Study 8 Flashcards
What is the state of liabilities and responsibilities in the social context?
They are in a constant state of FLUX.
Why does the insurance industry need to adapt regularly?
Because new LAWS evolve and judicial interpretation of EXISTING law is frequently MODIFIED.
What is necessary for the insurance industry to keep up with changes?
Major REWRITES and frequent REVISIONS of standard policy wordings.
What do Commercial General Liability (CGL) policies try to use?
Plain LANGUAGE.
Why has the wording of CGL policies become more complex?
Due to the increasing number of POLICY ENHANCEMENTS.
Where were many policy enhancements once available?
By ENDORSEMENT or by SEPARATE rider.
What has happened to many of the enhancements?
They have been BUILT into the STANDARD policy.
How can certain exclusions be avoided in CGL policies?
By purchasing more SPECIFIC insurance COVERAGES or by noting exceptions through ENDORSEMENT.
What types of exclusions are simply not insurable in CGL policies?
Certain EXCLUSIONS that cannot be covered by insurance.
What does this study explore in terms of CGL policies?
The WORDINGS of CGL policies, what they mean, the EXCLUSIONS, and how they restrict COVERAGE.
True or False: Judicial interpretation of existing laws in insurance is stable and rarely changes.
False – it is regularly MODIFIED.
What do exclusions in CGL policies do?
They RESTRICT coverage.
What must insurers do to attract their target markets?
They modify the RECOMMENDED policy wordings to retain their INDIVIDUALITY.
How many distinct sections are there in the CGL policy?
FIVE distinct sections.
What are the five sections of the CGL policy?
Coverages, Who Is Insured, Limits of Insurance, Conditions, and Definitions.
How many distinct insuring agreements are in Section I—Coverages?
FOUR distinct insuring agreements.
What is covered under Coverage A—Bodily Injury and Property Damage Liability?
Bodily injury or PROPERTY DAMAGE to a third party during the policy period.
What does ‘legally obligated to pay’ mean in the context of Coverage A?
The insured must have a LEGAL obligation to pay a claim for coverage to apply.
What types of liability does Coverage A primarily cover?
TORT liability, and sometimes CONTRACTUAL and STATUTORY liability.
True or False: The CGL policy covers any penalty sums or costs to prevent future losses.
False – it covers COMPENSATORY damages, not penalties or future loss prevention costs.
What is considered ‘compensatory damages’?
Damages that make the third party financially WHOLE with respect to their injury.
What is the definition of bodily injury in the CGL policy?
Bodily injury includes sickness, DISEASE, and death resulting from these conditions.
What does ‘property damage’ include?
Physical INJURY to tangible property, including loss of use of that property.
True or False: Loss of use of tangible property without physical injury is NOT covered under property damage.
False – it IS covered if the loss of use is due to physical injury.
What is the difference between an occurrence policy and a claims-made policy?
An occurrence policy covers damage during the policy period; a claims-made policy covers claims when made against the insured.
What is the coverage territory for the CGL policy?
Canada, the US and its territories, and international waters/airspace related to travel between these countries.
True or False: A CGL policy provides coverage for incidents occurring anywhere in the world.
False – it covers specific TERRITORIES like Canada, the US, and certain international areas.
What can happen if a claims-made policy lapses?
The insured could be left without COVERAGE if a claim is made after the policy lapses.
What limitation is included in the CGL policy regarding occurrences?
Coverage is limited to ONE policy term for an occurrence to prevent coverage under multiple policies.
What does the ‘expected or intended injury’ exclusion do?
It prevents coverage for injuries that were EXPECTED or INTENDED by the insured.
In the case of a home builder intentionally removing trees, is there coverage under the CGL policy?
No – it is an INTENTIONAL act that causes damage.
True or False: A restaurant owner using reasonable force to remove a troublesome patron would be covered under the CGL policy.
True – if the force is reasonable, there is coverage.
What happens if a store employee intentionally punches a customer?
There is NO coverage under the CGL policy for this intentional act.
What is excluded under the CGL regarding contractual liability?
Contractual liability is excluded under the CGL, except for compensatory damages arising from liability the insured would have had even without a contract and liability in an ‘insured contract.’
Are obligations under workers’ compensation laws covered by the CGL?
No, obligations under workers’ compensation legislation or similar laws are not covered under the CGL.
Is employers’ liability for bodily injury to an employee covered by the CGL?
No, employers’ liability for bodily injury to an employee during employment is excluded.
What exception applies to employers’ liability under the CGL?
An exception applies to claims brought by an employee denied coverage by a workers’ compensation authority, subject to the policy’s terms.
What is excluded regarding aircraft and watercraft under the CGL?
Aircraft and watercraft, whether owned or entrusted to others, are excluded, including operations at landing areas.
What are the exceptions to the aircraft and watercraft exclusion?
Exceptions include watercraft on shore at premises the insured owns, non-owned watercraft under 8 meters, and certain contingent employers’ liability claims.
