Commercial General Liability Flashcards
Kim owns an Art studio where she offers painting lessons and sells painting and art supplies. She carries a Commercial General Liability policy to cover her business. Which of the following situations would be covered by Kim’s CGL insurance?
Answer Choices: Select the Correct Answer
Mitch slips and falls at Kim’s home on her slippery kitchen floor and sustains an injury to his back.
Kim drives her Dodge sedan into the picket fence that surrounds the floral shop across the street from her studio. The fence is destroyed.
A client slips and falls on wet paint that was dripped on the floor in Kim’s art studio. The client breaks her arm.
Kim is injured when she falls from a stepladder at work in her art studio.
A client slips and falls on wet paint that was dripped on the floor in Kim’s art studio. The client breaks her arm. is correct.
EXPLANATION:
The CGL policy is designed to cover “premises liability” and business liability exposures. This would cover the client who slipped and fell in the studio. The other answer choices would be covered under different types of liability policies.
Captain Spew’s Seafood Restaurant is covered by a Commercial General Liability policy. A customer is served oysters in the restaurant’s lovely seating area and 20 minutes later begins throwing up at the table. This claim will be paid under which of the following hazards?
Answer Choices: Select the Correct Answer
Premises liability because the customer was still on the premises when he ate the food.
Products liability because the food is a product of the restaurant.
Completed operation liability because the food preparation was complete.
Personal injury liability because the customer was injured by the food.
The correct answer is: Products liability because the food is a product of the restaurant.
EXPLANATION:
Food served in a restaurant is one of the only exceptions to the “products liability” coverage that the product be removed from the premises before coverage would apply.
Which of the following is NOT an “insured” under a CGL policy?
Answer Choices: Select the Correct Answer
The real estate manager of an LLC.
The spouse of a sole proprietor.
The spouse of an executive officer in an organization.
Employees.
The spouse of an executive officer in an organization. is correct.
EXPLANATION:
Please refer to the chart on Screen #13 in the CGL chapter; Module A to review “insureds” under a CGL policy.
The named insured’s spouse is considered to be an “insured” under all of the following named insured designations in a CGL policy, EXCEPT:
Answer Choices: Select the Correct Answer
Joint venture.
Individual.
Trust.
Partnership.
Trust. is correct.
EXPLANATION:
The spouse of the named insured is not covered as an “other insured” in a trust.
A business is looking to hire an independent contractor to perform some services for clientele of the business. The business would like to have an Owners & Contractors Protective Liability policy in place before the independent contractor begins working. Who purchases the policy and who is named on the policy as the insured?
Answer Choices: Select the Correct Answer
The business purchases the policy and names the independent contractor as the insured.
The independent contractor is the purchaser and the named insured on the policy.
The independent contractor purchases the policy and names the business as the insured.
The business is the purchaser and the named insured on the policy.
The independent contractor purchases the policy and names the business as the insured. is correct.
EXPLANATION:
The independent contractor purchases the policy and names the business as the insured. OCP insurance is used to cover the vicarious liability of a business that hires an independent contractor.
A customer looking at a new clothes iron in a department store did not notice the iron was plugged in, and was burned badly on one hand. The customer makes a claim of negligence against the store. This claim would fall under which of the following general liability exposures?
Answer Choices: Select the Correct Answer
Products liability.
Premises liability.
Operations liability.
Completed operations liability.
Premises liability. is correct.
EXPLANATION:
The scenario posed in the question was an example of a premises liability exposure because the accident occurred on the premises.
All of the following are “insured contracts” as defined by the Commercial General Liability policy, EXCEPT:
Answer Choices: Select the Correct Answer
Land and mine surveyor agreement.
Lease agreement.
Sidetrack agreement.
Elevator maintenance agreement.
Land and mine surveyor agreement. is correct.
EXPLANATION:
A land and mine surveyor agreement is not an “insured contract” that is covered by the CGL policy. The other three answer choices are covered by the CGL policy as “insured contracts”.
Frank’s Furniture, Inc. has hired Harry’s Handyman Services, Inc. to repair a staircase leading from the ground floor up to a furniture showroom on the second floor. While performing the repairs, a carpenter working for Harry drops a hammer and injures a Frank’s Furniture customer on the first floor. This situation would fall under which exposure of Harry’s Commercial General Liability?
Answer Choices: Select the Correct Answer
Contractual liability.
Products & Completed Operations liability.
Premises & Operations liability.
Independent Contractors legal liability.
Premises & Operations liability. is correct.
EXPLANATION:
The situation described in the question falls under the Premises & Operations liability exposure covered by a CGL policy. In this case, the “operations” are on going so the occurrence is not required to have happened on the premises.
Which of the following is NOT one of the five types of general liability exposures?
Answer Choices: Select the Correct Answer
Errors & Omissions.
Premises and operations.
Insured contracts.
Fire damage liability.
Errors & Omissions. is correct.
EXPLANATION:
Errors & Omissions is a specialized professional liability exposure, not a general liability exposure.
All of the following are examples of when “operations” or “work” is considered to be complete under a Commercial General Liability policy, EXCEPT:
Answer Choices: Select the Correct Answer
The operations (work) called for in the contract has been completed.
Work is completely finished at one work site, even if work is not complete at another site.
A portion of the work is complete and put to its intended use.
A portion of the work is complete and the remainder of the work has been turned over to a subcontractor.
A portion of the work is complete and the remainder of the work has been turned over to a subcontractor. is correct.
