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Commercial Insurance > Self-Review > Flashcards

Self-Review Flashcards

1
Q

Which one of the following is the preferred definition of “risk”?

a. the person insured
b. the property insured
c. the perils insured against
d. the chance of economic loss

A

d. the chance of economic loss

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2
Q

What is the mathematical principle that forms the basis for insurance?

a. the law of geometry
b. the law of large numbers
c. the pythagorean Theorem
d. the law of algebra

A

b. the law of large numbers

The law of large numbers is the primary underpinning to the insurance mechanism. It says that the more exposure units in the mix, the easier it becomes to predict the group’s losses.

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3
Q

Which one of the following is NOT a necessary part of any definition of insurance?

a. the transfer of risk to a third party
b. the accumulation of a fund to pay the losses
c. the use of standardized forms
d. a large enough number of similar exposure units

A

c. the use of standardized forms

Any definition of insurance must include the transfer of risk to a third party (the insurer); the accumulation of a fund to pay the losses; and a large enough number of similar exposure units (the insureds).

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4
Q

An insured being “made whole again” is an example of the principle of:

a. indemnity
b. insurance
b. large numbers
d. underwriting

A

a. indemnity

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5
Q

“Fire” is an example of:

a. a hazard
b. a peril
c. a policy
d. an event

A

b. a peril

Perils are causes of loss - such as fire, wind, theft, injury, etc.

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6
Q

Storing gasoline in a home is an example of:

a. a hazard
b. a peril
c. a policy
d. an event

A

a. a hazard

Hazards are things that increase the chance of loss from a peril, such as the storage of flammable liquids.

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7
Q

Not purchasing collision insurance on an older car is an example of what risk management technique?

a. non-insurance transfer
b. avoidance
c. control
d. retention

A

d. retention

Retention is when one does not purchase insurance and decides to assume the risk on his or her own.

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8
Q

Installing a burglar alarm is an example of what risk management technique?

a. non-insurance transfer
b. avoidance
c. control
d. retention

A

c. control

Control is the minimizing of hazards, the things that increase the chance of loss. By putting a burglar alarm in a car, the owner is using the technique of control.

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9
Q

Which one of these terms describes the situation where one stands to suffer a financial loss if an event occurs?

a. insurable interest
b. indemnity
c. hazard
d. peril

A

a. insurable interest

Insurable interest is having a monetary interest in the subject being insured.

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10
Q

Which one of the following is NOT one of the major lines of insurance?

a. homeowner
b. property
c. casualty
d. marine

A

a. homeowner

There are 3 major types or lines of insurance in property and casualty; marine, property, and casualty.

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11
Q

What are the four types of ocean marine policies?

A

Hull, Cargo, Liability, and Freight

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12
Q

Which clause extends marine coverage on goods until they reach their final destination?

a. sue and labor clause
b. protection and indemnity clause
c. general average clause
d. warehouse to warehouse clause

A

d. warehouse to warehouse clause

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13
Q

What is the term that describes a policy covering small, valuable articles that can be carried anywhere?

a. homeowners
b. floater
c. personal property
d. fire

A

b. floater

The floater is a policy to cover high-value property anywhere.

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14
Q

Where does on find a list of the types of property that may be written by marine insurers?

a. reinsurance treaty
b. ISO manual
c. Nationwide marine definition
d. Lloyd’s of London

A

c. Nationwide marine definition

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15
Q

Who founded the first insurance company in America?

a. George Washington
b. Thomas Jefferson
c. John Hancock
d. Benjamin Franklin

A

d. Benjamin Franklin

It was the Philadelphia Contributionship for the Insurance of Houses form Loss by Fire

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16
Q

In which state was the ‘standard fire policy’ developed?

a. California
b. Florida
c. Texas
d. New York

A

d. New York

In 1887, the New York legislature drafted a form for use in that state. It was quickly adopted by insurers in New York and by other states

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17
Q

Which one of the following is NOT a type of social insurance?

a. social security
b. workers compensation
c. unemployment compensation
d. assigned risk auto

A

d. assigned risk auto

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18
Q

Which one of the following lists the four types of voluntary insurers?

a. governmental, risk retention group, self, for-profit
b. governmental, self, for-profit, cooperative
c. self, excess, for-profit, risk retention
d. for-profit, cooperative, excess, self

A

b. governmental, self, for-profit, and cooperative

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19
Q

Why does the government offer insurance?

a. to compete with the private sector
b. to offer the consumer a broader choice of policies
c. because the coverage is usually not available from the private sector
d. all of the above

A

c. because the coverage is usually not available from the private sector

Governmental insurers offer voluntary coverage on risks that the private market may find too hazardous.

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20
Q

The preferred term for “self insurance” is:

a. retention
b. avoidance
c. non-insurance transfer
d. deductible

A

a. retention

The organization “retains” its exposure to loss and pays losses out of that fund into which it has been making contributions

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21
Q

“Combined ratio” measures:

a. an insurer’s cash flow
b. an insurer’s claim payments
c. an insurer’s expense payments
d. an insurer’s claim and expense payments

A

d. an insurer’s claim and expense payments

It means the amount of money the insurer spends both on losses and its expenses.

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22
Q

Insurance forms a basis of:

a. the stock market
b. the credit system
c. the banking system
d. the federal government

A

b. the credit system

A social benefit provided by insurance is that it forms the basis for the credit system. Few - if any - banks would be willing to loan the amount of money necessary to purchase a new car, a home, or business if faced with the possibility of that property being destroyed by a fire.

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23
Q

Another name for a reciprocal insurer is:

a. Lloyd’s of London
b. a county mutual
c. an inter-insurance exchange
d. a stock company

A

c. an inter-insurance exchange

A reciprocal - or inter-insurance exchange is a group of individuals or firms who combine to pay each other’s losses

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24
Q

A reciprocal is managed by:

a. an attorney-in-fact
b. the company president
c. the company’s board of directors
d. the owners

A

a. an attorney-in-fact

The members of a reciprocal are called the owners. The owners hire an attorney-in-fact to manage the day-to-day operations of the reciprocal. The attorney-in-fact collects premiums, settles losses, and solicits new business.

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25
Q

Who owns a mutual insurer?

a. shareholders
b. employees
c. the controlling family
d. the policyholders

A

d. the policyholders

Every policyholder is a member of the corporation.

