Section Review Questions - C

Question 1

A midi-tail extended reporting period (ERP) provides professional liability coverage:

Select one:

a. for claims reported at any future date.
b. where the insurer is notified of the occurrence within 60 days after the policy expires, although the actual claim may then be filed within 5 years.

Answer 1

Chapter 16: Professional Liability (E&O)

The correct answer is: where the insurer is notified of the occurrence within 60 days after the policy expires, although the actual claim may then be filed within 5 years.

Question 2

To protect against client claims for failure to recommend the appropriate insurance, an insurance agent should have:

Select one:

a. Professional Liability
b. Premises Liability

Answer 2

Chapter 16: Professional Liability (E&O)

The correct answer is: Professional Liability

Question 3

If the insured desires to cancel a CGL:

Select one:

a. the insured may only cancel on the anniversary date.
b. the insured may do so by giving written notice to the insurer.

Answer 3

Chapter 15: Commercial General Liability

The correct answer is: the insured may do so by giving written notice to the insurer.

Question 4

A manufacturer who is sued for a defective toy would be covered by:

Select one:

a. products and completed operations
b. errors and omissions

Answer 4

Chapter 15: Commercial General Liability

The correct answer is: products and completed operations

Question 5

Each of these is considered to be a Casualty Insurance coverage EXCEPT:

Select one:

a. commercial auto
b. flood
c. liability
d. commercial crime

Answer 5

I find it helpful to think of Casualty Insurance as a Miscellaneous, Odds & Ends category that primarily covers “new” problems that arose after Property Insurance was well established. So, we toss into the Casualty basket auto insurance, Commercial Crime, and Liability.

Chapter 23: Commercial Auto

The correct answer is: flood

Question 6

The Inside the Premises - Robbery or Safe Burglary of Other Property form covers valuables stolen in which situation?

Select one:

a. the safe’s combination was written on the back of the safe
b. there is visible damage to the safe
c. a burglar guesses the safe’s combination
d. the safe is left open

Answer 6

The “Safe Burglary” part of the policy requires that there be a breaking into the safe (or the taking of the safe itself).

Chapter 20: Commercial Crime Policies

The correct answer is: there is visible damage to the safe

Question 7

In a state requiring 25/50/5 auto liability coverage, the required coverage for BI per person is:

Select one:

a. $5,000
b. $10,000
c. $25,000
d. $50,000

Answer 7

The first number always indicates the Bodily Injury Liability coverage per person. Here that is $25,000. The second number is the Bodily Injury Liability coverage for all persons injured ($50,000). The third number is the Property Damage Liability coverage ($5,000).

Chapter 19: Personal Auto Policy

The correct answer is: $25,000

Question 8

A single limit auto policy provides $200,000 coverage. The Insured causes an accident in which 4 persons suffer injuries totaling $250,000.

The Insurer must pay:
Select one:
a. $200,000
b. $250,000

Answer 8

Chapter 19: Personal Auto Policy

The correct answer is: $200,000

Question 9

Which of the following policies contains a consent to settle provision?

Select one:

a. E&O and Employment Practices Liability
b. CGL and Employment Practices Liability
c. Employment Practices Liability only
d. Commercial Auto and Employment Practices Liability

Answer 9

The E&O (Professional Liability Policy) contains a consent to settle provision because a settlement could seriously damage the professional’s reputation.

Chapter 17: Employment Practices Liability Insurance

The correct answer is: E&O and Employment Practices Liability

Question 10

Molly’s state requires 25/50/10 auto liability insurance. Molly is involved in an accident with an at-fault driver who only has 15/30/5 coverage. Molly is protected by her:

Select one:

a. underinsured motorist
b. uninsured motorist

Answer 10

Chapter 19: Personal Auto Policy

The correct answer is: uninsured motorist

Question 11

The term “retention” in an umbrella policy is similar to:

Select one:

a. deductible
b. franchise
c. subrogation
d. supplementary

Answer 11

The umbrella often provides better coverage than the underlying policy. For such claims the underlying policy won’t pay at all and the umbrella is stuck for the total claim unless it has a “self insured retention layer” specifying that the Insured will pay at least a relatively token amount. This “retention” acts as a deductible.

Chapter 21: Excess Liability and Umbrella Insurance

The correct answer is: deductible

Question 12

The Inside the Premises - Robbery or Burglary of Other Property policy covers which of the following?

