts toward a different limit.)
What is the difference between the Commercial General Liability Occurrence and Claims-Made forms?
The types of occurrences they cover
The deductible
The policy period
The coverage trigger point
The coverage trigger point.
(The trigger is the event that brings coverage into play. It may be an occurrence either of bodily injury or property damage; or, in a form with a claims-made trigger, the formal making of a claim.)
Personal Injury Liability Insurance covers all of the following, except:
False Arrest
Malicious prosecution
Libel and Slander
Bodily Injury
Bodily Injury.
Under the CGL, which of the following would exclude from coverage the legal liability associated with a product?
Strict liability
Breach of warranty
Negligence
Expected or intended injury
Expected or intended injury.
Which of the following would be found in Section I of a CGL?
The policy definitions
List of insureds under the policy
Coverage for bodily injury and property damage
The Commercial General Liability conditions
Coverage for bodily injury and property damage.
Which of the following is considered an insured’s product?
Remodeled building
Goods sold by the insured at a trade show
Merchandise held by the insured as inventory
Goods shipped to a retailer to be sold
Goods sold by the insured at a trade show.
A covered product is one manufactured and sold by the insured and transferred to the possession of a buyer.
All of the following are true about extended reporting periods, except:
The basic extended reporting period does not increase the policy limits
The supplemental tail requires an annual premium
Under the supplemental tail, the insured must request coverage within 60 days after the end of the policy term
The basic extended reporting period allows a claim to be reported after the policy period for a specified number of days
The supplement tail requires an annual premium.
The supplemental extended reporting period has a one-time premium.
A CGL policy with a general aggregate limit of $300,000 and a per-occurrence limit of $100,000 would have how much remaining after paying a claim for a $200,000 loss, and subsequently a second claim for a $100,000 loss?
$300,000
Zero
$200,000
$100,000
$100,000.
(The first claim would only be paid up to the per occurrence limit of $100,000. The second claim would paid in full. Combined, the two claims could reduce the aggregate by $200,000, leaving only $100,000 available for all other claims in the policy period.)
Which of the following is true concerning the Premium Audit condition of the Commercial General Coverage Part to the Commercial Package Policy?
Premium Audit refers to the right of the insured to contest the premium after policy issuance
Premium Audit is the comparison of the insured’s premium with the average premium in the insured’s rating classification
Premium audit determines what the earned premium will be at the end of the policy period
Premium Audit is the action taken by the insurer to see that the insured’s rating is properly classified
Premium audit determines what the earned premium will be at the end of the policy period.
(The insured must keep records sufficient for the insurer to compute premiums based upon sales, receipts, or payroll. After an audit, an additional premium is required if these records show that these items are greater than the estimates that developed the deposit premium.)
Which of the following is not an example of personal injury?
Infringement of copyright
A broken leg
False arrest
Misappropriation of a title or slogan
A broken leg.
Advertising Injury Coverage includes all of the following, except:
Wrongful entry
Misappropriation of advertising ideas or style of doing business
Infringement of copyright
Violation of copyright, title or slogan
Wrongful entry.
Wrongful entry is an example of Personal Injury
All of the following are true of Supplementary Payments under the CGL, except:
They reduce the limits of insurance
They apply to bodily injury and property damage liability
They pay defense costs incurred by the insurer
They include the cost of bail bonds up to $250
They reduce the limits of insurance.
A CGL policy provides coverage for:
Professional Liability
Pollution Liability
Operations Liability
Employee Injury
Operations Liability.
Pollution, Contractual, and Employee Liability are exclusions under a CGL.
Which of the following is false about the CGL’s two coverage forms?
The retroactive date is unique to the Claims-Made form
Coverage under the occurrence form is based on when the loss is reported
Coverage is triggered when an occurrence takes place during the policy period
The claims-made form covers losses that occur after the retroactive date and before the policy expiration date
Coverage under the occurrence form is based on when the loss is reported.
(With the Occurrence form it doesn’t matter when the loss is reported, but the date the loss occurred must be during the policy period.)
Which of the following would not be excluded under Coverage A of the CGL?
Damage to insured’s work
Operation of mobile equipment
Workers’ Compensation
Product recall
Operation of mobile equipment.
(The operation of mobile equipment is covered, though the transportation of this equipment to or from a job site is specifically excluded.)
Which of the following would be an insured under the CGL policy?
Spouse of volunteer worker
Trustee’s spouse
Spouse of an LLC member
Spouse of a partner
Spouse of a partner.
(The spouse of an individual or partner is also an insured. Spouses of shareholders, LLC members, employees, volunteers, trustees, directors, and officers are not insured under the policy)
Medical payments coverage under the Commercial General Liability Coverage Forms includes reasonable medical expenses if they are incurred and reported within how many years following an accident?
5
3
1
2
1.
(Expenses that have been incurred and reported within one year of the date of the accident are covered under this section.)
Which of the following would not be considered an insured under a CGL?
Volunteer worker
Real Estate Manager acting on behalf of the insured
An LLC employee’s spouse assisting in cleaning the office so they can leave for vacation more quickly
Executor of the CEO’s estate after his death
An LLC employee’s spouse assisting in cleaning the office so they can leave for vacation more quickly.
(The spouse of an LLC employee is not considered an insured. The LLC, its members and managers are considered insureds.)