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26
Q

What is the term given to a reciprocal or a mutual that can go back to its policyholders for more money if needed to cover the expenses for a year?

a. unprofitable
b. assessable
c. fruitless
d. unproductive

A

b. assessable

They may assess their policyholders for the extra money needed to cover their expenses.

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27
Q

What is the term given to the process when a mutual insurer decides to become publicly traded?

a. retention
b. avoidance
c. demutualization
d. none of the above

A

c. demutualization

By choosing to “demutualize” many insurance companies have now bought out the ownership interest of their policyholders and are now being traded on the various stock markets.

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28
Q

To indemnify means:

a. to replace
b. to cheat
c. to make whole
d. to insure

A

c. to make whole

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29
Q

Which one of the following is NOT a characteristic that is unique to the insurance contract?

a. negotiable
b. indemnity
c. aleatory
d. adhesion

A

a. negotiable

Insurance contracts are aleatory and contracts of adhesion. An insurance policy’s purpose is to “indemnify” the policyholder in the event of a covered loss.

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30
Q

How are ambiguities in an insurance policy interpretted?

a. against the insured
b. in favor of the insured
c. in favor of the insurer
d. none of the above

A

b. in favor of the insured

Since insurance contracts are written on a take or leave it basis, courts interpret any ambiguity in the language strictly against the insurer.

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31
Q

What do we mean when we say that an insurance policy is a contract of “utmost good faith”?

a. that it was negotiated “at arm’s length”
b. that it can be overturned at the wish of either party
c. that both parties may rely on the other for truthful information
d. none of the above

A

c. that bother parties may rely on the other for truthful information

An insurance contract is a personal contract between the insurer and the insured. While all contracts require “good faith” dealings between the parties, insurance requires “utmost good faith”.

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32
Q

Which one of the following is NOT a piece of information found on an insurance policy’s declarations page?

a. name and address of the insured
b. names of others insured by the policy
c. name and address of the agent
d. the premium

A

b. names of others insured by the policy

The dec page contains basic information about the policy; such as: name of the insurer and agent; name and address of the insured; policy period; limits of liability; forms applicable; and premium

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33
Q

The section of a policy that tells what is not covered is:

a. declarations
b. conditions
c. exclusions
d. endorsements

A

c. exclusions

The exclusions section of the policy states what losses are not covered by a particular policy.

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34
Q

On a personal auto policy, a resident spouse must be shown as a named insured to receive the protection reserved for a named insured.

a. true
b. false

A

b. false

The PAP extends insured status to: resident relatives of the named insured; any person using an auto covered by the policy; and any other person or organization that is legally responsible for the use of an auto covered by the policy.

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35
Q

Which one of the following is NOT a way in which property is insured?

a. blanket
b. schedule
c. open
d. variable

A

d. variable

The policy describes the property to be covered: schedule property, blanket property and open property.

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36
Q

A restaurant suffers a fire. While closed, the owner loses income. That loss of income is referred to as a(n):

a. direct loss
b. indirect loss
c. uninsurable loss
d. uncovered loss

A

b. indirect loss

Indirect losses arise out of direct losses and happen over a period of time.

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37
Q

Which one of the following statements best characterizes the agency relationship?

a. it is a relationship where one person acts on behalf of another
b. it is a relationship that is not legally recognized
c. it is a relationship that requires a written contract
d. it is a relationship that exists on in insurance

A

a. it is a relationship where one person acts on behalf of another person

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38
Q

An insurance agent knows that one of his customers is conducting a dangerous operation in the insured home. Which one of the following duties requires the agent to report this activity to the insurer?

a. obedience
b. loyalty
c. reasonable care
d. accounting

A

b. loyalty

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39
Q

What is the term given to the practice of an insurance agent using an insurer’s premium for his own benefit?

a. fraud
b. theft
c. larceny
d. commingling

A

d. commingling

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40
Q

What is the name given to the situation where a 3rd party might think that an agent has permission from a principal to do something?

a. express authority
b. emergency authority
c. apparent authority
d. contractual authority

A

c. apparent authority

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41
Q

What is the blanket term that applies to anyone who sells insurance?

a. agent
b. producer
c. broker
d. solicitor

A

b. producer

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42
Q

What is the term for the ability of an independent insurance agent to place his customers with any of the companies he represents?

a. ownership of expirations
b. express authority
c. American Agency System
d. implied authority

A

a. ownership of expirations

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43
Q

What is the term for an insurance agent who has a contract with one insurer?

a. independent agent
b. captive agent
c. direct writing agent
d. exclusive agent

A

d. exclusive agent

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44
Q

Insurance companies who sell their products through salaried employees are:

a. American Agency System companies
b. direct writers
c. captive insurers
d. inter-insurance exchanges

A

b. direct writers

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45
Q

Insurance brokers describe themselves as:

a. agents of the insured
b. agents of the insurer
c. solicitors
d. none of the above

A

a. agents of the insured

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46
Q

Which one of the following is NOT a responsibility of an insurance intermediary?

a. explain the policy to the insured
b. help the insurer obtain reinsurance on a risk
c. collect the premiums
d. obtain proper coverage for the customer

A

b. help the insurer obtain reinsurance on a risk

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47
Q

Which one of the following is NOT a department in a typical insurance company?

a. underwriting
b. marketing
c. trading
d. claims

A

c. trading

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48
Q

Which one of the following is NOT a duty of an underwriter?

a. accept submissions
b. pay claims
c. reject submissions
d. modify submissions

A

b. pay claims

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49
Q

Which one of the following best describes the information an underwriters may obtain on an applicant?

a. motor vehicle report
b. credit report
c. property inspection
d. all of the above

A

d. all of the above

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50
Q

Which one of the following best describes a physical hazard?

a. something objective about a risk that increases the chance of loss
b. dishonesty on the part of the insured
c. indifference on the part of the insured
d. the chance that a court will rule against the insured

A

a. something objective about a risk that increases the chance of loss

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51
Q

Which one of the following best describes a morale hazard?

a. something objective about a risk that increases the chance of loss
b. dishonesty on the part of the insured
c. indifference on the part of the insured
d. the chance that a court will rule against the insurer

A

c. indifference on the part of the insured

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52
Q

Which one of the following best describes a moral hazard?

