chapter nine - commercial general liability coverage

Question 1

Which of the following legal liability exposures is covered if the employee of a business causes bodily injury to another person while working at the insured’s business location?

Completed operations

Products

Premises and Operations

Contingent liability

Answer 1

Premises and Operations

Question 2

Which of the following is not considered a product liability exposure?

Goods stored on the insured premises

Goods manufactured and sold to customers

Product distributed to customers

Product consumed by a person at a restaurant

Answer 2

Goods stored on the insured premises.

(A product exposure involves the manufacture, sale, handling, distribution, or disposal of insured property away from the insured premises.)

Question 3

Which of the following legal liability exposures is covered if bodily injury or property damage is caused by the insured’s negligent or faulty work?

Completed operations

Premises and Operations

Products

Contingent liability

Answer 3

Completed operations

(Coverage is for the bodily injury or property damage caused by negligent work by the insured, but this policy does not cover the actual work.)

Question 4

Which of the following legal liability exposures is covered if a business employs an independent contractor?

Premises and Operations

Completed operations

Products

Contingent liability

Answer 4

Contingent liability

(This legal liability occurs when a business is held responsible for the actions or failures of others through a binding contract or agreement.)

Question 5

A large department store leases space from a shopping mall and is responsible for the actions of parties as specified in the language of the lease.

Answer 5

Contractual Liability.

Question 6

A home remodeling company that hires subcontractors to perform its installations is responsible for the actions or work of a subcontractor.

Answer 6

Contingent Liability.

Question 7

The owner of a discount tire store was demonstrating how to rotate tires to a small crowd of people attending an outdoor vendor fair when a tire iron slipped and smashed the window of a nearby parked car.

Answer 7

Operations.

Question 8

2 days after a company installed new kitchen cabinets in a customer’s home, but cabinets fell and caused damage to the walls, countertop, and kitchen sink.

Answer 8

Completed operations.

Question 9

While shopping at a discount tire store, a customer suffered a head injury when a large tire display crashed into the aisle.

Answer 9

Premises.

Question 10

Due to faulty design, a chair was manufactured with uneven legs, causing a customer who purchased the chair to sustain an injury after falling out of the chair.

Answer 10

Products.

Question 11

In the _____ form, insurance covered is triggered when an “occurrence” takes place during the policy period and within the coverage territory.

Answer 11

Occurrence Form.

Question 12

In a ____ form, covered is triggered if an “occurrence” takes place AFTER the retroactive date and is REPORTED within the policy period.

Answer 12

Claims-Made Form.

Question 13

Which form provides coverage for a loss that takes place during the policy period and is not required to be reported within a certain time frame?

Claims-Made Form

CGL

Occurrence Form

Special Coverage Form

Answer 13

Occurrence Form.

(The occurrence form is appropriate when the insured knows that the loss occurred during the policy period, but not necessarily when it was reported.)

Question 14

Coverage A

Answer 14

Bodily Injury and Property Damage Liability

Question 15

Which of the following is NOT an exclusion in the CGL policy?

Insured’s Work

Host Liquor Liability for those with incidental exposure

Impaired Products

Insured’s Product

Answer 15

Host Liquor Liability for those with incidental exposure.

(Host Liquor Liability is provided for those who only have incidental exposure. For example, if the insured is an insurance agency and is hosting its annual Christmas party, the exclusion won’t apply. However, if the insured is a restaurant that serves alcohol and is hosting its annual Christmas party, the exclusion WILL apply.)

Question 16

Which of the following is not a peril covered by personal injury?

Malicious prosecution

Libel

Breach of contract

Wrongful eviction

Answer 16

Breach of contract

(Libel, slander, misappropriation of advertising ideas or style of business, infringement of copyright, title, or slogan in the insured’s advertisement, and violation of privacy are also personal injury perils.)

Question 17

Coverage B

Answer 17

Personal and Advertising Injury

Question 18

Coverage C

Answer 18

Medical Payments

Question 19

Supplementary Payments only apply to Coverages ___ and ___, are paid in addition to any applicable limit of liability.

Answer 19

A and B.

Question 20

Provides protection for liability arising from false arrest, malicious prosecution, wrongful eviction, invasion of privacy, libel or slander, use of another’s ideas in the advertisement, infringement of copyright or slag in the insured’s advertisement.

Answer 20

Personal and Advertising Injury

Question 21

The insurer will pay losses the insured becomes legally obligated to pay because of bodily injury or property damage provided the occurrence took place during the policy period and in the US, any of its territories/possessions, Puerto Rico, or Canada.

Answer 21

Bodily Injury and Property Damage

Question 22

All of the following are insured under the CGL, except:

A person participating in an athletic event

A volunteer worker acting on behalf of the insured

A partner

A stockholder

Answer 22

A person participating in an athletic event.