Are automobiles covered under the CGL?
No, coverage is excluded for the ownership, use, or entrustment of automobiles, including loading or unloading.
What exception applies to the automobile exclusion?
Coverage applies for defective automobiles leased to others for more than 30 days with an insured lessee, and for equipment mounted on vehicles used at the site.
What property is excluded under the CGL?
Property owned, rented, or occupied by the insured, and costs for repairs or maintenance, are excluded from coverage.
What property damage is excluded related to alienated premises?
Damage to property sold, given away, or abandoned by the insured is excluded, except for certain completed operations hazards.
Is property loaned to the insured covered?
No, property loaned to the insured is excluded, as it should be covered by a property insurance policy.
What happens if property is in the insured’s care, custody, or control?
Personal property in the insured’s care, custody, or control is excluded from coverage.
Is property damage to a contractor’s work excluded?
Yes, property damage to the insured’s work or part of it is excluded, including mistakes in the work performed.
Is damage to the insured’s product covered?
No, property damage to the insured’s product is excluded under the CGL, as it is considered a business risk.
What is not covered regarding defective products or work?
Property damage to impaired property, or a failure to perform a contract according to its terms, is excluded.
Is product recall coverage included under the CGL?
No, product recall expenses are excluded, and a separate product recall policy is required.
Are damages arising from data corruption covered?
No, compensatory damages arising from the loss or corruption of electronic data are excluded.
Is bodily injury covered under personal and advertising injury?
No, bodily injury arising out of personal and advertising injury is not covered.
What does the personal and advertising injury insuring agreement cover?
It covers false arrest, malicious prosecution, wrongful eviction, slander, libel, privacy violations, and certain advertising infringements.
What exclusions apply to personal and advertising injury?
Exclusions include knowing violations of another’s rights, criminal acts, material published with knowledge of falsity, and intellectual property infringement.
Is media- and web-related business coverage excluded under personal and advertising injury?
Yes, except for false arrest, malicious prosecution, and wrongful eviction.
What does ‘Coverage C: Medical Payments’ cover in a CGL policy?
It covers reasonable medical expenses for third parties, regardless of fault, for accidents occurring on the insured’s premises or during their operations.
What is a key exclusion in Medical Payments coverage?
Coverage does not apply to injuries sustained by employees, persons entitled to workers’ compensation, or athletes.
What is ‘Coverage D: Tenants Legal Liability’?
It covers liability for damages to rented premises, protecting tenants against property damage they cause while renting or occupying the property.
What is the main exclusion under Tenants Legal Liability?
Property damage that is expected or intended from the standpoint of the insured is not covered.
In a CGL policy, who is automatically insured under Section II—Who Is Insured?
It extends coverage to spouses, company members, employees, volunteers, and even legal representatives after the insured’s death.
What is the ‘general aggregate limit’ in a CGL policy?
It is the maximum amount payable in a policy period for bodily injury, property damage, and medical payments, subject to specific conditions.
What is the ‘each occurrence limit’ in a CGL policy?
It is the maximum amount payable for any single occurrence under bodily injury, property damage, and medical payments coverage.
How does the insurer’s audit affect premiums in a CGL policy?
The insured’s premium is adjusted based on actual revenue, with the insured paying the difference if revenue exceeds estimates.
What is the ‘cross-liability clause’ in a CGL policy?
It allows one insured to bring an action against another insured, as if they had separate policies, even if there is only one policy in effect.
What is the ‘no action clause’ in a CGL policy?
It outlines the circumstances under which the insurer can be sued for coverage, generally applying the legal time limits for lawsuits.
What is an ‘insured contract’ in a CGL policy?
It refers to certain types of contracts, such as leases or hold-harmless agreements, where liability may still be covered by the policy despite the general exclusion for contractual liabilities.
What are ‘supplementary payments’ in a CGL policy?
They are additional payments made by the insurer for specific expenses like defense costs, and are not subject to the coverage limits.
What does ‘products-completed operations hazard’ refer to?
It refers to an additional aggregate limit applied to damages arising from the use of completed products or services provided by the insured.
How does the ‘other insurance clause’ work?
It ensures that this insurance is primary unless another policy for the same loss exists, in which case coverage will be shared between policies.
In Quebec, what does the insurer’s obligation in the event of the insured’s bankruptcy refer to?
The insurer must still fulfill duties as described under the policy even if the insured or their estate becomes bankrupt or insolvent.
How does the CGL policy address premium payment?
The first named insured is responsible for paying all premiums, and the policy will respond to adjustments based on audited revenue.
What is a key condition in a CGL policy regarding inspections?
The insurer may inspect the insured’s business, but these inspections are not safety checks; they are meant to assess underwriting risk.
What does the policy specify about subrogation rights?
If the insured has subrogation rights, they are transferred to the insurer to recover payments made under the policy.