a. something objective about a risk that increases the chance of loss
b. dishonesty on the part of the insured
c. indifference on the part of the insured
d. the chance that a court will rule against the insurer

A

b. dishonesty on the part of the insured

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53
Q

Which one of the following is NOT a typical duty of an insurer’s marketing representative?

a. making underwriting decisions
b. keeping agents up-to-date about company’s products and services
c. looking for new product needs
d. acting as a liaison with other departments

A

a. making underwriting decisions

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54
Q

Which one of the following is NOT a step in the claims process?

a. insured notifies agent or insurer of loss
b. insurer assigns an adjuster
c. an underwriter reviews
d. a check is issued to the insured

A

c. an underwriter reviews

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55
Q

A staff adjuster is:

a. an independent contractor who works for many insurers
b. an independent contractor who works for insureds only
c. an employee of an insurance company
d. none of the above

A

c. an employee of an insurance company

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56
Q

A public adjuster is:

a. an independent contractor who works for many insurers
b. an independent contractor who works for insureds only
c. an employee of an insurance company
d. always a lawyer

A

b. an independent contractor who works for insureds only

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57
Q

Which is NOT an additional coverage available with a CP policy?

a. debris removal
b. preservation of property
c. fire department services
d. inflation guard

A

d. inflation guard

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58
Q

True or False: The additional coverage preservation of property provides coverage for any direct damage that occurs to undamaged property for up to thirty days following loss while it is transported and/or temporarily stored at another location.

A

True

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59
Q

Up to what amount of coverage is available through the Newly Acquired Business Personal Property coverage extension?

a. $50,000
b. $100,000
c. $250,000
d. $1,000,000

A

b. $100,000

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60
Q

The Property Located Away From Described Premises coverage extension restores coverage for direct damage and debris removal for loss to what types of outdoor property?

a. Outdoor fences, radio and television antennas, and trees, shrubs, and plants (other than stock of trees, shrubs or plants)
b. outdoor fences, and tress, shrubs and plants
c. radio and television antennas, and trees, shrubs and plants
d. outdoor fences and radio and television antennas

A

a. outdoor fences, radio and television antennas, and tress, shrubs, and plants (other than stock of trees, shrubs or plants)

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61
Q

True or False: The extension of Replacement Cost of Property of Others optional coverage is available only when the insured is subject to a written contractual obligation governing his liability for the property of others.

A

A. True

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62
Q

Which three perils does the Broad Form (CP 10 20) add to the eleven listed under the Basic Form (CP 10 10)?

a. Riot or Civil Commotion; Vandalism; and Volcanic Action
b. Windstorm or Hail; Explosion; and Smoke
c. Sinkhole Collapse; Fire; and Aircraft or Vehicles
d. Falling Objects; Weight of Ice, Snow, or Sleet; and Water Damage

A

d. Falling Objects; Weight of Ice, Snow or Sleet; and Water Damage

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63
Q

Under which of the following scenarios would coverage for water damage be available under the Broad Form (CP 10 20)?

a. Damage caused by an undetected leak over a thirty day period
b. Damage from the purposeful discharge of steam
c. Damage resulting from frozen pipes in a heated building that has been vacant for 45 days
d. Damage caused by a seepage over a seven-day period in a building that had been vacant for 90 days

A

c. Damage resulting form frozen pipes in a heated building that had been vacant for 45 days

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64
Q

The Commercial Property policy provides what amount of coverage for the increased costs of construction incurred due to the enforcement of a building law?

a. $5,000
b. $10,000
c. $25,000
d. $100,000

A

b. $10,000

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65
Q

True or False: Both named peril forms exclude all types of earth movement, including earthquake, landslide, mine subsidence, and sinkhole collapse.

A

False

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66
Q

Which of the following is an example of the differences between open perils and named perils coverage?

a. named perils refers to the specified exclusions listed in the policy
b. under named perils coverage, any loss is covered, unless it is a named peril
c. open perils coverage requires the insured to prove that an open peril caused a loss
d. open perils coverage requires that the insurer prove an exclusion applies in the event of a loss

A

d. Open perils coverage requires that the insurer prove an exclusion applies in the event of a loss

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67
Q

Which of the following is an example of a non-fortuitous loss?

a. theft of computer equipment
b. a computer system with a manufacturing defect
c. a computer hard drive fails because it is worn out
d. compute ruse results in a carpal tunnel syndrome claim

A

c. a computer hard drive fails because it is worn out

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68
Q

True or False: The purpose of the third set of exclusions under the special form are designed to eliminate coverage where two excluded perils operate to cause a loss.

A

True

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69
Q

Which of the following items are NOT subject to a $2,500 special limit for any one occurrence of theft?

a. furs
b. jewelry and watches worth more than $100 each
c. lottery tickets held for sale
d. gold or silver bullion

A

c. lottery tickets held for sale

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70
Q

What are the four types of conditions associated with the Commercial Property Policy?

a. Common Policy, Commercial Property, Loss, and Inspection
b. Commercial Property, Loss, Inspection and Additional
c. Additional, Cancellation, Loss, and Common Policy
d. Common Policy, Commercial Property, Loss, and Additional

A

d. Common Policy, Commercial Property, Loss and Additional

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71
Q

True or False: The inspection and surveys condition, which states that the insurer does not warrant the insured’s operations are safe or healthful, also applies to any rating, advisory, or similar organization making inspections under the policy.

A

True

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72
Q

If an insurer liberalizes a policy by increasing coverage without any corresponding premium increase, which of the following is true?

a. The revisions automatically apply to policies written within the past 45 days
b. The revisions automatically apply to all insureds with similar policies
c. The revisions only apply if approved buy the ISO (Insurance Services Office).
d. The revisions apply to all policies upon policy renewal.

A

b. The revisions automatically apply to all insureds with similar practice.

73
Q

True or False: In case of loss an insurer may examine the insured under oath, either by oral or written examination.

