Commercial Property and Liability Insurance

Question 1

5 examples of Uninsurable Risks for businesses

Answer 1

1. Insufficient capital
2. Large scale common disasters
3. Economic and market downturns
4. Change in consumer/demand
5. Obsolescence

Question 2

2 types of property losses associated with a business

Answer 2

1. Indirect Loss - disruption in business (fire in kitchen halts business)
2. Direct Loss - results in loss of value (fire in kitchen damages equipment/property)

Question 3

Name the 3 types of property that commercial property insurance predominantly covers:

Answer 3

1. Buildings/Real Property
2. Business Personal Property
3. Personal Property of others

Question 4

True or False

Values and costs at the time of a loss determine the coinsurance calculation (Business/Commercial)

Answer 4

True

Question 5

True or False

It is the insurer’s responsibility to maintain the proper amount of coverage (Business/Commercial)

Answer 5

False; it is the insured’s responsibility

Question 6

True or False

The market value of the property is NOT a factor in determining replacement cost

Answer 6

True

Question 7

3 separate policy forms that must be written to cover indirect losses from damage to business property that results in additional expenses and/or reduced revenue

Answer 7

1. Business Interruption Insurance
2. Extra Expense Insurance
3. Contingent Business Interruption and Extra Expense Insurance

Question 8

What is “Ocean Marine Insurance?”

Answer 8

Policies cover shipping vessels and their cargo

Question 9

What is Boiler and Machinery Insurance?

(Equipment Breakdown Insurance)

Answer 9

-Fills a gap in coverage by insuring equipment for hazard that are typically excluded in other property coverage

-Wide range of equipment

Question 10

Inland Marine Insurance

Answer 10

-Used to be ocean marine but has evolved

-like liability insurance

-mostly covers personal property, inventory, equipment (moved on occasional or regular basis), valuable papers, electronic data, etc.

Question 11

3 general types of Commercial Auto Insurance

Answer 11

-Business Auto Coverage Form (similar to PAPs)

-Garage Coverage (dealerships, shops, parking lots)

-Motor Carrier Coverage

Question 12

General Crime Insurance insures direct losses of 3 types of property…

Answer 12

1. Money
2. Securities (contracts, tickets, stamps, charge slips, etc)
3. Tangible Property

Question 13

2 ways to settle losses (commercial insurance) and explain them

Answer 13

1. Loss Sustained Basis - losses will only be settled if they occur during policy period AND
   are discovered during policy period OR within specified period
2. Discovery Basis - pay losses discovered during current policy period even if loss occurred prior to period of coverage.

Question 14

3 types of coverage by General Liability policies

Answer 14

Coverage A - Bodily Injury and Property Damage

Coverage B - Personal and Advertising Injury

Coverage C - Medical costs for bodily injuries to non-owners/employees on business premises

Question 15

Liability Loss Exposures that Commercial General Liability policies cover (6 things)

Answer 15

1. Premises liability
2. Business operations liability
3. Product liability (think e. coli outbreak)
4. Completed operations liability (installing a furnace; gas leak)
5. Contractual liability
6. Contingent liability

Question 16

Liability Insurance Coverages:

Occurrence Basis vs Claims-Made Basis

Answer 16

Occurrence Basis - insures liability risks for claim events that occur within term of policy regardless when claim is made

Claims-Made Basis - insures liability liability risks for events that occur after specified date (i.e. retroactive date)

Question 17

What are Business Owners Policies (BOPS)?

Answer 17

A package of coverages designed to satisfy most of the insurance needs of small-medium sized businesses.

Question 18

4 Coverages typically included in Business Owners Policies (BOPS)

Answer 18

1. Commercial Property Insurance
2. Business Income and Extra Expense Insurance
3. Commercial Liability Insurance
4. Non-owned Auto Liability Insurance

Question 19

2 types of Professional Liability Insurance

Answer 19

1. Malpractice Insurance
2. Errors & Omissions Insurance (non medical basically)

Question 20

Directors and Officers Liability Insurance (D&O)

Answer 20

Provides protection for the directors and officers of a corporation in the event they are sued for alleged mismanagement

Question 21

Worker’s Compensation (WC)

Answer 21

-Worker/Employee is entitled to benefits from employer as a result of occupational injuries or diseases

-Employers pay full cost of coverage

Question 22

Employers Liability Insurance

Answer 22

-Insures the employer when it is sued (by employer or family) because occupational injuries/disease is not covered

Question 23

Employment Practices Liability Insurance (EPLI)

Answer 23

Covers businesses against claims by workers who allege that their legal rights as employees have been violated