Select one:

a. employee theft of goods from the business
b. damage to the building caused by the burglary
c. a burglary where a large amount of cash is stolen
d. theft from a vehicle

Answer 12

Employee theft is covered by an Employee Dishonesty Policy or Fidelity Bond. The Inside the Premises - Burglary of Other Property Policy won’t cover money (get a TDD for that), and it won’t cover theft off premises, such as from a vehicle. So, our correct answer is that damage to the building caused by the burglar will be covered. However, any fire or vandalism would be covered by a property insurance policy, not by the crime policy.

Chapter 20: Commercial Crime Policies

The correct answer is: damage to the building caused by the burglary

Question 13

After an auto accident, the auto policy requires the Insured to notify the:

Select one:

a. Insurer
b. police

Answer 13

Chapter 19: Personal Auto Policy

The correct answer is: Insurer

Question 14

The Postal Service wants to guarantee that a contractor will be able to complete an addition to the post office according to the contract specifications. The contractor should purchase a:

a. completion bond
b. performance bond
c. bid bond
d. contract bond

Answer 14

The Performance Bond guarantees that a task will be completed on time as per the instructions. Watch out for the Completion Bond which should been called a “Lender’s Bond.” The Completion Bond doesn’t guarantee performance - it simply guarantees that a borrower will use the borrowed funds for the purpose promised.

Chapter 22: Surety Bonds

The correct answer is: performance bond

Question 15

The transportation expenses following a deer damaging the auto are covered under the Personal Auto Policy’s:

Select one:

a. Medical Payments coverage
b. Comprehensive (Other Than Collision) coverage
c. Collision coverage
d. Supplementary coverage

Answer 15

Such perils as flood, earthquake, theft, and hitting a deer are covered by Comprehensive, so that section of the policy will cover the Transportation Expense of a rental car for $20 per day up to a total of $600.

Chapter 19: Personal Auto Policy

The correct answer is: Comprehensive (Other Than Collision) coverage

Question 16

A customer is accidentally injured by an appliance store employee. Under a commercial liability policy, the customer’s bodily injury is:

Select one:

a. not covered
b. covered under Premises and Operations
c. covered under Completed Operations
d. covered under Directors and Officers Liability

Answer 16

Customers may be paid as victims if they are injured by the negligence of an Insured (the store owner or the store employees). But, customers are not insureds if they injure another customer. The injured customer can probably recover under the other customer’s Homeowner Personal Liability policy (a topic covered on the Property Exam).

Chapter 15: Commercial General Liability

The correct answer is: covered under Premises and Operations

Question 17

The party who agrees to pay the insured (obligee) for loss caused by employee embezzlement under a Fidelity bond is the:

Select one:

a. principal employee
b. surety
c. obligee employer
d. obligor

Answer 17

Chapter 22: Surety Bonds

The correct answer is: surety

Question 18

A Theft, Disappearance and Destruction form covers:

Select one:

a. A company’s money disappears.
b. A company’s stock plummets in value.

Answer 18

Chapter 20: Commercial Crime Policies

The correct answer is: A company’s money disappears.

Question 19

Which is a burglary?

Select one:

a. The clerk is thrown to the ground and money is taken from the clerk’s wallet.
b. The door on the building is forced open and property is taken after business hours.

Answer 19

Chapter 20: Commercial Crime Policies

The correct answer is: The door on the building is forced open and property is taken after business hours.

Question 20

Persons covered under an auto policy are identified in which policy section?

Select one:

a. Exclusions
b. Insuring agreement
c. Conditions
d. Definitions

Answer 20

The persons covered under an auto policy are the Insureds. To find who is an Insured, we will look to the Definitions section which either may be part of the Conditions or may be a separate policy. But, Definitions is a more specific answer than Conditions.

Chapter 19: Personal Auto Policy

The correct answer is: Definitions

Question 21

A real estate agent desiring coverage for accidents occurring on a developable commercial lot should purchase:

Select one:

a. Commercial General Liability
b. Personal Injury Liability

Answer 21

Chapter 15: Commercial General Liability

The correct answer is: Commercial General Liability

Question 22

Medical payments covers a tenant injured:

Select one:

a. in the unit occupied by the landlord.
b. in the tenant’s unit.

Answer 22

Chapter 15: Commercial General Liability

The correct answer is: in the unit occupied by the landlord.

Question 23

A Business Auto Policy may be used to cover each of the following EXCEPT:

Select one:

a. a tractor trailer.
b. an earthmover.
c. a truck.
d. a pickup or van.

Answer 23

Chapter 23: Commercial Auto

The correct answer is: an earthmover.