A

True

74
Q

If a loss payment has already been made at time stolen property is recovered, the insured:

a. Is required to return the payment and take back the recovered property
b. May retain the property after reimbursing the insurer for recovery expenses and any necessary repairs
c. May return the claim payment in exchange for the recovered property, but must pay for recovery and repairs
d. May return the claim payment in exchange for the recovered property; the insurer pays for recovery and repairs within liability limits

A

d. may return the claim payment in exchange for the recovered property; the insurer pays for recovery and repairs within liability limits

75
Q

What is the minimum deductible under Pollutant Cleanup & Removal Additional Aggregate Limit of Insurance endorsement, CP 04 07?

a. $100
b. $1,000
c. $5,000
d. $10,000

A

b. $1,000

76
Q

True or False: The Your Business Personal Property - Separation of Coverage endorsement, CP 19 10, is designed to assign the limit of insurance to various categories of business personal property.

A

True

77
Q

Which of the following is NOT an endorsement designed to ADD coverage to the Commercial Property policy?

a. Manufacturers Consequential Loss Assumption endorsement, CP 99 02
b. Utility Services - Direct Damage endorsement, CP 04 17
c. Debris Removal Additional Insurance
d. Spoilage Coverage endorsement, CP 04 40

A

c. Debris Removal Additional Insurance

78
Q

True or False: When the Sprinkler Leakage Exclusion endorsement, CP 10 56, applies, if sprinkler leakage results in a covered cause of loss, the insurer will pay for the loss or damage caused by the covered cause of loss.

A

True

79
Q

Which is a true statement concerning the Broken or Cracked Glass Exclusion Form endorsement, CP 10 52?

a. In excludes coverage for damage caused by or resulting from existing cracks or extensions of existing cracks
b. It is used to list glass that becomes broken or cracked after the policy goes into effect
c. It is used to exclude coverage for broken or cracked glass that occurs during the policy term
d. It is used to list existing broken or cracked glass for the purpose of assigning higher deductible amounts

A

a. It excludes coverage for damage caused by or resulting from existing cracks or extensions of existing cracks

80
Q

Which of the following is intangible property?

a. cash
b. copyrights
c. molds and dyes
d. buildings

A

b. copyrights

81
Q

True or False: The right to protect one’s personal property is guaranteed by the United States Constitution.

A

True

82
Q

Of the following losses associated with an employee’s stolen laptop, which is a loss that some courts have determined is NOT eligible for coverage?

a. Damage to data
b. Physical loss of the laptop
c. Damage to the laptop screen
d. Theft of copyrighted information from the hard drive

A

a. damage to data

83
Q

One key to coverage under Web specialty policies is:

a. Computer hardware that must be rebuilt after a Web attack
b. Which company issued the policy
c. Whether or not the insured maintains non-Web based operations
d. Proper valuation of income stream through the insured’s Web site

A

d. Proper valuation of income stream through the insured’s Web site

84
Q

Which one of the following is NOT a way in which a business may become liable for bodily injury or property damage to someone else?

a. negligence
b. strict liability
c. admission by an employee
d. contract

A

c. admission by an employee

85
Q

Which one of the following represents all of the coverages provided by the CGL policy?

a. bodily injury and property damage
b. bodily injury and property damage; personal and advertising injury; and medical payments
c. bodily injury and property damage; and medical payments
d. personal injury; and medical payments

A

b. bodily injury and property damage; personal and advertising injury ; and medical payments

86
Q

The policy provision that brings a CGL into play is called a:

a. coverage gun
b. coverage shot
c. coverage arrow
d. coverage trigger

A

d. coverage trigger

87
Q

On a “claims-made” CGL, what provision allows claims that occur prior to the effective date of the policy to be covered?

a. coverage trigger
b. tail coverage
c. retroactive date
d. occurrence date

A

c. retroactive date

88
Q

Which one of the following represents the type of contractual liability covered by a CGL?

a. liability arising of of an insured contract
b. liability arising out of all contracts
c. liability arising out of employment contracts
d. liability arising out of oral contracts

A

a. liability arising out of an insured contract

89
Q

Which one of the following offenses was intentionally omitted from the CGL definition of “advertising injury”?

a. infringement of copyright
b. infringement of trade dress
c. infringement of a slogan
d. infringement of a patent

A

d. infringement of a patent

90
Q

The part of the policy where the insurer promises to provide the insurance is called the:

a. exclusions
b. conditions
c. definitions
d. insuring agreement

A

d. insuring agreement

91
Q

What is the key requirement of “damages” before the become payable under the CGL?

a. the insured must agree to pay them
b. the insurer must agree to pay them
c. the insured must be legally liable for them
d. the insured must be guilty of a crime

A

c. the insured must be legally liable for them

92
Q

The Coverage A insuring agreement promises that the insurer will defend the insured against:

a. any suit that alleges potentially covered allegations
b. any suit that alleges advertising injury
c. any suit that alleges personal injury
d. any suit seeking damages

A

d. any suit seeking damages

93
Q

When a suit is filed against a CGL insured, the insurance company has a right to defend such a suit. in addition to that right, defense of a suit is also the insurer’s:

a. duty
b. option
c. choice
d. all of the above

A

a. duty

94
Q

Offenses such as false arrest, slander, and copyright infringement are covered under which one of the CGL’s insuring agreements:

a. medical payments
b. bodily injury
c. personal and advertising injury
d. property damage

A

c. personal and advertising injury

95
Q

At which one of the following premises does CGL medical payments NOT apply?

a. in the insured’s factory
b. at a building rented by the insured
c. in the parking lot at the insured’s factory
d. at the home of the company president

A

d. at the home of the company president

96
Q

Which one of the following is not a “supplementary payment” in the CGL?

a. cost of bail bonds
b. expenses incurred by the insurer
c. expenses incurred by the insured
d. medical expenses

A

d. medical expenses

97
Q

A party for whom the insured has agreed to assume liability is called an:

a. additional insured
b. indemnitor
c. indemnitee
d. agent

A

c. indemnitee

98
Q

A clause in a contract where one party assumes the legal liability of another party is call a:

a. hammer clause
b. reservation of rights
c. non-waiver agreement
d. hold harmless agreement

A

d. hold harmless agreement

99
Q

True or False: A release of attachment bond is a bond which guarantees that the insured will not pay the judgment and court costs, if the court decides against the insured.

A

b. False

It is a bond that guarantees that the insured will pay the judgment and court costs, if the court decides against the insured. The amount is limited to applicable limit of insurance.