What does the ‘deductible’ apply to in a CGL policy?
The deductible applies to property damage under Coverage A and tenants legal liability under Coverage D.
How is the ‘aggregate limit’ affected by multiple claims?
The aggregate limit is reduced by the total payments made during the policy period, which includes all claims under different sections.
What is the definition of ‘reasonable medical expenses’ under Medical Payments?
It includes expenses for first aid, medical, surgical, dental services, and necessary ambulance, hospital, nursing, or funeral services.
How is the medical payments coverage helpful in avoiding litigation?
It provides quick payment for minor injuries without the need to establish fault, which can prevent costly lawsuits.
What type of operations create HIGH EXPOSURE for personal injury losses in the CGL policy?
ELECTRONIC CHATROOMS or BULLETIN BOARDS hosted or controlled by the insured!
What’s one reason you might be in court for a TRADEMARK INFRINGEMENT?
COPYING someone else’s logo or design – like when SAMSUNG had issues with APPLE’s rounded corners.
What’s a typical example where MEDICAL PAYMENTS insurance helps without proving FAULT?
Paying for that minor injury when your neighbor trips on your porch – NO BLAME, JUST HELP!
When do medical payments get EXCLUDED under the CGL policy?
If the injured person is already covered by WORKERS’ COMP or happens to be in ATHLETICS. No accidents on the soccer field, sorry!
What does TENANTS LEGAL LIABILITY insurance cover?
DAMAGE to rented property from a mishap, like setting off a FIRE in your store – better safe than sorry!
How does the CGL policy handle CROSS-LIABILITY?
It creates the illusion of separate policies for different insureds. It’s like your friend getting insurance for your BBQ mishap.
What is an EXCLUSION in an insurance policy?
It’s a provision that removes coverage for certain risks, narrowing the scope of protection.
Does the CGL policy cover asbestos claims?
No, asbestos is specifically excluded from coverage.
Is nuclear energy covered under CGL?
No, CGL excludes coverage for nuclear incidents and related risks.
What’s excluded under the pollution exclusion Part 1?
Spills, leaks, and discharges of pollutants are excluded, even if it happens on the insured’s premises.
Does the pollution exclusion cover all pollution situations?
No, there are exceptions, like pollution from smoke, hostile fire, and pollution cleanup.
Does the CGL policy cover terrorism-related injuries?
No, terrorism-related injuries or damage are excluded from CGL coverage.
What happens if radioactive materials cause damage under CGL?
No coverage for damages from the hazardous properties of radioactive materials.
Is bodily injury from nuclear materials covered?
No, it’s excluded, especially if it involves the operation of nuclear facilities.
Does the CGL cover pollution at a waste disposal site?
No, pollution from waste disposal sites is excluded from CGL coverage.
If an insured uses a contractor’s disposal site, is pollution covered?
No, pollution from the site is excluded unless it’s an additional insured scenario.
If radioactive materials cause damage under CGL?
No coverage for damages from the hazardous properties of radioactive materials.
Can CGL cover a pollution spill caused by a third-party hauler?
No, even if the waste is handled by a third party, the insured is still liable.
Are pollutants brought on-site by a contractor covered?
No, pollutants brought by contractors are excluded from CGL coverage.
Is accidental release of operational fluids covered?
Yes, if operational fluids from storage components accidentally escape, it’s covered.
Does CGL cover bodily injury from paint fumes?
Yes, if the fumes cause an allergic reaction during the insured’s operations, it’s covered.
Is terrorism-related property damage covered under CGL?
No, any damage or injury caused by terrorism is excluded from CGL coverage.
Does CGL cover war-related damages?
No, damages caused by war, civil unrest, or insurrection are excluded.
What are the five sections of a CGL policy?
Coverages, Who Is Insured, Limits of Insurance, Conditions, and Definitions.
What does the Who Is Insured section cover?
It extends coverage to persons like spouses, employees, trustees, and legal representatives under certain conditions.
Are volunteer workers covered by the CGL policy?
Yes, if they’re performing duties related to the insured’s business.
What does the Limits of Insurance section specify?
It sets the limits for the various coverages purchased under the policy.
What do Conditions describe in a CGL policy?
They describe how the policy works and the steps the insurer or insured must take if an event occurs.
Why are definitions important in a CGL policy?
They help understand special meanings of terms crucial for evaluating coverage.
What is the purpose of exclusions in an insurance policy?
Exclusions limit coverage for losses the insurer does not intend to cover, like asbestos or nuclear materials.
What was a significant event that led insurers to add terrorism exclusions to policies?
The September 11, 2001 attacks prompted insurers to limit exposure to terrorism.
Can endorsements restore coverage for terrorism under a CGL policy?
Yes, endorsements can bring coverage back for events like terrorism depending on the policy.
Why is it important for insurance professionals to explain exclusions?
To ensure the insured is aware of what’s covered and to avoid surprises later on.