Question 24

A building insured under a Premises Burglary policy suffers a loss of $350 cash, $2,000 stock, and $10,000 lost profits due to a closure caused by the burglary. The Premises Burglary policy will pay:

Select one:

a. $350
b. $2,000
c. $10,000
d. $12,350

Answer 24

To cover theft of money, we need a TDD (Theft, Disappearance, and Destruction Policy), also known as an Inside the Premises, Theft of Money and Securities Policy. The lost profits would be covered by a Business Interruption Business Income Policy. So, we will cover the theft of stock. Under insurance concepts, stock refers to inventory. If the policy is referring to stock certificates, it will use the term “securities.”

Chapter 20: Commercial Crime Policies

The correct answer is: $2,000

Question 25

Employee Dishonesty covers:

Select one:

a. Disappearance of inventory which can be proven only by a profit and loss computation.
b. Dishonest actions of the insured.
c. Disappearance of inventory which can be proven only by an inventory.
d. None of the above.

Answer 25

The Insurer under an Employee Dishonesty policy wants proof that a loss was actually caused by employee dishonesty. For that reason, the Insurer won’t pay claims based merely on an inventory loss or a profit and loss statement. Theft of money by an employee is covered by Employee Dishonesty, but not theft by the Insured.

Chapter 20: Commercial Crime Policies

The correct answer is: None of the above.

Question 26

Hitting a parked car is covered by:

Select one:

a. collision
b. comprehensive

Answer 26

Chapter 19: Personal Auto Policy

The correct answer is: collision

Question 27

An auto accident causing bodily injury and property damage results in:

Select one:

a. liability
b. policy cancellation

Answer 27

Chapter 19: Personal Auto Policy

The correct answer is: liability

Question 28

Under a CGL’s “Other Insurance” clause, the two insurers will share the loss:

Select one:

a. equally
b. pro rata

Answer 28

Chapter 15: Commercial General Liability

The correct answer is: equally

Question 29

Which type of insurance has a deductible?

Select one:

a. Property Damage Liability
b. Workers Compensation
c. Property Insurance
d. Professional Liability

Answer 29

Chapter 18: Workers Compensation Insurance

The correct answer is: Property Insurance

Question 30

A plumber negligently repaired a store’s water pipe. Several days after the repairs were completed, the pipe burst damaging goods in the store. This would be covered under which section of the CGL?

Select one:

a. Products and Completed Operations
b. Contractual
c. E&O
d. Premises

Answer 30

This is a classic Completed Operations coverage.

Chapter 15: Commercial General Liability

The correct answer is: Products and Completed Operations

Question 31

Self-insurers must comply with work comp regulations by:

Select one:

a. having at least $10,000,000 in cash to pay claims
b. complying with state regulations
c. requiring the workers to pay for their work comp
d. having a letter signed by the management team indicating solvency

Answer 31

Chapter 18: Workers Compensation Insurance

The correct answer is: complying with state regulations

Question 32

The indemnity agreement is designed to protect the:

Select one:

a. surety
b. obligee

Answer 32

Chapter 22: Surety Bonds

The correct answer is: surety

Question 33

A Business Auto policy covers:

Select one:

a. pollution damage caused by a vehicular accident
b. injury to a pedestrian struck by the insured business auto
c. injury to the driver of the business auto
d. damage to goods of others being transported

Answer 33

Damage to goods being transported would be covered by Inland Marine. The Business Auto policy excludes pollution issues, except it will cover cleanup of oil, diesel fuel, gasoline, or antifreeze which leaks from the insured auto’s mechanical systems as a result of an accident. The driver would be covered by Work Comp. But, we will cover the pedestrian or anyone or anything hit by the covered auto.

Chapter 23: Commercial Auto

The correct answer is: injury to a pedestrian struck by the insured business auto

Question 34

Taking property by force or threat of violence is:

Select one:

a. robbery
b. mysterious disappearance
c. theft
d. burglary

Answer 34

Robberies involve threats or violence. Robbery is a type of theft, but robbery is the most specific answer. Burglaries do not involve a threat or violence. The term “theft” includes both robbery and burglary. If I have a “Theft Policy,” both robbery and burglary are covered. But If I have only a Robbery Policy or only a Burglary Policy, I have much narrower coverage.

Chapter 20: Commercial Crime Policies

The correct answer is: robbery

Question 35

Work comp benefits are set by:

Select one:

a. state law.
b. the policy.

Answer 35

Chapter 18: Workers Compensation Insurance

The correct answer is: state law.