EXPLANATION:
When the contractor has turned over the remainder of the work (operations) to a subcontractor, the work is still considered to be incomplete.
Coverage A of a Commercial General Liability policy may provide all of the following coverages, EXCEPT:
Answer Choices: Select the Correct Answer
Bodily injury liability.
Premises and Operations liability.
Liability arising from slander.
Products liability.
Liability arising from slander. is correct.
EXPLANATION:
Liability from slander is NOT paid under Coverage A of the CGL policy.
Willie’s Widgets, Inc. holds a retirement party for a long-time employee with an open bar. One of Willie’s employees drinks too much, leaves the party and injures Matilda in a car accident. Matilda sues Willie’s Widgets for continuing to serve alcohol to an employee that was clearly drunk and then allowing him to drive. Which of the following statements BEST describes how Willie’s CGL policy will handle this third-party claim?
Answer Choices: Select the Correct Answer
The claim will be denied because liquor liability is excluded under the policy.
The policy will pay the claim because Willie’s Widgets is not a bar or liquor store in the business of selling alcohol.
The policy will pay to defend Willie’s against the claim but will not pay damages.
Willie’s must have endorsed their CGL policy to cover the social activities of the business for the claim to be covered.
The policy will pay the claim because Willie’s Widgets is not a bar or liquor store in the business of selling alcohol. is correct.
EXPLANATION:
The CGL policy excludes coverage for those in the alcoholic beverage business. Willie’s is in the “widget” business so the CGL policy will pay the claim.
Which of the following scenarios would NOT be excluded by the Coverage A - Exclusions section of the Commercial General Liability policy?
Answer Choices: Select the Correct Answer
Damage to the insured’s wheelchair ramp when one of his employees hits it while driving a truck into the insured’s warehouse.
Damage to a copy machine loaned to the insured by the office next door.
Damage from a fire caused by the insured in his rented office space.
Damage to a customer’s property that was given to the insured temporarily for safekeeping.
Damage from a fire caused by the insured in his rented office space. is correct.
EXPLANATION:
There is coverage for damage from a fire caused by the insured in his rented office space under the five exposures of Coverage A. You’ll remember that one of those five exposures is “Fire Damage Liability” or “Damage to Premises Rented to You”. The Coverage A exclusion for Damage to property the insured owns, rents, or occupies” is referring to damage caused by perils other than “a fire caused by the insured”.
All of the other answer choices are specifically excluded by Coverage A - Property Damage.
The Coverage A insuring agreement of a Commercial General Liability policy was rewritten to clarify that:
Answer Choices: Select the Correct Answer
Insurance can be written to cover claims that occurred prior to the retroactive date if the circumstances of the loss fit the definition of “occurrence” and not “accident”.
Insurance can be written to cover losses due to “occurrences” no matter how long they last.
Insurance cannot be written to cover losses that are known to have already taken place.
Insurance can be written to cover losses that are known to have already taken place as long as the coverage is written during the extended reporting period.
Insurance cannot be written to cover losses that are known to have already taken place. is correct.
EXPLANATION:
The Coverage A insuring agreement of a Commercial General Liability policy was rewritten to clarify that insurance cannot be written to cover losses that are known to have already taken place. This is called the “Known Loss Rule”.
Gordon’s Carpentry built a garage for a client. Two weeks after the work was completed, the garage collapsed and damaged the client’s car, equipment in the garage, and caused bodily injury to the client. Gordon’s CGL policy would not cover:
Answer Choices: Select the Correct Answer
The damage to the car.
The damage to the other equipment.
The damage to the garage.
Bodily injury to the client.
The damage to the garage. is correct.
EXPLANATION:
The garage is Gordon’s “work” and the policy would not cover damage to his work. The other damage, along with the bodily injury would be covered by the CGL. Again, a specific part of any property that must be restored, repaired, or replaced because the work was incorrectly performed on it is excluded.
Adam’s Applesauce, Inc. has been sold in four states and caused a salmonella outbreak. All jars of Adam’s Applesauce sold have been recalled. In this situation, which of the following statements is TRUE with regard to the coverage provided by Adam’s Commercial General Liability policy?
Answer Choices: Select the Correct Answer
The CGL policy will provide coverage for the loss Adam’s experienced in reimbursing the customer’s for the purchase price of the recalled product but will not cover the bodily injury liability incurred when a lawsuit is brought by those who contracted salmonella poisoning.
The CGL policy will provide coverage for the bodily injury liability incurred when a lawsuit is brought by those who contracted salmonella poisoning and the cost to dispose of the tainted product.
The CGL policy will not provide coverage for the cost to dispose of the tainted product but will provide coverage for the cost to remove the tainted product from grocery store shelves and dispose of it.
The CGL policy will provide no coverage.
The correct answer is: The CGL policy will provide no coverage.
EXPLANATION:
The CGL policy does not provide coverage for damages related to the recall of products.
Which of the following would be an example of “impaired property” as defined by the Commercial General Liability policy?
Answer Choices: Select the Correct Answer
A tool shed being constructed by the insured business collapses.
The insured’s component, when installed in a finished product of the insured, causes the product to shut down.
Another business has not met their contractual obligation to supply the insured business with a component necessary for its finished product to function.
The insured’s component, when installed in the finished product of another business, causes the product to shut down.
The insured’s component, when installed in the finished product of another business, causes the product to shut down. is correct.
EXPLANATION:
The only answer choice that is an example of “impaired property” as defined by the CGL policy is: “The insured’s component, when installed in the finished product of another business, causes the product to shut down.”