Question 23

The most the insurer will pay during the policy period for medical expenses under Coverages A, B, and C is which of the following limits of liability?

Personal and Advertising Injury Limit

General Aggregate Limit

Medical Expense Limit

Per Occurrence Limit

Answer 23

General Aggregate Limit

(The Products-Completed Operations is another limit, and all the limits pay regardless of the number of insureds, claims made, suits brought, or persons or organizations making claims or bringing suits)

Question 24

The Condition that states that the insurance applies separately to each insured is called __________________.

Legal Action

Other Insurance

Severability

Insured’s Right

Answer 24

Severability

Several suits against several insureds do not increase the insurance for that occurrence or policy period.

Question 25

Which of the following is not included in the definition of an insured contract?

Sidetrack agreement

Tenant agreement

Easement agreement

Contract for lease of premises

Answer 25

Tenant Agreement.

(The insured contract describes the liability assumed by the insured and also includes an obligation to indemnify a municipality, an elevator maintenance agreement, and an agreement in which an insured assumes tort liability.)

Question 26

Describes where the occurrence must take place to be insured and must be within the US, its territories and possessions, Puerto Rico, and Canada.

Answer 26

Coverage Territory

Question 27

Tangible property, other than an insured’s product or work, which cannot be used because it is thought or known to be defective, inadequate, deficient, or dangerous.

Answer 27

Impaired property

Question 28

Any goods or products that are manufactured, sold, handled, distributed, or disposed of by the named insured.

Answer 28

Your Product.

Question 29

Operations performed by the named insured including materials, parts, or equipment furnished in connection with the operations.

Answer 29

Your work.

Question 30

A contract in which if the insured assumes liability the liability will be transferred to the insurance contract.

Answer 30

Insured Contract

Question 31

Each of the following provides buy back coverage for the insured, except:

Pollution extension endorsement

Modified pollution extension endorsement

Limited pollution liability coverage

Pollution liability coverage for designated sites

Answer 31

Modified pollution extension endorsement.

(The CGL policy excludes bodily injury or property damage arising from discharge, dispersal, seepage, migration, and release or escape of pollutants, and these three coverages are bought back for coverage on an individual account basis.)

Question 32

Damages from which of the following would apply to the per occurrence limit under a Commercial General Liability policy?

Invasion of privacy

Medical payments

Libel and slander

False arrest

Answer 32

Medical Payments.

(The Per Occurrence Limit only applies to certain damages under Coverages A and C. The three wrong options are examples of Personal Injury, which is under Coverage B and counts toward a different limit.)

Question 33

What is the difference between the Commercial General Liability Occurrence and Claims-Made forms?

The types of occurrences they cover

The deductible

The policy period

The coverage trigger point

Answer 33

The coverage trigger point.

(The trigger is the event that brings coverage into play. It may be an occurrence either of bodily injury or property damage; or, in a form with a claims-made trigger, the formal making of a claim.)

Question 34

Personal Injury Liability Insurance covers all of the following, except:

False Arrest

Malicious prosecution

Libel and Slander

Bodily Injury

Answer 34

Bodily Injury.

Question 35

Under the CGL, which of the following would exclude from coverage the legal liability associated with a product?

Strict liability

Breach of warranty

Negligence

Expected or intended injury

Answer 35

Expected or intended injury.

Question 36

Which of the following would be found in Section I of a CGL?

The policy definitions

List of insureds under the policy

Coverage for bodily injury and property damage

The Commercial General Liability conditions

Answer 36

Coverage for bodily injury and property damage.

Question 37

Which of the following is considered an insured’s product?

Remodeled building

Goods sold by the insured at a trade show

Merchandise held by the insured as inventory

Goods shipped to a retailer to be sold

Answer 37

Goods sold by the insured at a trade show.

​​A covered product is one manufactured and sold by the insured and transferred to the possession of a buyer.

Question 38

All of the following are true about extended reporting periods, except:

The basic extended reporting period does not increase the policy limits

The supplemental tail requires an annual premium

Under the supplemental tail, the insured must request coverage within 60 days after the end of the policy term

The basic extended reporting period allows a claim to be reported after the policy period for a specified number of days

Answer 38

The supplement tail requires an annual premium.

The supplemental extended reporting period has a one-time premium.

Question 39

A CGL policy with a general aggregate limit of $300,000 and a per-occurrence limit of $100,000 would have how much remaining after paying a claim for a $200,000 loss, and subsequently a second claim for a $100,000 loss?

$300,000

Zero

$200,000

$100,000

Answer 39

$100,000.