Question 36

Which bond covers employee embezzlement?

Select one:

a. bid
b. fidelity

Answer 36

Chapter 22: Surety Bonds

The correct answer is: fidelity

Question 37

A CGL covers:

Select one:

a. Earthquake coverage.
b. Injuries to the Insured’s employees.
c. Liability assumed through a sidetrack agreement.
d. Auto accidents.

Answer 37

Chapter 15: Commercial General Liability

The correct answer is: Liability assumed through a sidetrack agreement.

Question 38

A truck driver injured in a trucking accident would be covered under:

Select one:

a. commercial auto policy
b. work comp

Answer 38

Chapter 18: Workers Compensation Insurance

The correct answer is: work comp

Question 39

Which can be purchased alone?

Select one:

a. comprehensive
b. collision

Answer 39

Chapter 19: Personal Auto Policy

The correct answer is: comprehensive

Question 40

Under an E&O policy, claims occurring during the policy period may be reported after the policy expires if the policy has:

a. an Extended Reporting Period
b. a Retroactive Date

Answer 40

Chapter 16: Professional Liability (E&O)

The correct answer is: an Extended Reporting Period

Question 41

An employee waives worker’s comp coverage. The worker’s later work related injury would be:

Select one:

a. not covered
b. covered by Commercial General Liability Coverage Form
c. covered by Errors and Omissions
d. covered by the employer

Answer 41

Trick question! As we learned earlier, an employee can not waive worker’s comp coverage. We just want to get you prepared for lousy test questions.

Chapter 18: Workers Compensation Insurance

The correct answer is: covered by the employer

Question 42

Molly’s state requires 25/50/10 auto liability insurance. Molly is involved in an accident with an at-fault driver who only has 15/30/5 coverage. Molly is protected by her:

Select one:

a. uninsured motorist
b. underinsured motorist

Answer 42

Chapter 23: Commercial Auto

The correct answer is: uninsured motorist

Question 43

E&O covers claims arising from:

Select one:

a. intentional acts
b. felonious acts
c. auto accidents
d. wrongful acts

Answer 43

E&O policies do better than merely covering negligence. E&O policies also cover “wrongful acts” where there is an error in judgment that doesn’t necessarily rise to the level of negligence. This is better coverage than provided by the typical liability policy. The victim has to show that the professional made a mistake but doesn’t have to prove that negligence occurred.

Chapter 16: Professional Liability (E&O)

The correct answer is: wrongful acts

Question 44

An Excess Liability policy:

Select one:

a. deepens but does not broaden coverage.
b. eliminates the need for the underlying policy.

Answer 44

Chapter 21: Excess Liability and Umbrella Insurance

The correct answer is: deepens but does not broaden coverage.

Question 45

A driver’s personal auto policy has liability limits of $15,000, $20,000, $10,000. A passenger in the car suffered $17,000 bodily injury when the vehicle hit a building. The passenger’s bodily injuries are covered by:

Select one:

a. comprehensive
b. physical damage
c. liability
d. collision

Answer 45

We seldom think of this problem, but the passengers in a vehicle have the right to sue the driver if the driver’s negligence causes an accident. The policy will pay a maximum of $15,000 for bodily injury by any one person. The driver would be liable for the extra $2,000, but the auto policy will only pay the policy limit of $15,000 for bodily injury to any one person.

Chapter 23: Commercial Auto

The correct answer is: liability

Question 46

A business which uses its own fund sources to pay for injuries to workers is said to be covered by:

Select one:

a. private insurance.
b. self insurance.

Answer 46

Chapter 18: Workers Compensation Insurance

The correct answer is: self insurance.

Question 47

Employee embezzlement of money is covered by:

Select one:

a. Employee Dishonesty Form
b. Theft, disappearance and destruction

Answer 47

Chapter 20: Commercial Crime Policies

The correct answer is: Employee Dishonesty Form

Question 48

Infringement is covered by:

Select one:

a. Personal Injury and Advertising Liability
b. Premises and Operations Liability

Answer 48

Chapter 15: Commercial General Liability

The correct answer is: Personal Injury and Advertising Liability

Question 49

The insured’s reasonable expenses incurred while assisting the insurer with defense efforts are covered by:

Select one:

a. supplementary
b. bodily injury liability
c. medical payments
d. property damage liability

Answer 49

The Insurer wants the Insured to assist the insurance company’s lawyers. So, Supplementary will cover the Insured’s costs of assisting in the defense efforts. This adds to the policy’s limit of liability (pays over and above the policy limit).