100
Q

The “general aggregate limit” represents:

a. the most that the CGL will pay under each coverage
b. the most the CGL will pay under all coverages
c. the most the CGL will pay for a products-completed operations claim
d. the most the CGL will pay under all coverages other than products-completed operations

A

d. the most the CGL will pay under all coverages other than products-completed operations

101
Q

Which one of the following is not a right or obligation reserved for the named insured under a CGL policy?

a. payment of the premium
b. receipt of notices of cancellation and non-renewal
c. receipt of notices of change to the policy
d. receipt of a copy of the policy application

A

d. receipt of a copy of the policy application

102
Q

True or False: If the named insured is a partnership, the spouse of a partner receives the same protections as the named insured.

A

False

103
Q

“Members” and “managers” are unique to which kind of corporate organization under the CGL provisions:

a. partnership
b. proprietorship
c. limited liability company
d. corporation

A

c. limited liability company

104
Q

For which one of the following would an employee of a CGL insured receive protection under the employer’s CGL?

a. the negligent injury of a customer on the premises
b. the negligent injury of a fellow employee
c. the negligent injury of a supervisor
d. the failure to provide medical services

A

a. the negligent injury of a customer on the premises

105
Q

True or False. Upon the death of a named insured the CGL extends insured status to the spouse and children only.

A

False

106
Q

The clauses in an insurance policy that outline the rights and duties of the insured and insurer are called:

a. exclusions
b. declarations
c. agreements
d. conditions

A

d. conditions

107
Q

True or False? If an insured declares bankruptcy, that releives the insurer of its duties under a CGL policy.

A

False

Bankruptcy is not a condition that affects coverage. The clause states that bankruptcy or insolvency of the insured does not relives the insurer of its obligations under the CGL coverage part.

108
Q

Which one of the following is NOT required to be included in a notice of loss to an insurer on a CGL policy?

a. the term of the policy
b. the date of the offense or occurrence
c. the names and addresses of any witnesses
d. the nature of any injuries

A

a. the term of the policy

109
Q

True or False? In most cases, when a CGL coverage form and some other insurance cover the same occurrence or offense, the CGL policy will respond on a primary basis.

A

True

110
Q

Which one of the following conditions is found only on a claims-mad CGL?

a. duties in the event of a loss
b. right to claim and occurrence information
c. separation of insureds
d. representation

A

b. right to claim and occurrence information

111
Q

True or False? Under a claims-made CGL policy bodily injury and property damage must be caused by an occurrence in order for coverage to apply.

A

True

Bodily injury and property damage must be caused by an “occurrence” in a claims-made policy.

112
Q

The provision that allows a claims-made policy to cover incidents that occur prior to its effective date is called:

a. policy inception
b. retroactive date
c. tail coverage
d. extended reporting period

A

b. retroactive date

113
Q

The provision that allows a claims-made policy to cover claims that are first made after the policy expires is called:

a. retroactive date
b. policy inception
c. extended reporting period
d. none of the above

A

c. extended reporting period

114
Q

Another term for the extended reporting period is:

a. tail coverage
b. BI coverage
c. PD coverage
d. PI coverageq

A

a. tail coverage

115
Q

Which one of the following is NOT a possible choice for a retroactive date under a claims-made policy?

a. retroactive date the same as the inception date
b. retroactive date earlier than the inception date
c. no retroactive date at all
d. retroactive date in the middle of the new policy

A

d. retroactive date in the middle of the new policy

116
Q

Which one of the following is NOT specifically listed as being taken into account by an insurer when pricing a supplemental extended reporting period?

a. the exposures insured
b. previous types and amounts of insurance
c. loss experience
d. limits available for future payments of damages

A

c. loss experience

117
Q

Factors that can affect the applicability of the expected or intended exclusion are:

a. the sex of the injured person; mental capability; intent to protect
b. the age of the injured person; intentional injury; ability to make legal decisions
c. the age of the injured person; intoxication; mental capacity; foreseeability

A

c. the age of the injured person; intoxication; mental capacity; foreseeability

118
Q

The exception to the expected or intended exclusion is:

a. the exclusion does not apply unless the insured and insurer agree in writing not to enforce
b. the exclusion does not apply to bodily injury resulting from the use of reasonable force to protect persons or property
c. the exclusion does not apply bodily injury done by advertising

A

c. the exclusion does not apply to bodily injury resulting form the use of reasonable force to protect persons or property

119
Q

The liquor liability exclusion applies to BI or PD for which any insured may be held liable under all of the following instances with the exception of:

a. causing or contributing to the intoxication of any person
b. furnishing alcoholic beverages to a person under the legal drinking age
c. any statue or regulation relating to the sale and gift distribution of alcoholic beverages
d. the named insured being a social host at an event where alcohol is served

A

d. the named insured being a social host at an event where alcohol is served

120
Q

True or False? The damage to your work exclusion applies to property damage to the named insured’s work that is included within the product-completed operations hazard, as defined on the CGL form.

A

True

121
Q

What is the exception to the damage to impaired property or property not physically injured exclusion?

a. the exclusion does not apply if the named insured’s product is incorporated into another’s product making that other product less useful.
b. the exclusion does not apply to loss of use of other property arising out of sudden and accidental physical injury to the named insured’s product or work after it has been put to its intended use
c. the exclusion does not apply to damage to impaired property arising out of a failure by the named insured to perform a contract
d. the exclusion does not apply if the other product that has been damaged can be restored to use by repairing or replacing the named insured’s product

A

b. the exclusion does not apply to loss of use of other property arising out of sudden and accidental physical injury to the named insured’s product or work after it has been put to its intended use

122
Q

True or False? Personal and advertising injury liability coverage does not apply to injuries arising out of a written publication of material that the named insured knows is false.

A

True

123
Q

The insured has personal and advertising injury liability coverage in all of the following instances with the exception of:

a. injury arising from written publication of material that slanders a person’s products
b. the use of another’s advertising idea in the named insured’s advertisement
c. injury arising out of a criminal act committed at the direction of any insured
d. written publication of material that violates another’s right of privacy

A

c. injury arising out of a criminal act committed at the direction of any insured

124
Q

What type of businesses are not meant to be covered by Coverage B under the CGL form?

a. contractors, retail stores, manufacturers
b. broadcasters, publishers, telecasters
c. druggists, restaurants, truckers
d. accountants, doctors, exporters

A

b. broadcasters, publishers, telecasters

125
Q

True or False? Personal and Advertising injury liability coverage does NOT apply to injuries arising out of the discharge of pollutants.