(The first claim would only be paid up to the per occurrence limit of $100,000. The second claim would paid in full. Combined, the two claims could reduce the aggregate by $200,000, leaving only $100,000 available for all other claims in the policy period.)

Question 40

Which of the following is true concerning the Premium Audit condition of the Commercial General Coverage Part to the Commercial Package Policy?

Premium Audit refers to the right of the insured to contest the premium after policy issuance

Premium Audit is the comparison of the insured’s premium with the average premium in the insured’s rating classification

Premium audit determines what the earned premium will be at the end of the policy period

Premium Audit is the action taken by the insurer to see that the insured’s rating is properly classified

Answer 40

Premium audit determines what the earned premium will be at the end of the policy period.

(The insured must keep records sufficient for the insurer to compute premiums based upon sales, receipts, or payroll. After an audit, an additional premium is required if these records show that these items are greater than the estimates that developed the deposit premium.)

Question 41

Which of the following is not an example of personal injury?

Infringement of copyright

A broken leg

False arrest

Misappropriation of a title or slogan

Answer 41

A broken leg.

Question 42

Advertising Injury Coverage includes all of the following, except:

Wrongful entry

Misappropriation of advertising ideas or style of doing business

Infringement of copyright

Violation of copyright, title or slogan

Answer 42

Wrongful entry.

Wrongful entry is an example of Personal Injury

Question 43

All of the following are true of Supplementary Payments under the CGL, except:

They reduce the limits of insurance

They apply to bodily injury and property damage liability

They pay defense costs incurred by the insurer

They include the cost of bail bonds up to $250

Answer 43

They reduce the limits of insurance.

Question 44

A CGL policy provides coverage for:

Professional Liability

Pollution Liability

Operations Liability

Employee Injury

Answer 44

Operations Liability.

Pollution, Contractual, and Employee Liability are exclusions under a CGL.

Question 45

Which of the following is false about the CGL’s two coverage forms?

The retroactive date is unique to the Claims-Made form

Coverage under the occurrence form is based on when the loss is reported

Coverage is triggered when an occurrence takes place during the policy period

The claims-made form covers losses that occur after the retroactive date and before the policy expiration date

Answer 45

Coverage under the occurrence form is based on when the loss is reported.

(With the Occurrence form it doesn’t matter when the loss is reported, but the date the loss occurred must be during the policy period.)

Question 46

Which of the following would not be excluded under Coverage A of the CGL?

Damage to insured’s work

Operation of mobile equipment

Workers’ Compensation

Product recall

Answer 46

Operation of mobile equipment.

(The operation of mobile equipment is covered, though the transportation of this equipment to or from a job site is specifically excluded.)

Question 47

Which of the following would be an insured under the CGL policy?

Spouse of volunteer worker

Trustee’s spouse

Spouse of an LLC member

Spouse of a partner

Answer 47

Spouse of a partner.

(The spouse of an individual or partner is also an insured. Spouses of shareholders, LLC members, employees, volunteers, trustees, directors, and officers are not insured under the policy)

Question 48

Medical payments coverage under the Commercial General Liability Coverage Forms includes reasonable medical expenses if they are incurred and reported within how many years following an accident?

5

3

1

2

Answer 48

1.

(Expenses that have been incurred and reported within one year of the date of the accident are covered under this section.)

Question 49

Which of the following would not be considered an insured under a CGL?

Volunteer worker

Real Estate Manager acting on behalf of the insured

An LLC employee’s spouse assisting in cleaning the office so they can leave for vacation more quickly

Executor of the CEO’s estate after his death

Answer 49

An LLC employee’s spouse assisting in cleaning the office so they can leave for vacation more quickly.

(The spouse of an LLC employee is not considered an insured. The LLC, its members and managers are considered insureds.)

Question 50

Why is bodily injury to an employee excluded in Commercial General Liability Insurance?

It falls under the doctrine of contributory negligence

Coverage is provided under Workers’ Compensation

The employee is considered an insured

It falls under the doctrine of assumption of risk

Answer 50

Coverage is provided under Workers’ Compensation.

General Liability policies exclude injuries to employees because they are covered by Workers’ Compensation

Question 51

All of the following are true of the Commercial General Liability Conditions (Section IV) under the Claims-Made Form, except:

The insured must maintain records necessary so the insurer may compute the premium

Insurance applies as if each named insured were the only named insured, and separately to each insured against whom the claim is brought

The insured cannot sue the insurer until all terms of the policy have been fully complied with

Insolvency of the insured relieves the insurer of any obligations under the policy

Answer 51

Insolvency of the insured relieves the insurer of any obligations under the policy.

(Neither bankruptcy nor insolvency of the insured or of the insured’s estate relieves the insurer from its obligations.)