Chapter 15: Commercial General Liability

The correct answer is: supplementary

Question 50

An insured can get a lower premium by:

Select one:

a. taking a per-loss deductible.
b. waiving coverage for defense costs.

Answer 50

Chapter 15: Commercial General Liability

The correct answer is: taking a per-loss deductible.

Question 51

The parties to a bond include each of the following EXCEPT:

Select one:

a. surety
b. principal
c. donee
d. obligee

Answer 51

The parties to a bond are the principal, the obligee, and the surety. A donee is one who receives a donation - there is no such thing here.

Chapter 22: Surety Bonds

The correct answer is: donee

Question 52

Contractual Liability Coverage covers liability:

Select one:

a. implied by contract.
b. assumed by contract.

Answer 52

For Contractual Liability to apply, the Insured must expressly assume liability of another - this can’t be done by mere implication. I know, I know, lame question. I agree.

Chapter 15: Commercial General Liability

The correct answer is: assumed by contract.

Question 53

The Inside the Premises –Theft of Money and Securities Form covers money:

Select one:

a. stolen from a corporate board member.
b. stolen by a corporate official.

Answer 53

This policy excludes theft by an insured’s employee. The policy to cover theft by a corporate official is the Employee Dishonesty Policy (Fidelity Bond).

Chapter 20: Commercial Crime Policies

The correct answer is: stolen from a corporate board member.

Question 54

A sexual harassment claim against a business would be covered by:

Select one:

a. Bodily Injury coverage under a CGL
b. Personal Injury coverage under a CGL
c. Homeowner Liability
d. Employment Practices Liability

Answer 54

Chapter 17: Employment Practices Liability Insurance

The correct answer is: Employment Practices Liability

Question 55

If you are hit by someone with no insurance, you should have?

Select one:

a. underinsured motorist
b. uninsured motorist

Answer 55

Chapter 19: Personal Auto Policy

The correct answer is: uninsured motorist

Question 56

Which is a burglary?

Select one:

a. A thief breaks down a door after business hours and steals goods.
b. A customer steals a watch from an open display counter.

Answer 56

Chapter 20: Commercial Crime Policies

The correct answer is: A thief breaks down a door after business hours and steals goods.

Question 57

Personal and Advertising Injury Liability covers:

Select one:

a. breach of contract
b. illegal activities
c. wrongful eviction
d. pollution

Answer 57

Chapter 15: Commercial General Liability

The correct answer is: wrongful eviction

Question 58

Which of the following is considered to be a “custodian” under a commercial crime policy?

Select one:

a. janitor
b. owner, partner, employee, or manager
c. watchperson
d. customer

Answer 58

A “custodian” is someone authorized to regularly have custody of the goods on premises. The owners, partners, employees, and managers are all custodians. A watchperson or janitor would not be expected to have custody of the goods. If we have a jewelry store, we would be upset to find the janitor, watchperson, or customer with possession of the inventory. This subtle distinction is important in the robbery policy which covers robbery of a “custodian.”

Chapter 20: Commercial Crime Policies

The correct answer is: owner, partner, employee, or manager

Question 59

State law requires that commercial autos be covered for each of the following EXCEPT:

Select one:

a. physical damage
b. bodily injury liability
c. property damage liability
d. supplementary

Answer 59

Chapter 23: Commercial Auto

The correct answer is: physical damage

Question 60

A consent to settle provision protects the reputation of the:

Select one:

a. insurer
b. insured

Answer 60

Chapter 16: Professional Liability (E&O)

The correct answer is: insured

Question 61

A commercial umbrella does NOT cover:

Select one:

a. premises and operations
b. auto liability
c. products and completed operations
d. home accidents

Answer 61

Chapter 21: Excess Liability and Umbrella Insurance

The correct answer is: home accidents

Question 62

Part 2 of the Worker Comp policy covers:

Select one:

a. Employer Liability.
b. Property Damage Liability.

Answer 62

Chapter 18: Workers Compensation Insurance

The correct answer is: Employer Liability.

Question 63

A “claims made” policy will always pay a covered claim that occurs:

Select one:

a. During the policy term if it is reported and presented during the policy term.
b. During the policy term even if it is presented after the policy term.
c. Any time.
d. Before the retroactive date.

Answer 63

The “Claims Made” form will only cover an event that occurred after the Retroactive Date and before the policy expires. If there is an ERP (Extended Reporting Period), the victim may have additional time after the policy expires to file a claim.