A

True

126
Q

True or False? Coverage under the medical payments coverage part of the CGL form does NOT require legal liability on the part of the insured.

A

True

127
Q

Which one of the following is eligible for medical payments coverage?

a. any insured
b. a customer visiting the insured’s place of business
c. a tenant living in his apartment
d. a professional athlete injured at work

A

b. a customer visiting the insured’s place of business

128
Q

Which one of the following athletic activities is eligible for medical payments coverage?

a. church picnic softball game
b. spur of the moment touch football game
c. a professional baseball game
d. all of the above

A

d. all of the above

129
Q

True or False? Bodily injury occurring away from premises owned by the named insured and arising out of the name insured’s product is covered under the medical payments section of the CGL form.

A

False

130
Q

What are the exceptions to the contractual liability exclusion in the CGL form?

a. liability the insured would have in the absence of the contract and liability assumed in an insured contract
b. breach of contract and failure to perform
c. warranties for the insured’s products and failure to provide instructions on the use of the insured’s products
d. additional insured agreements and railroad indemnity agreements

A

a. liability the insured would have in the absence of the contract and liability assumed in an insured contract

131
Q

True or False? A contract for a lease of premises is an insured contract.

A

True

132
Q

What is a sidetrack agreement?

a. contract between owner and contractor for construction on the owner’s premises
b. contract between business and railroad wherein railroad builds track onto business’s property and business releases railroad from liability
c. contract between manufacturer and trucking company in which trucking company agrees to indemnify manufacturer for damage to finished products
d. contract between railroad and municipality in which railroad assumes liability of construction and maintenance work around tracks that cross city roads

A

b. contract between business and railroad wherein railroad builds track onto business’s property and business releases railroad from liability

133
Q

Which one of the following is not an insured contract?

a. an easement or license agreement
b. an elevator maintenance agreement
c. an obligation to indemnify a municipality in connection with work for a municipality
d. a hold harmless agreement

A

c. an obligation to indemnify a municipality in connection with work for a municipality

134
Q

True or False? Defense costs for entities whose liability has been assumed by the insured through an insured contract reduces the limits of insurance available to the insured.

A

False

The current CGL form states, “reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages.” Defense costs for entities whose liability has been assumed by the insured through an insured contract are not included within the limits of insurance.

135
Q

Which one of the following is NOT an exception to the pollution exclusion?

a. BI sustained within a building and caused by fumes from heating equipment
b. BI arising out of fumes from a hostile fire
c. BI for which the insured contractor is liable and the owner of the work site is added as additional insured
d. BI arising from escape of pollutants from a site that used to be owned by the insured

A

d. BI arising form escape of pollutants from a site that used to be owned by the insured

136
Q

True or False? There are no exceptions for the pollution exclusion pertaining to pollutants transported or processed as waste by the insured.

A

True

137
Q

The release of pollutants from a location on which the insured is performing operations is excluded depending on which requirement?

a. the pollutants have to be brought on to the location by the insured in connection with such operations
b. the pollutants have to be released from the mobile equipment owned by the insured and brought onto the location
c. the pollutants have to be released from equipment owned by the owner of the location
d. the pollutants have to be released from a hostile fire caused by the insured

A

a. the pollutants have to be brought on to the location by the insured in connection with such operations

138
Q

What is the exception to the pollution cleanup costs exclusion?

a. liability for BI caused by the release of pollution from premises owned by the insured
b. liability for damages because of PD that the insured would have in the absence of a cleanup order
c. liability caused by BI arising out of a hostile fire
d. liability caused by the escape of waste being transported by the insured

A

b. liability for damages because of PD that the insured would have in the absence of a cleanup order

139
Q

True or False? Certain off-premises exposures and exposures within the products-completed operations hazard offer examples of instances when pollution liability can be covered under the CGL form.

A

True

140
Q

True or False? The named insured cannot use the CGL coverage form to cover damage to its own property, whether real property or personal property.

A

True

141
Q

What is the alienated premises exclusion?

a. an exclusion that applies to property damage to property owned by people who do not live in this country
b. an exclusion that applies to property damage to premises that the named insured sells, gives away, or abandons
c. an exclusion that applies to property damage to property that the insured built and held for rental purposes
d. an exclusion that applies to property damage to premises rented to the insured for a period of seven or fewer days

A

b. an exclusion that applies to property damage to premises that the named insured sells, gives away, or abandons

142
Q

Which one of the following is not a state exception to the care, custody, or control exclusion?

a. the exclusion does not apply to property damage to premises and contents rented to the named insured for less than seven days
b. the exclusion does not apply to property damage to property included within the products-completed operations hazard
c. the exclusion does not apply to liability assumed under a sidetrack agreement

A

b. the exclusion does not apply to property damage to property included within the products-completed operations hazard

143
Q

True or False? Property damage to that particular part of real property on which the named insured is working applies to completed operations.

A

False

Part five of the exclusion refers to property damage to that particular part of real property on which the named insured, or others working on behalf of the name insured, are performing operations, if the property damage arises out of those operations. This exclusion applies to real property and applies if the damage is done at the time the operations are going on. Completed operations are not the subject of this part of exclusion J.

144
Q

What is the faulty workmanship exclusion?

a. an exclusion that applies to damage to property in which the insured is performing operations
b. an exclusion that applies to property damage to property owned or rented to the named insured
c. an exclusion that applies to property damage to that particular part of any property that has to be repaired or replaced because the insured’s work was incorrectly performed
d. an exclusion that applies to property damage to personal property in the care and control of the insured

A

c. an exclusion that applies to property damage to that particular part of any property that has to be repaired or replaced because the insured’s work was incorrectly performed

145
Q

The BAP is generally appropriate for insuring all of the following vehicles except which one?

a. delivery vehicles
b. fleets
c. pick-ups and vans
d. 18-wheel semi-trucks

A

d. 18-wheel semi-trucks

146
Q

The designation symbol for owned autos subject to a compulsory uninsured motorists law is which one of the following symbols?

a. Symbol 1
b. Symbol 4
c. Symbol 6
d. Symbol 9

A

c. Symbol 6

147
Q

If the client wishes to take a comprehensive approach and insure any auto that the company owns, hires, borrows, or uses in its business, which covered auto designation symbol is used?