Why is bodily injury to an employee excluded in Commercial General Liability Insurance?
It falls under the doctrine of contributory negligence
Coverage is provided under Workers’ Compensation
The employee is considered an insured
It falls under the doctrine of assumption of risk
Coverage is provided under Workers’ Compensation.
General Liability policies exclude injuries to employees because they are covered by Workers’ Compensation
All of the following are true of the Commercial General Liability Conditions (Section IV) under the Claims-Made Form, except:
The insured must maintain records necessary so the insurer may compute the premium
Insurance applies as if each named insured were the only named insured, and separately to each insured against whom the claim is brought
The insured cannot sue the insurer until all terms of the policy have been fully complied with
Insolvency of the insured relieves the insurer of any obligations under the policy
Insolvency of the insured relieves the insurer of any obligations under the policy.
(Neither bankruptcy nor insolvency of the insured or of the insured’s estate relieves the insurer from its obligations.)
Which type of reporting period is provided automatically under the CGL written on a claims-made basis?
Supplemental Extended Reporting Period
Premium Extended Reporting Period
Basic Extended Reporting Period
Primary Extended Reporting Period
Basic Extended Reporting Period.
(The basic extended reporting period (BERP) is provided by the policy for no extra charge. It permits claims to be reported for 60 days following the termination of the policy.)
Which of the following is covered by Medical Payments under the CGL?
Bodily injury to a person on a part of the premises that the insured owns or rents and that the person normally occupies
Bodily injury to an insured that is injured while playing tennis
Bodily injury to an insured’s customer while shopping on the insured’s business premises
Bodily injury to a person hired to do work for the insured
Bodily injury to an insured’s customer while shopping on the insured’s business premises.
Which of the following conditions would not be found in Section IV of the CGL?
The insured cannot sue the insurer until all terms of the policy have been fully complied with
An insured’s insolvency relieves the insurer of any obligations under the policy
The insured must maintain records necessary so the insurer may compute the premium
Insurance applies as if each named insured were the only named insured, and separately to each insured against whom the claim is brought
An insured’s insolvency relieves the insurer of any obligations under the policy.
Which statement is false regarding the completed operations exposure?
The exposure must occur away from the insured’s premises
It includes risks of defective installation, construction or repair
Coverage includes replacement of the work that caused the loss
It begins after the insured’s operations are completed and the insured leaves the job site
Coverage includes the replacement of the work that caused the loss.
(Coverage will pay for bodily injury and property damage caused by negligent or faulty workmanship by an insured, but will not pay for the cost to replace the work that caused the loss.)
What is the date after which an occurrence can take place and be covered under the claims-made form?
The Countersignature Date
The Retroactive Date
The Expiration Date
The Effective Date
The retroactive date.
(The Retroactive Date is the date that defines the period of coverage under a claims-made form. Claims resulting from occurrences prior to the policy’s stated retroactive date are excluded.)
Choose the false statement about the CGL policy.
Contingent Liability Policies are also called Owners and Contractors Protective Liability
Coverage is automatically provided for watercraft liability
The insurer’s written consent is required for any transfer of rights and duties to another person
The insurer may examine the insured’s books anytime during the policy period, or within 3 years after the policy ends
Coverage is automatically provided for watercraft liability.
Choose the false statement about the CGL policy.
Changes to a CGL policy may be made only by endorsement issued by the insurer
The General Aggregate Limit will be reduced by a medical payment
A bodily injury claim must be caused by an occurrence and it must have taken place in covered territory
A Products and Completed Operations Liability claim will reduce the General Aggregate Limit
A products and Completed Liability claim will reduce the General Aggregate Limit.
(Products and Completed Operations claims have their own aggregate limit and these claims do not reduce the General Aggregate)
In addition to conducting accounting business in his own office, Tom also goes to client’s offices for appointments, which represents which type of exposure?
Completed Operations
Contingent Liability
Product
Premises and Operations
Premises and Operations
Premises and operations liability coverage covers an insured’s operations both on and off its own premises
Which of the following is not a contingent liability exposure?
Owners and Contractors Protective liability exposure
Liability exposure of insured’s sub-contractors
Premises liability exposure
Contractual liability exposure
Premises Liability Exposure.
Contingent liability exposure exist when the insured is held liable for the actions or failure of actions of others
Which of the following would not be excluded under Coverage A of the CGL?
Workers’ Compensation
Operation of mobile equipment
Damage to insured’s work
Product recall
Operation of mobile equipment.
Which of the following would not be covered under Coverage A of the CGL?
An insured’s employee is injured when a bookcase in the office falls on her
An insured’s client was injured when she slipped on a loose rug on the insured’s premises
An insured was visiting a client in Canada, who was injured after he tripped over the insured’s briefcase
While working at a trade show, an insured’s employee started a small fire
An insured’s employee is injured when a bookcase in the office falls on her.
(Workers’ Compensation insurance will cover the injuries to an employee arising out of work activities)
Who is not an insured under the Commercial General Liability policy?
The spouse of a named insured
Members of a past partnership not listed in the Declarations
Executive officers, with respect to their duties as the insured’s officers or directors
Employees other than executive officers, for acts within the scope of their employment
Members of a past partnership not listed in the Declarations.
(There may be several insureds other than those named in the Declarations. However, only the current members of a partnership or LLC are considered insureds.)