Chapter 16: Professional Liability (E&O)

The correct answer is: During the policy term if it is reported and presented during the policy term.

Question 64

A CGL’s medical payments covers:

Select one:

a. the insured
b. an employee
c. a customer
d. a contestant in an athletic event

Answer 64

The primary purpose of med pay is to cover customers. Med pay specifically excludes injuries to employees (get Work Comp for that), the Insured (get a Health Insurance policy), and contestants in an athletic event.

Chapter 15: Commercial General Liability

The correct answer is: a customer

Question 65

A truck driver causes an accident which damages a car, injures the car’s driver, and causes the truck to leak chemicals into the ground. The truck’s business auto policy will NOT cover:

Select one:

a. pollution caused by the leaking chemicals
b. damage to the truck
c. bodily injury to the car’s driver
d. damage to the car

Answer 65

Chapter 23: Commercial Auto

The correct answer is: pollution caused by the leaking chemicals

Question 66

Vicarious liability refers to liability for:

Select one:

a. punitive damages
b. pollution
c. the acts of another
d. future acts

Answer 66

Vicarious liability refers to liability for the acts of another. For example: An employer will often be held liable for the negligence of employees; or A retailer may be held liable for injuries caused by a defective product manufactured in Brazil even if the retailer wasn’t negligent in any way; or Each partner in a partnership is “vicariously liable” for the business related accidents caused by the other partners.

Chapter 15: Commercial General Liability

The correct answer is: the acts of another

Question 67

The surety will pay the bail bond’s penal sum to the obligee if the principal:

Select one:

a. dies
b. fails to show up for trial

Answer 67

Chapter 22: Surety Bonds

The correct answer is: fails to show up for trial

Question 68

After an accident involving a covered business auto, the insured must do each of the following EXCEPT:

Select one:

a. notify the insurer and forward any summons to the insurer.
b. protect the vehicle from further damage.
c. authorize the insurer to settle within the policy limits.
d. submit to examination under oath.

Answer 68

The Insurer doesn’t need the consent of the Insured to settle. Remember, however, that this isn’t true with an E&O (Professional Liability) Policy where consent of the Insured is needed before the Insurer can settle with the victim.

Chapter 23: Commercial Auto

The correct answer is: authorize the insurer to settle within the policy limits.

Question 69

The work comp policy provision covering workers in other states is:

Select one:

a. standard business liability
b. other states coverage

Answer 69

Chapter 18: Workers Compensation Insurance

The correct answer is: other states coverage

Question 70

Supplementary covers each of these EXCEPT:

Select one:

a. bonds
b. medical payments
c. defense costs
d. costs of the insured in assisting the defense efforts

Answer 70

Med Pay isn’t part of Supplementary. Med Pay is a separate part of the policy.

Chapter 15: Commercial General Liability

The correct answer is: medical payments

Question 71

Which policy section contains information about the defense of lawsuits covered by the policy?

Select one:

a. exclusions
b. obligations of the insurer
c. definitions
d. obligations of the insured

Answer 71

We are all looking for “Supplementary Payments” as the answer. When my “expected answer” isn’t there, I usually panic. Don’t make my mistake. On the Casualty Exam, expect the unexpected. There are often multiple correct answers to a question. We expect the obvious answer to be there but the testwriters love to throw in vague but correct answers, such as “Insuring Agreement,” or, in this case, “Obligations of the Insurer.” You are right, many of the questions are trick questions. Well, at least they aren’t as straight-forward as they could be.

Chapter 15: Commercial General Liability

The correct answer is: obligations of the insurer

Question 72

A beautician inadvertently injures a customer when the beautician mistakenly applied a toxic chemical to the customer’s skin. This would be covered by the beautician’s:

Select one:

a. bodily injury liability under the CGL
b. E&O
c. premises liability
d. products liability

Answer 72

As is true with other businesses, a barber or beautician needs a CGL (Commercial General Liability policy) to cover the routine accidents, such a slip and fall. However, because barbers and beauticians are considered to be professionals, they should have an E&O policy to cover professional wrongs.

Chapter 16: Professional Liability (E&O)

The correct answer is: E&O

Question 73

A Work Comp policy may cover each of these EXCEPT:

Select one:

a. Employer’s Liability.
b. Death Benefit.
c. Rehabilitation Benefit.
d. Health Coverage for the worker’s family.

Answer 73

Chapter 18: Workers Compensation Insurance

The correct answer is: Health Coverage for the worker’s family.

