Commercial Liability Insurance

Question 1

Risk exposures covered by liability insurance include:

Answer 1

■	premises and operations;
■	products and completed operations;
■	fire legal;
■	independent contractors; and
■	contractual liability.

Question 2

The most common among the many business risk exposures of a business is the ___—that is, liability arising out of the business location or the activities of the business.

Answer 2

premises and operations exposure

Question 3

• Away from premise

* Exception: spoiled food

Answer 3

Products- Completed operations Exposure

Question 4

• Rentals are covered from fire.

* Tenant is held liable

Answer 4

Fire Legal Liability

Question 5

A business insured may contract with an independent company to perform services for its customers. If any injury or damage occurs, the insured could be held liable. An example is Jones Hardware, who contracts with Wizard Heating and Air to install a new furnace for a customer. If Wizard Heating and Air doesn’t install the furnace correctly, and 90 days later a fire starts in the furnace, Jones Hardware could be liable along with Wizard Heating and Air. This coverage may be bought as a separate policy called owners and contractors protective.

Answer 5

15.3.4 Independent Contractor Liability

Question 6

Contractual liability—L.E.A.S.E

Answer 6

■	Lease of a premises
■	Easement agreement for the use of shared property (such as the example above)
■	Agreement to indemnify a municipality
■	Sidetrack agreement with a railroad
■	Elevator maintenance agreement

Question 7

The CGL forms provide three coverages:

Answer 7

■ Coverage A—bodily injury and property damage liability
■ Coverage B—personal and advertising injury liability
■ Coverage C—medical payments

Question 8

__liability pays the sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which the insurance applies.

Answer 8

Coverage A—bodily injury (BI) and property damage (PD) liability

Question 9

There are a number of important exclusions that apply to Coverage A, including liability::

Answer 9

• Intentional injury
• Contractual liability (except for LEASE)
• Liquor liability
• Employee work-related injuries (covered under workers’ compensation)
• Pollution liability (bodily injury, property damage, or clean-up costs)
• Aircraft, autos, or watercraft liability (except as specified in the policy)
• Transportation of mobile equipment by auto or the use of mobile equipment in any prearranged racing activity
• Owned or rented property in the insured’s care, custody, or control (except for fire legal liability)
• Product recall

Question 10

__coverage, which covers liability arising out of such offenses as libel, slander, or advertisements. The claimant may be an individual or another business.

Answer 10

Coverage B provides personal and advertising injury liability

Question 11

Coverage B: Liability arising out of any of the following is excluded:

Answer 11

■ Knowingly inflicting injury that violates the rights of another
■ Oral or written publication of material that the insured knows is false, but publishes anyway
■ Material that was published before the effective date of the policy
■ Any offense committed by an insured who is involved in the business of advertising, publishing, broadcasting, telecasting, or designing or determining content of websites for others
■ Infringement of copyright, patent, trademark, trade secret, or other intellectual property rights
■ Violating recording and distribution of materials laws

Question 12

__are also available for Coverages A and B without reducing the limits of insurance:

Answer 12

supplementary payments

Question 13

The following supplementary payments are also available for Coverages A and B without reducing the limits of insurance

Answer 13

■ All expenses incurred by the insurance company
■ Up to $250 for the cost of bail bonds
■ Reasonable expenses incurred by the insured to assist in the investigation and defense of a claim, including up to $250 per day for loss of earnings
■ All court costs taxed against the insured in a suit
■ Prejudgment and post judgment interest
■ Defense costs

Question 14

Supplementary Payments (BAILED

Answer 14

• Bail bonds up to $250
• Aid—first aid expenses
• Interest on judgments in appeal
• Loss of earnings up to $250 per day
• Expenses incurred by the insured to assist in the defense of a claim
• Defense costs

Question 15

• Medical payments
• Without regard to fault
• Must be reported within one year of accident

Answer 15

Coverage C

Question 16

Excluded under Coverage C of the CGL are injuries:

Answer 16

■ to any insured or to a tenant or employee of the insured; and
■ payable under workers’ compensation or related laws.

Question 17

• Trigger—injury or damage occurs while policy in force

* Claim can be made after expiration

Answer 17

Occurrence Form

Question 18

Traditionally, liability policies have been written on an occurrence basis. Coverage under the occurrence form is triggered by __ even though a claim may be made after the policy has expired.