a. Symbol 9
b. Symbol 1
c. Symbol 6
d. Symbol 8

A

b. Symbol 1

148
Q

If symbols 1, 2, 3, 4, 5, or 6 are entered next to a coverage in item two of the declarations, what can be said of autos acquired after the policy begins?

a. the same coverage would apply automatically for other autos acquired during the remainder of the policy period
b. the insured must ask for coverage in writing before those acquired autos get any insurance coverage
c. the acquired autos are not covered under the BAP and must be added at the renewal for any coverage to apply
d. the acquired autos have physical damage coverage since they are owned autos, but no liability coverage

A

a. the same coverage would apply automatically for other autos acquired during the remainder of the policy period

149
Q

Trailers with a load capacity of how many pounds are considered covered autos for liability coverage if the BAP provides liability coverage?

a. 1,000 pounds
b. 2,000 pounds or less
c. 500 pounds or less
d. There is no load capacity limit

A

b. 2,000 pounds or less

150
Q

Under what circumstances does the BAP consider mobile equipment to be a covered auto for liability purposes?

a. while the equipment is being carried or towed by a covered auto
b. while the equipment is owned by the named insured and used in his business
c. while the equipment is being used off public roadways
d. while the equipment is in storage on the name insured’s premises

A

a. while the equipment is being carried or towed by a covered auto

151
Q

In part two of the liability insuring agreement under the BAP, what does the insurer promise to do?

a. to pay for all damages the insured causes due to an auto accident
b. to pay all sums the insured legally must pay as a covered pollution cost or expense resulting from an auto accident
c. to reimburse the insured for his legal defense costs
d. to pay the damages caused by the insured’s breach of contract

A

b. to pay all sums the insured legally must pay as a covered pollution cost or expense resulting from an auto accident

152
Q

Is a salesman using his own personal auto on company business an insured under the company’s BAP?

a. yes, if the salesman does not have any personal auto insurance
b. no, the employee of the named insured is not an insured while using an auto owned by the employee under the terms of the BAP
c. yes, but only if the salesman has paid an extra premium for the coverage
d. no, unless the work contract between the salesman and the named insured employer requires the salesman to be an additional insured on the employer’s BAP

A

b. no, the employee of the named insured is not an insured while using an auto owned by the employee under the terms of the BAP

153
Q

The supplementary payments extension in the BAP includes all bu which one of the following items?

a. the cost of bail bonds
b. all costs taxed against the insured in a lawsuit
c. hospital costs incurred by the insured after an auto accident
d. all expenses incurred by the insurer

A

c. hospital costs incurred by the insured after an auto accident

154
Q

Give an example of an example of an exception to the pollution exclusion in the BAP.

a. one of the named insured’s covered autos runs into a tank truck causing the truck’s cargo of pollutants to spill out and result in injuries and property damage
b. one of the named insured’s covered autos is transporting pollutants and is hit by a train spilling the pollutants onto the train tracks
c. while the pollutants are being moved from the covered auto, they are spilled accidentally into a lake owned by the state
d. bodily injury is claimed when the covered auto overturns and fumes from a resulting hostile fire spread into the air

A

a. one of the named insured’s covered autos runs into a tank truck causing the truck’s cargo of pollutants to spill out and result in injuries and property damage

155
Q

The war exclusion in the BAP applies under what circumstances?
a. only when the insured is involved in the cause of the war
b. only to liability assumed under a contract or agreement
c. only to instances when covered autos are used in a riot or other public unrest
d.
only when the named insured’s employees are involved in the distrubance

A

b. only to liability assumed under a contract or agreement

156
Q

If the insured has three covered autos and all are involved in the same accident, what limits of insurance are available to the insured under the terms of the BAP?

a. the insured has the declared limits of liability available to him, not three times the limit
b. the insured has three times the declared limits of liability since all three cars are covered autos
c. the available limit of insurance depends on whether one or all of the covered autos caused the accident
d. the available limits of insurance depend on whether the covered autos were driven by insureds or non-insureds

A

a. the insured has the declared limits of liability available to him, not three times the limit

157
Q

In the physical damage section of the BAP, the specified causes of loss coverage includes all of the following with one exception. Which is the exception?

a. fire
b. vandalism
c. collision with another vehicle
d. theft

A

c. collision with another vehicle

158
Q

The labor costs the insurer agrees to pay as part of the towing coverage are covered only for what type of performance?

a. labor performed at the place of the covered auto’s disablement
b. all the labor necessary to repair the auto at the repair shop
c. only labor costs associated with repairing glass breakage
d. the labor costs charged by the repair garage over and above the insured’s physical damage deductible

A

a. labor performed at the place of the covered auto’s disablement

159
Q

The temporary transportation expenses coverage extension will be paid after a waiting period. What is the waiting period?

a. a day after the insured notifies the insurer of the loss
b. immediately after the police report of the loss is filed
c. 48 hours after the theft of the covered auto
d. as soon as the insured and the insurer can agree on the value of the damaged car

A

c. 48 hours after the theft of the covered auto

160
Q

Which one of the following is an exception to the electronic equipment exclusion in the BAP?

a. any electronic equipment designed solely for the reproduction of sound
b. any device used to disrupt speed measurement equipment
c. permanently installed equipment designed solely for the reproduction of sound
d. tapes, records, and discs as long as they are owned by the named insured

A

c. permanently installed equipment designed solely for the reproduction of sound

161
Q

The insurer can pay the actual cash value of the damaged or stolen property at the time of loss or it has one other option. What is the other option?

a. the insurer can pay the cost of repairing or replacing the damaged or stolen property with other property of like kind of quality
b. the insurer can pay on a replacement cost basis
c. the insurer can pay the value agreed upon by the insured and the insurer before the inception date of the auto policy
d. the insurer can pay the amount for which the insured is liable

A

a. the insurer can pay the cost of repairing or replacing the damaged or stolen property with other property of like kind or quality

162
Q

How is the deductible shown in the declarations applied?

a. the deductible is applied per occurrence
b. the deductible is applied on an each covered auto basis
c. the deductible is applied on a per claims-made basis
d. the deductible is applied on a per insured basis

A

b. the deductible is applied on an each covered auto basis

163
Q

If the named insured and the insurer disagree on the amount of loss, what is the procedure at that point?