Question 74

In a bid bond, the contractor is the:

Select one:

a. principal
b. obligee

Answer 74

The principal is the one who is primarily obligated to perform the job. The obligee is entitled to receive the performance and is the one who is paid if the principal “forfeits” the bond by failing to perform.

Chapter 22: Surety Bonds

The correct answer is: principal

Question 75

A CGL Insurer may use an audit to establish:

Select one:

a. the Insured’s solvency.
b. whether the Insured was negligent.
c. whether a claim is covered by the policy.
d. the appropriate premium.

Answer 75

The purpose of the audit to calculate the true earned premium based on the amount of the Insured’s business activity. The liability premium is usually based on an estimate of business activity. Don’t confuse this with the Insurer’s right to inspect the property at any time.

Chapter 15: Commercial General Liability

The correct answer is: the appropriate premium.

Question 76

Which is a covered nonowned auto?

Select one:

a. A car left with the Insured by a friend who is abroad for 3 years.
b. A company car furnished for the Insured.
c. An auto operated by the Insured but owned by another member of the family.
d. A motorcycle operated by the Insured but owned by another member of the family.

Answer 76

The auto policy excludes coverage for vehicles with fewer than four wheels, vehicles regularly available for the Insured’s use, and vehicles furnished for the insured’s use (company car). But the auto policy will cover a vehicle temporarily borrowed by the Insured.

Chapter 19: Personal Auto Policy

The correct answer is: An auto operated by the Insured but owned by another member of the family.

Question 77

Personal and Advertising Injury Liability covers each of these EXCEPT:

Select one:

a. False arrest
b. Unfair competition
c. Errors and Omissions
d. Malicious prosecution

Answer 77

Chapter 15: Commercial General Liability

The correct answer is: Errors and Omissions

Question 78

If an accident occurs when an Insured is driving a vehicle owned and insured by another, which is generally correct?

Select one:

a. the driver’s policy pays primary
b. the vehicle’s policy pays primary

Answer 78

Chapter 19: Personal Auto Policy

The correct answer is: the vehicle’s policy pays primary

Question 79

Bodily injury caused by a hit-and-run driver is covered by:

Select one:

a. uninsured motorist
b. underinsured motorist

Answer 79

Chapter 19: Personal Auto Policy

The correct answer is: uninsured motorist

Question 80

Supplementary Payments:

Select one:

a. provides for defense costs.
b. has a deductible.

Answer 80

Chapter 15: Commercial General Liability

The correct answer is: provides for defense costs.

Question 81

If the insured desires to cancel a CGL:

Select one:

a. delivery of written notice by email is acceptable.
b. the insured may cancel by telephone

Answer 81

Chapter 15: Commercial General Liability

The correct answer is: delivery of written notice by email is acceptable

Question 82

A CGL covers each of the following EXCEPT:

Select one:

a. bodily injury
b. personal injury
c. employers liability
d. property damage

Answer 82

Chapter 15: Commercial General Liability

The correct answer is: employers liability

Question 83

A burglary policy covers the felonious removal of property:

Select one:

a. from a locked building which is broken into.
b. from an unlocked building.

Answer 83

The Burglary Policy will only cover a theft (felonious abstraction) from the premises. There are special policies to cover theft away from the premises but the standard Burglary Policy only covers a burglary at the insured premises listed on the dec sheet.

Chapter 20: Commercial Crime Policies
The correct answer is: from a locked building which is broken into.

Question 84

A mini-tail extended reporting period (ERP) provides additional coverage for:

Select one:

a. all future claims, no matter when filed.
b. claims reported within 60 days after the policy expires.

Answer 84

Chapter 16: Professional Liability (E&O)

The correct answer is: claims reported within 60 days after the policy expires.

Question 85

Which deepens coverage only?

Select one:

a. umbrella
b. excess liability

Answer 85

Chapter 21: Excess Liability and Umbrella Insurance

The correct answer is: excess liability

Question 86

A grocery store customer accidentally injures another customer while placing a large bag of dog food into a shopping cart. The store’s CGL will:

Select one:

a. cover this under work comp.
b. cover this under the CGL’s med pay section.
c. cover this under the CGL’s liability section.
d. not cover this at all.

Answer 86

Chapter 15: Commercial General Liability

The correct answer is: cover this under the CGL’s med pay section.

Question 87

Another name for the bond’s premium is:

Select one:

a. the penal sum.
b. the service fee.

Answer 87

Chapter 22: Surety Bonds

The correct answer is: the service fee.