Answer 18

damage or injury that occurs during the policy period,

Question 19

Note
For example, an occurrence form policy expires on June 30, and the businessowner (insured) obtains a new policy with a different carrier. A customer was injured in the insured’s store on May 30, while the previous policy was in force. The insured files a claim on July 30 because the customer’s injury that happened in May has gotten progressively worse. Because the business carried an occurrence policy, the insurer covering the business on May 30 will cover this claim.

Answer 19

For example, an occurrence form policy expires on June 30, and the businessowner (insured) obtains a new policy with a different carrier. A customer was injured in the insured’s store on May 30, while the previous policy was in force. The insured files a claim on July 30 because the customer’s injury that happened in May has gotten progressively worse. Because the business carried an occurrence policy, the insurer covering the business on May 30 will cover this claim.

Question 20

• Trigger—claim made and reported during policy

* Occurrence is on or after the retroactive date

Answer 20

Claims-Made Form

Question 21

The retroactive date is listed in the CGL declarations. The insured has three options for the retroactive date:

Answer 21

■ Use the same date as the policy effective date

■ Use an earlier date than the policy effective date
■ Have no retroactive date

Question 22

__provide coverage for claims made after a claims-made policy’s expiration date.

Answer 22

Extended reporting periods (ERPs)

Question 23

__of either 60 days or five years is available automatically and free of charge under specified conditions.

Answer 23

A basic extended reporting period

Question 24

A basic extended reporting period of either__ or__ is available automatically and free of charge under specified conditions

Answer 24

60 days

five years

Question 25

___. It provides an unlimited extension of the reporting period, although the event causing the claim must still occur between the retroactive date and the policy expiration date.

Answer 25

A supplemental extended reporting period endorsement

Question 26

An auto is a land motor vehicle, trailer, or semitrailer, including any attached machinery or equipment, that is:

Answer 26

■ designed for travel on public roads; or

■ subject to compulsory or financial responsibility laws or other motor vehicle laws.

Question 27

__means any of the following types of land vehicles, including any attached machinery or equipment:

Answer 27

Mobile equipment

Question 28

Mobile equipment means any of the following types of land vehicles, including any attached machinery or equipment:

Answer 28

■ Bulldozers, farm machinery, forklifts, and other vehicles designed for use principally off public roads
■ Vehicles that travel on crawler treads
■ Vehicles, self-propelled or not, maintained primarily to provide mobility to permanently mounted power cranes, shovels, loaders, diggers, or drills, or road construction or resurfacing equipment such as graders, scrapers, or rollers
■ Vehicles that are not self-propelled and are maintained primarily to provide mobility to permanently attached equipment such as air compressors, pumps, and generators, or cherry pickers and similar devices used to raise or lower workers

Question 29

__means any goods or products, other than real property, that are manufactured, sold, handled, distributed, or disposed of by the insured. It also includes the following when furnished in connection with the product:

Answer 29

insured’s product

Question 30

The insured’s product means any goods or products, other than real property, that are manufactured, sold, handled, distributed, or disposed of by the insured. It also includes the following when furnished in connection with the product:

Answer 30

■ Containers
■ Materials
■ Parts
■ Equipment

Question 31

__means work or operations performed by or on behalf of the insured and materials, parts, or equipment furnished in connection with such work or operations

Answer 31

The insured’s work

Question 32

__usually means the described territory of the United States of America, including its territories and possessions, Puerto Rico, and Canada. No coverage extends to Mexico.

Answer 32

Coverage territory

Question 33

_means handling of property

Answer 33

Loading or unloading

Question 34

Loading or unloading means handling of property:

Answer 34

■ after it is accepted for movement into or onto an aircraft, watercraft, or auto;
■ while it is in or on an aircraft, watercraft, or auto; or
■ while it is being moved from an aircraft, watercraft, or auto to the place where it is finally delivered.

Question 35

__are any irritants or contaminants or waste. Waste includes materials to be recycled, reconditioned, or reclaimed.

Answer 35

Pollutants

Question 36

__a vehicle designed to travel on a public road

Answer 36

Auto

Question 37

—vehicles designed principally for use off public roads

Answer 37

Mobile Equipment

Question 38

—any goods or products, other than real property, that are manufactured, sold, handled, distributed, or disposed of by the insured

Answer 38

• Insured’s products

Question 39

—U.S.A. including its territories and possessions, Puerto Rico, and Canada

Answer 39

Coverage Territory

Question 40

g—handling of property accepted for movement into or onto an aircraft, watercraft, or auto

Answer 40

Loading or uploading

Question 41

Each of the following is also an insured under the CGL:

Answer 41

■ The named insured’s employees for acts within the scope of their employment or while performing duties related to the conduct of the insured’s business (does not include executive officers of a corporation or managers of a limited liability company)
■ If the named insured dies, the named insured’s legal representative

Question 42

Note
•	Individuals (sole proprietor) and spouses
•	Partners and spouses
•	Corporations and directors/ officers
•	Trusts
•	Insureds by definition (not named)
•	Employees
•	Named insured’s legal representative

Answer 42

• Individuals (sole proprietor) and spouses
• Partners and spouses
• Corporations and directors/ officers
• Trusts
• Insureds by definition (not named)
• Employees
• Named insured’s legal representative

Question 43

_is the most that will be paid for the sum of Coverages A, B, and C during a policy period, except for damages arising out of the products-completed operations exposure.

