Ins Exam K - Commercial General Liability

Question 1

OVERVIEW OF CGL

Answer 1

Primarily covers insured’s legal liability arising out of damages suffered by:

• Customers
• Tenants
• Clients
• General Public

Question 2

PARTIES in LIABILITY INSURANCE

Answer 2

The Parties in liability insurance:

• 1st Party: Insured or Policyholder
• 2nd Party: insurer or Ins Co
• 3rd Party: Person who collects ins proceeds due to legal liability of the insured.

Question 3

COVERAGE A:

- COVERAGE SECTIONS of the CGL

Answer 3

Bodily Injury and Property Damage
- Provides coverage for the legal liab of an insured for BI or PD to others arising out of the insured’s premises or operations

Question 4

COVERAGE B:

- COVERAGE SECTIONS of the CGL

Answer 4

Personal and Advertising Injury Liability

• Protects insured against liab arising out of certain offenses, such as:
• Libel (written)
• Slander (spoken)
• Invasion of Privacy
• False Arrest, Discrimination, Humiliation

Question 5

COVERAGE C:

- COVERAGE SECTIONS of the CGL

Answer 5

Medical Payments

• Covers certain medical expenses for BI to others caused by an accident that takes place during the policy period
• Pays w/o regard to fault; legal liab need not be proven (“good will” cvrg) - No Fault Legal Liab
• CLAIMS MUST BE REPORTED W/IN 1 YR OF ACCIDENT
• BI to insured or EEs not cvrd

Question 6

COVERAGE A: BI, PD

- Liability Coverage Provides

Answer 6

Protection for the insureds against loss from their legal liab arising out of the operation, maintenance, or use of the premises and for the liab arising out of biz ops

Question 7

PREMISES

- COVERAGE A

Answer 7

Provides the insured w/ liab protection for BI to a 3rd Party or damage to a 3rd Party’s property as a result of a condition of, or arising out of the use of, the premises

• NO CVRG for BI/PD to INSURED or EEs
• PREMISES OWNED, RENTED, or USED by INSURED

Question 8

OPERATIONS

- COVERAGE A

Answer 8

Provides the insured w/ liab protection for BI to a 3rd Party or damage to a 3rd Party’s property as a result of business ops either on or away from the premises where business is conducted
- Ex: activities of a contractor, plumber, electrician, etc.

Question 9

Premises and Operations Examples

Answer 9

• Customer slips on wet floor
• Hotel guest falls down stairs
• Store EE damages customer’s auto while loading
• Delivery boy on bicycle injuries pedestrian
• Plumber damages counter top while installing dishwasher

Question 10

PRODUCTS

- Coverage A

Answer 10

provides liab protection for insureds who are in the biz of manufacturing or distributing/selling products

• PRODUCTS MUST BE OFF PREMISES - COMPLETED
• Becomes a product after it leaves the store where purchased and the control is relinquished

Question 11

COMPLETED OPERATIONS

- Coverage A

Answer 11

Provides liab protection for insureds who are in the business of completing their business ops away from the premises they own, rent, or control

• All work has been completed and put to its intended use
• Work negligently performed (ie: improper installation)

Question 12

Products and Completed Operations Examples

Answer 12

• Consumption of spoiled soup
• Soda bottle bursting @ a picnic
• Exploding microwave oven
• Improperly installed dishwasher

Question 13

FIRE LEGAL LIABILITY

- Additional CGL Coverages

Answer 13

Coverage is intended for an insured who is a tenant or lessee who agrees under contract to be responsible for the portion of building in the insured’s care, custody, or control

• Covers PD caused by fire due to the negligence of the insured
• MINIMUM: $50k Fire

Question 14

HOST LIQUOR LEGAL LIABILITY

- Additional CGL Coverages

Answer 14

Avail to insureds not in the biz of selling or serving liquor

• covers insured for their legal responsibility for BI or PD to others
• Ex would incl an employer providing liquor at a special event (ie: Co Picnic)

Question 15

SUPPLEMENTARY PAYMENTS (BAILED)
 - Additional CGL Coverages

Answer 15

LOSS OF EARNINGS: Up to a certain limit per day ($250) for loss of insured’s earnings only b/c of attendance @ hearings or trials
EXPENSES: insured’s reasonable expenses for attending court as well as other costs taxed against the insured
DEFENSE COSTS: costs associated w/ insured’s defense

Question 16

GENERAL AGGREGATE LIMIT

- CGL Limits of Ins

Answer 16

• Largest Limit
• the most that will be paid for the sum of covrgs A, B, and C during a specific policy period
• Does not incl damages arising out of the products and completed ops hazard
• This limit may be modified by endt so that it applies separately to ea of the insured’s locations or projects

Question 17

PER OCCURRENCE LIMIT

- CGL Limits of Ins

Answer 17

• the most that will be paid for the sum of damages under Covrg A and C b/c of all BI, PD, and med pymnts arising out of any 1 occurrence
• this limit is also subject to either the general agg limit of the products and completed ops agg limit, whichever is applicable.