Question 88

A business or personal auto policy may cover each of the following EXCEPT:

Select one:

a. bail bonds
b. loss of earnings
c. judgment interest
d. fines

Answer 88

Chapter 23: Commercial Auto

The correct answer is: fines

Question 89

If the insured with an umbrella must pay the first $1,000 of a claim, the insured must have had:

Select one:

a. a self-insured retention layer
b. an inadequate attorney

Answer 89

The claim obviously involved something covered by the umbrella which wasn’t covered by the underlying policy. In such a situation, the umbrella will require the Insured to pay some part of the claim. This amount (specified in the umbrella) is known as a Self Insured Retention
Layer.

Chapter 21: Excess Liability and Umbrella Insurance
The correct answer is: a self-insured retention layer

Question 90

Employment Practices Liability will cover which of the following claims?

Select one:

a. workers compensation
b. the cost of complying with the Americans With Disabilities Act
c. the expense of a union strike
d. discrimination claims

Answer 90

Although the EPL will cover discrimination claims, the other issues listed are specifically excluded.

Chapter 17: Employment Practices Liability Insurance
The correct answer is: discrimination claims

Question 91

Professional liability insurance is available for:

Select one:

a. wholesalers
b. dry cleaners
c. plumbers
d. pharmacists

Question 92

Professional liability insurance is available for:

Select one:

a. wholesalers
b. dry cleaners
c. plumbers
d. pharmacists

Answer 92

Chapter 16: Professional Liability (E&O)

The correct answer is: pharmacists

Question 93

Each of the following is automatically insured under a CGL EXCEPT:

Select one:

a. executor or property manager
b. corporate officer’s spouse
c. the partner’s spouse
d. employees, corporate officers, shareholders and directors

Answer 93

Chapter 15: Commercial General Liability

The correct answer is: corporate officer’s spouse

Question 94

A tenant agrees to keep the leased premises in a clean and tidy condition. A pedestrian was injured by junk and debris on the sidewalk. This injury to the pedestrian would be covered by which section of a commercial liability policy?

Select one:

a. Premises and Operations
b. Contractual Liability
c. Independent Contractors Liability
d. Owner’s and Contractor’s Protective

Answer 94

This is plain old liability because the owner is responsible for the sidewalks. Of course the tenant won’t do what the tenant promises. The Insurer will cover this under the owner’s liability portion of the CGL and then subrogate against the tenant for breach of contract.

Chapter 15: Commercial General Liability

The correct answer is: Premises and Operations

Question 95

Each of the following is a casualty coverage EXCEPT:

Select one:

a. Earthquake
b. Auto
c. Commercial General Liability
d. Employment Practices

Answer 95

Chapter 17: Employment Practices Liability Insurance

The correct answer is: Earthquake

Question 96

Under a crime policy, the insured who suffers a loss is required to:

Select one:

a. file a proof of loss form
b. file criminal charges against any suspect

Answer 96

Chapter 20: Commercial Crime Policies

The correct answer is: file a proof of loss form

Question 97

M owns a business and is concerned about an employee lawsuit alleging wrongful termination. M should consider which of the following forms of liability coverage?

Select one:

a. workers compensation
b. employment practices liability
c. commercial general liability
d. business owner policy

Answer 97

Chapter 17: Employment Practices Liability Insurance

The correct answer is: employment practices liability

Question 98

Products Liability covers:

Select one:

a. product recall.
b. personal injury liability.
c. injuries from defective products sold to the public.
d. repair of defective products.

Answer 98

Chapter 15: Commercial General Liability

The correct answer is: injuries from defective products sold to the public.

Question 99

The CGL’s Contractual Liability coverage does not apply to:

Select one:

a. sidetrack agreements
b. lease agreements
c. agreements to indemnify a municipality as required by ordinance
d. an agreement to indemnify an appraiser

Answer 99

Be sure to memorize that standard list of Contractual Liability coverages: (1) Lease Agreements, (2) Easement Agreements, (3) Agreements to indemnify a municipality as required by ordinance, (4) Sidetrack Agreements, and (5) Elevator Maintenance Agreements. Remember the acronym LEASE.

Chapter 15: Commercial General Liability

The correct answer is: an agreement to indemnify an appraiser

Question 100

The definition of “covered auto” in a personal auto policy does NOT include:

Select one:

a. a new van purchased last week
b. the insured’s trailer
c. a rental vacation car
d. a company car available for the insured’s regular use

Answer 100

Chapter 19: Personal Auto Policy

The correct answer is: a company car available for the insured’s regular use