Question 52

Which type of reporting period is provided automatically under the CGL written on a claims-made basis?

Supplemental Extended Reporting Period

Premium Extended Reporting Period

Basic Extended Reporting Period

Primary Extended Reporting Period

Answer 52

Basic Extended Reporting Period.

(The basic extended reporting period (BERP) is provided by the policy for no extra charge. It permits claims to be reported for 60 days following the termination of the policy.)

Question 53

Which of the following is covered by Medical Payments under the CGL?

Bodily injury to a person on a part of the premises that the insured owns or rents and that the person normally occupies

Bodily injury to an insured that is injured while playing tennis

Bodily injury to an insured’s customer while shopping on the insured’s business premises

Bodily injury to a person hired to do work for the insured

Answer 53

Bodily injury to an insured’s customer while shopping on the insured’s business premises.

Question 54

Which of the following conditions would not be found in Section IV of the CGL?

The insured cannot sue the insurer until all terms of the policy have been fully complied with

An insured’s insolvency relieves the insurer of any obligations under the policy

The insured must maintain records necessary so the insurer may compute the premium

Insurance applies as if each named insured were the only named insured, and separately to each insured against whom the claim is brought

Answer 54

An insured’s insolvency relieves the insurer of any obligations under the policy.

Question 55

Which statement is false regarding the completed operations exposure?

The exposure must occur away from the insured’s premises

It includes risks of defective installation, construction or repair

Coverage includes replacement of the work that caused the loss

It begins after the insured’s operations are completed and the insured leaves the job site

Answer 55

Coverage includes the replacement of the work that caused the loss.

(Coverage will pay for bodily injury and property damage caused by negligent or faulty workmanship by an insured, but will not pay for the cost to replace the work that caused the loss.)

Question 56

What is the date after which an occurrence can take place and be covered under the claims-made form?

The Countersignature Date

The Retroactive Date

The Expiration Date

The Effective Date

Answer 56

The retroactive date.

(The Retroactive Date is the date that defines the period of coverage under a claims-made form. Claims resulting from occurrences prior to the policy’s stated retroactive date are excluded.)

Question 57

Choose the false statement about the CGL policy.

Contingent Liability Policies are also called Owners and Contractors Protective Liability

Coverage is automatically provided for watercraft liability

The insurer’s written consent is required for any transfer of rights and duties to another person

The insurer may examine the insured’s books anytime during the policy period, or within 3 years after the policy ends

Answer 57

Coverage is automatically provided for watercraft liability.

Question 58

Choose the false statement about the CGL policy.

Changes to a CGL policy may be made only by endorsement issued by the insurer

The General Aggregate Limit will be reduced by a medical payment

A bodily injury claim must be caused by an occurrence and it must have taken place in covered territory

A Products and Completed Operations Liability claim will reduce the General Aggregate Limit

Answer 58

A products and Completed Liability claim will reduce the General Aggregate Limit.

(Products and Completed Operations claims have their own aggregate limit and these claims do not reduce the General Aggregate)

Question 59

In addition to conducting accounting business in his own office, Tom also goes to client’s offices for appointments, which represents which type of exposure?

Completed Operations

Contingent Liability

Product

Premises and Operations

Answer 59

Premises and Operations

Premises and operations liability coverage covers an insured’s operations both on and off its own premises

Question 60

Which of the following is not a contingent liability exposure?

Owners and Contractors Protective liability exposure

Liability exposure of insured’s sub-contractors

Premises liability exposure

Contractual liability exposure

Answer 60

Premises Liability Exposure.

Contingent liability exposure exist when the insured is held liable for the actions or failure of actions of others

Question 61

Which of the following would not be excluded under Coverage A of the CGL?

Workers’ Compensation

Operation of mobile equipment

Damage to insured’s work

Product recall

Answer 61

Operation of mobile equipment.

Question 62

Which of the following would not be covered under Coverage A of the CGL?

An insured’s employee is injured when a bookcase in the office falls on her

An insured’s client was injured when she slipped on a loose rug on the insured’s premises

An insured was visiting a client in Canada, who was injured after he tripped over the insured’s briefcase

While working at a trade show, an insured’s employee started a small fire

Answer 62

An insured’s employee is injured when a bookcase in the office falls on her.

(Workers’ Compensation insurance will cover the injuries to an employee arising out of work activities)

Question 63

Who is not an insured under the Commercial General Liability policy?

The spouse of a named insured

Members of a past partnership not listed in the Declarations

Executive officers, with respect to their duties as the insured’s officers or directors

Employees other than executive officers, for acts within the scope of their employment

Answer 63

Members of a past partnership not listed in the Declarations.

(There may be several insureds other than those named in the Declarations. However, only the current members of a partnership or LLC are considered insureds.)