Question 18

CGL POLICY COVRG FORM

Answer 18

The insured may select 1 of 2 CGL covrg froms:

• Occurrence Form - most common type of CGL Policy
• Claims-Made Form - most commonly used for Prof Liab, EPL, Pollution, and D&O

Question 19

OCCURRENCE CGL FORM

Answer 19

Covrg Trigger:

• Covers BI and PD to others that occurs, starts, or is discovered during the policy period regardless of when the claim is actually reported and filed. Covrg may apply even if policy has expired.
• Determining the trigger is nec to determine the insurer
  
  • when did the claim occur?

Question 20

CLAIMS-MADE CGL FORM

Answer 20

• The insurer will handle claims that are made during the policy period, even if the occurred outside of the policy period, but after the RETRO DATE
• This version REDUCES the CARRIER’S EXPOSURE and was dvloped in response to the long-term nature of liab claims

Question 21

RETRO DATE - covrg trigger

- Claims-Made CGL Form

Answer 21

• Covrg activated when a claim is made during the policy period and the claim occurs after a RETRO DATE
• a RETRO DATE is a date selected by the insured and indicated on Dec Page, from which the insurer becomes responsible for injuries and/or damages that occur after that date

Question 22

RETRO DATE - No Retro Date

- Claims-Made CGL Form

Answer 22

• covers any claim made during policy period, regardless of when it took place
• However, if claim would have been covered by an occurrence form from an earlier time, that ins is primary and the claims-made policy would be excess

Question 23

EXTENDED REPORTING PERIOD (Tails)

- Claims-Made CGL Form

Answer 23

• Allows for a claim to be covered after the expiration of the policy; extends the claims reporting period - mini-tail
• Nec when policy is:
  
  • Replaced w/ an occurrence form
  • Cancelled or Non-Renewed

Question 24

BASIC TAIL (or mini tail)

• ERP Options
• Claims-Made CGL Form

Answer 24

• Extends claim reporting period up to 5 yrs after the end of the policy period as long as - mid-tail
  
  • Any occurrence is reported to the insurer no later than 60 days after the end of the policy period
• Loss event causing the claim must occur between the retro date and the policy expiration date
• No charge is imposed for the basic tail

Question 25

SUPPLEMENTAL TAIL or unlimited tail - max tail - ERP Options - Claims-Made CGL Form

Answer 25

- Purpose is to provide unltd reporting time - extends the time for claims to be filed out to infinity - Added by Endt, additional premium charged - Loss event causing the claim must occur between the retro date and the policy expiration date - Extends claims reporting period, not the policy period - May not be cancelled by the insurer - Must be purchased w/in 60 days of policy expiration

Question 26

NAMED INSURED - Individually Owned Businesses - Partnership or Joint Venture

Answer 26

- for indiv owned businesses - incls Named Insured and spouse (for business acts) - for partnership or joint venture - incls the Named Insured, all partners, members, and their spouses (for business acts)

Question 27

NAMED INSURED - Limited Liab Co (LLC) - for Any Other Org

Answer 27

- LLC - incls the Named Insured and all members and mgrs (for biz acts) - for Any Other Org - incls Named Insured, Officers, and Directors (for biz acts) - Stockholders are also insureds, but only in relation to their possible liab as stockholders

Question 28

EMPLOYEES | - who is an insured

Answer 28

Ea of the following is also an insured under teh CGL for conduct related to their duties in the course of employment - Named Insured's EEs - RE Mgrs - Legal Rep of the Insured - Anyone driving a vehicle or mobile equipment registered to the Named Insured

Question 29

CGL Exclusions 1*

Answer 29

Common excls incl: - RECALL of PRODUCTS - expected or intended injury - liquor liab - unless endorsed - host liquor not excld - Injuries covred under applicable auto or watercraft - Injuries to EEs, such as those covrd under wrkr' compensation - BI and PD to an insured, his employer, his property, his products