a. either party may demand an appraisal of the loss
b. the insured must file a lawsuit to determine the proper amount of loss
c. both parties must agree to an appraisal process
d. the insurer can pay the amount it decides is appropriate and the insured must file a complaint with the state insurance department

A

a. either party may demand an appraisal of the loss

164
Q

All of the following are duties of the insured in the event of a loss except which one?

a. give the insurer prompt notice of the loss
b. send copies of legal papers immediately to the insurer
c. cooperate with the insurer in the investigation of the loss
d. pay the claimant as soon as possible so that the insurer can then reimburse the insured

A

d. pay the claimant as soon as possible so that the insurer can then reimburse the insured

165
Q

No one may bring legal action against the insurer under the BAP until two things happen. One is that there has been full compliance with all the terms of the auto policy. What is the other item?

a. the insurer agrees in writing that the insured has an obligation to pay a liability claim
b. the insured agrees in writing that he is liable and that the insurer should pay the claimant
c. the claimant sues the insurer in an attempt to determine the insured’s liability
d. the state insurance department determines that the insurer must pay the claim

A

a. the insurer agrees in writing that the insured has an obligation to pay a liability claim

166
Q

What are the terms of the bankruptcy condition?

a. if the insurer becomes bankrupt, the insured has to pay the liability claims made against him
b. if the insured becomes bankrupt, the insurer will not be relieved of any obligation under the terms of the BAP
c. if the claimant faces bankruptcy because of the loss, the insurer will speed up payments to help the claimant
d. if the insured becomes bankrupt, that cancels any liability obligations he has under the terms of the BAP

A

b. if the insured becomes bankrupt, the insurer will not be relieved of any obligation under the terms of the BAP

167
Q

The BAP is void if the named insured intentionally conceals a material fact concerning a claim. What happens if any other insured does this?

a. it has no effect on the BAP coverage
b. coverage is void
c. coverage is void only as to that other insured
d. coverage is voidable if the insurer chooses to make it so

A

b. coverage is void

168
Q

Under which one of the following circumstances is the BAP not considered as primary coverage?
a. covered autos owned by the named insured
b. for hired auto physical damage coverage, any covered rented by the named insured
c trailers connected to non-owned vehicles
d. for liability assumed under an insured contract

A

c. trailers connected to non-owned vehicles

169
Q

The definition of mobile equipment is detailed but mobile equipment generally refers to what type of vehicles?

a. vehicles that are not usually used on public roads
b. vehicles that the insured uses on personal business
c. vehicles that are used to tow other vehicles or equipment
d. vehicles that are not owned by the named insured

A

a. vehicles that are not usually used on public roads

170
Q

What is the meaning of “covered pollution cost or expense”?

a. any cost or expense arising out of any demand, request or order to test for, clean up, or assess the effects of pollutants
b. property damage claims that are covered by the BAP
c. costs or expenses arising out of the release of pollutants being transported by the insured
d. excess liability coverage offered as an endorsement to the BAP that applies to a pollution claim

A

a. any cost or expense arising out of any demand, request or order to test for, clean up, or assess the effects of pollutants

171
Q

What is a leased worker?

a. a person furnished to the insured for a finite time period to supplement the workforce
b. a part time or seasonal employee
c. a person leased to the named insured under an agreement with a labor leasing firm
d. an independent contractor who leases himself out for periods of six months or less

A

c. a person leased to the named insured under an agreement with a labor leasing firm

172
Q

What does the separation of insured provision accomplish?

a. it allows the insured to receive duplicate payments for the same elements of loss
b. it states that the coverage under the BAP applies separately to each insured who is seeking coverage
c. it allows the BAP to have more than one named insured
d. it states that if a named insured separates from his or her spouse during the policy period, the terms of the BAP still apply to both

A

b. it states that the coverage under the BAP applies separately to each insured who is seeking coverage

173
Q

Which one of the following is not considered an “insured contract”?

a. a lease of premises
b. the obligation to indemnify a municipality
c. a car rental contract for a leased auto that comes with a driver
d. any easement or license agreement

A

c. a car rental contract for a leased auto that comes with a a driver

174
Q

What is the definition of loss in the BAP?

a. damage to or loss of use of tangible property
b. damage to real property and intangible property
c. damage that is direct and accidental
d. damage to and loss of use of real and personal property

A

c. damage that is direct and accidental

175
Q

What is a drive-away contractor?

a. an individual or a company hired by an auto manufacturer or an auto dealer to drive cars from point A to point B
b. an individual that leases himself out to general contractors to drive heavy-duty trucks
c. a subcontractor who rents his cranes and other construction equipment to a general contractor for 1 day or less
d. a company that hires temporary workers to haul products from manufacturing plant to retail store

A

a. an individual or a company hired by an auto manufacturer or an auto dealer to drive cars from point A to point B

176
Q

The Driving Schools endorsement modifies the who is an insured clause to include the named insured, any driving instructors, and a third party. Name the third party who is an insured under this endorsement.

a. any student driver while being instructed by an instructor
b. the parents of the student drivers since the students are minors
c. the schools that the student drivers attend
d. the leasing company if the autos are leased

A

a. any student driver while being instructed by an instructor

177
Q

The Repossessed Autos endorsement makes any auto that the named insured repossesses a covered auto under certain circumstances. Which one of the following is not one of these circumstances?

a. while the auto is being repossessed by the named insured
b. when the auto is held for sale after repossession by the named insured
c. when the employee of the re-possessor uses the car to run an errand
d. pending delivery after the sale of the auto

A

c. when the employee of the re-possessor uses the car to run an errand

178
Q

Which one of the following statements is true?

a. the Snowmobiles endorsement provides liability coverage but not physical damage coverage
b. the Snowmobile endorsement provides liability coverage while the insured is in a snowmobile racing contest
c. premium for the Snowmobiles endorsement is estimated and can be refunded to the insured upon cancellation of the coverage
d. the Snowmobiles endorsement defines a snowmobile as a land motor vehicle designed for use on ice and snow, propelled by mechanical means other than fans

A

d. the Snowmobiles endorsement defines a snowmobile as a land motor vehicle designed for use on ice and now, propelled by mechanical means other than fans

Commercial Insurance (7 decks)

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