Answer 43

general aggregate limit

Question 44

__that represents the most that will be paid under Coverage A because of injury and damage arising out of the products-completed operations exposure. This would cover a fire claim due to the faulty installation of a fireplace by the

Answer 44

products-completed operations aggregate limit

Question 45

___represents the most that will be paid under Coverage B for the sum of all damages due to personal injury or advertising injury sustained by any one person or organization. This limit is also subject to the overall general aggregate limit

Answer 45

personal and advertising injury limit

Question 46

__is the most that will be paid for any one occurrence under Coverages A and C because of all bodily injury, property damage, and medical payments arising out of any one occurrence. This limit is also subject to either the general aggregate limit or the products-completed operations aggregate limit, whichever is applicable

Answer 46

per occurrence limit

Question 47

__represents the most that will be paid under Coverage A for liability for property damage to premises rented to the named insured for fire damage. This sublimit is also subject to the per occurrence limit and the general aggregate limit.

Answer 47

damage to premises rented to the insured limit

Question 48

__is the most that will be paid under Coverage C for all medical expenses because of bodily injury sustained by any one person. This sublimit is also subject to the per occurrence and general aggregate limits.

Answer 48

medical expense limit

Question 49

Note
Policy Limits of Coverage
• A—bodily injury/property damage—per occurrence
• B—personal injury and advertising injury—per person or organization
• C—medical (no fault)—per person
• General aggregate—per policy period (1 year)
• Coverage A, B, and C claims combined
• Product & completed operations aggregate

Answer 49

Policy Limits of Coverage
• A—bodily injury/property damage—per occurrence
• B—personal injury and advertising injury—per person or organization
• C—medical (no fault)—per person
• General aggregate—per policy period (1 year)
• Coverage A, B, and C claims combined
• Product & completed operations aggregate

Question 50

If a claim is made or suit brought against any insured, the insured must immediately record the specifics of the claim or suit and the date it was received, and notify the insurer as soon as possible. The insured must also see to it that the insurer receives written notice of any claim or suit as soon as practical.
The insured must also:

Answer 50

■ immediately send the insurer copies of any demands, notices, or other legal papers received in connection with a claim or suit;
■ authorize the insurer to obtain records;
■ cooperate with the insurer in the investigation, settlement, or defense of a claim; and
■ not voluntarily make a payment, assume any obligation, or incur any expense, other than expenses for first aid, without the insurer’s consent, except at the insured’s own cost.

Question 51

The other insurance condition states that when the insured’s CGL is primary and other primary insurance applies to the same loss, the loss will be divided between the policies by one of two methods:

Answer 51

■ Contribution by equal shares

■ Contribution by limits

Question 52

__all insurers contribute equally up to the limit of the policy with the lowest limit. At that point, the insurer with the lowest limit stops paying since it has already paid its policy’s limit, and the other insurers share the remainder of the loss. This continues either until the loss is paid in full or each company has paid its limit.

Answer 52

contribution by equal shares,

Question 53

__condition is included in the claims-made form, but not the occurrence form. It provides that the insurer will give the first-named insured certain information relating to the current CGL claims-made form and any previous claims-made forms the insurer has issued to the insured during the previous three years

Answer 53

your right to claim and occurrence information

Question 54

The your right to claim and occurrence information condition is included in the claims-made form, but not the occurrence form. It provides that the insurer will give the first-named insured certain information relating to the current CGL claims-made form and any previous claims-made forms the insurer has issued to the insured during the previous three years. The information includes:

Answer 54

■ a list or record of each occurrence not previously reported to any other insurer of which this insurer has been notified according to policy provisions; and
■ a summary, by policy year, of payments made and amounts reserved under any applicable general aggregate limit and products-completed operations aggregate limit.

Question 55

• Three year claims history
• Automatically provided if company cancels or nonrenews
• 30 days

Answer 55

Right to Claim Information