Question 30

CGL Exclusions 2*

Answer 30

Common excls incl: - Contractual Liab - Damage to personal prop in the insured's care, custody, or control - War - Mobile Equipment - Electronic Data - damage arising of loss or loss of use to stored data - Personal and Advertising Injury (excl under Covrg A)

Question 31

INSURED CONTRACT (INCIDENTAL CONTRACT)

Answer 31

- Excl for liab assumed under contract has some important exceptions in that liab that the insured would have incurred even w/o assuming it under contract and liab assumed under INSURED CONTRACTS (also called INCIDENTAL CONTRACTS) is covered

Question 32

INSURED CONTRACT incl LEASED

Answer 32

- Lease of Premises - Easement or license agreement - Agrmnts w/ municipalities as required by ordinance - Sidetrack Agreements - Elevator maintenance agreements

Question 33

DUTIES in the EVENT of OCCURRENCE, OFFENSE, CLAIM, or SUIT (Loss) - CGL Conditions

Answer 33

- Prompt notification to insurer (don't need to hire an appraiser) - Immediately record the claim specifics and notify the insurer - Send insurer copies of legal papers - Cooperate w/ and assist the insurer - Do not voluntarily make any pymnt, assume any obligations, or incur any expenses (except first aid expenses)

Question 34

OTHER INSURANCE | - CGL Conditions

Answer 34

States that when the insured's CGL is primary and other ins applies to the same loss, the loss will be divided between the policies by 1 of 2 methods - contribution by = shares - all insurers contribute = up to the limit of policy w/ the lowest limit; higher limit policies continue paying until limits are met or loss is paid in full, whichever comes first - contribution by limits (similar to pro rata)

Question 35

INDEPENDENT CONTRACTORS - Standard CGL covrg form | - Other GL Covrgs and Related Contracts

Answer 35

- Standard CGL covrg forms cover the insured's liab for the ops of ICs - Many insurers, however, require their insureds to require that any ICs doing wrk for them carry their own valid GL ins - in some instances, the IC may be required to carry W/C ins as well

Question 36

INDEPENDENT CONTRACTORS - when ins is required | - Other GL Covrgs and Related Contracts

Answer 36

When ins is required on the part of the IC, the IC must make sure his ins: - meets certain specified min covrg requirmnts - remains in force for the entire time teh contractor is hired by the insured to do wrk for them - provides certificates of ins as proof of valid ins cvrg

Question 37

OWNERS and CONTRACTORS PROTECTIVE LIAB (OCP) COVRG FORM

Answer 37

As an alternative to having ICs covrg provided thru the names insured's CGL policy, some insured's choose to go w/ a separate covrg form referred to as Owners and Contractors Protective (OCP) Liab Covrg. - for designated contractor - liab protection for specific project or location. Covrg ends when project ends. Primary xposure from Vicarious Liab

Question 38

EXCESS LIAB INS COVRG

Answer 38

- same cvrg as found in the primary policy, but @ higher limits; primary policy pays 1sty, excess policies pay after primary policy limits are exhausted - provides insured w/ higher limits but no additional cvrg - can be purchased for commercial or personal xposures

Question 39

UMBRELLA LIAB INS CVRG - combined limit - personal lines - commercial lines

Answer 39

- combined blanket single limit over existing or underlying cvrgs - Personal Lines - umbrella policies provide excess cvrg over the liab sections of policies such as auto, home, and small watercraft policies - commercial lines - provides cvrg over policies such as CGL, BAP, and BOP

Question 40

UMBRELLA LIAB INS CVRG - primary - underlying

Answer 40

- umbrellas dvlped to provide insured w/ broader than primary covrg - required underlying policies generally issued @ high limits; covrg must remain in effect - when limits of underlying contract are exhausted, umbrella kicks in

Question 41

UMBRELLA LIAB INS CVRG - no deductible - DIC

Answer 41

- no deductible unless primary covrg is not ins effect or does not provide covrg; insured retains part of the loss w/ a self-insured retention ($250) that acts like a deductible - many commercial umbrella policies have a difference in contract section that allows for proper coordination between the contracts

Question 42

Professional Liability *

Answer 42

Protects professionals against claims for damages arising out of the services they provide, or fail to provide, when practicing their professions - Pros who fail to meet the standards of expected skill and care generally accepted for their professions or occupations, resulting in harm to a 3rd Party - must consent