CHAPTER 7
When rating Commercial General Liability (CGL) Coverage, the two rates that apply for most classifications are the
A. Products-completed operations rate and the pollution rate.
B. Premises-operations rate and the products-completed operations rate.
C. Bodily injury rate and the personal injury rate.
D. Owners and contractors protective rate and the premises-operations rate
B. Premises-operations rate and the products-completed operations rate.
The formula used to determine the premium for a Commercial General Liability policy is
A. Rate x Rate Exposure = Premium.
B. Premium factor x Coverage limit = Premium.
C. Rate x Class code base = Premium.
D. Premium base x Exposure = Premium.
A. Rate x Rate Exposure = Premium.
Which one of the following losses would be covered by the Business Auto Coverage Form (BACF)?
A. Computers the insured has delivered are damaged by rain after the insured leaves them in an open area following delivery.
B. Part of a load of plasma TV screens is damaged when the insured's truck stops suddenly and the TVs slide in the back of the truck.
C. The insured has to pay an employee's medical bills because of an accident involving one of the insured's vehicles.
D. The insured has agreed to pay for liability losses caused by the insured's negligence that a shipper may incur while the insured is hauling goods for the shipper.
D. The insured has agreed to pay for liability losses caused by the insured's negligence that a shipper may incur while the insured is hauling goods for the shipper.
An animal damaged the interior of an insured's automobile while it was parked with the windows down. Which one of the following types of physical damage coverage under the Business Auto Coverage Form (BACF) would cover this loss?
A. Towing and labor
B. Comprehensive
C. Specified perils
D. Collision
B. Comprehensive
Under the Business Auto Coverage Form (BACF), collision is generally understood to mean
A. Any incident in which a vehicle loses its equilibrium.
B. The striking together of a vehicle with any object that is not a vehicle.
C. A striking together with violent impact.
D. Collision only with another vehicle.
C. A striking together with violent impact.
When rating Commercial General Liability (CGL) Coverage, the exposure is a measure of the
A. Number of expected losses.
B. Severity of expected losses.
C. Organization's susceptibility of liability losses.
D. Size of the business operations to be insured.
D. Size of the business operations to be insured.
Mary works as a volunteer at a local library. The library is covered by an unendorsed commercial general liability policy. Which one of the following best describes Mary’s status under the policy if she is named in a lawsuit by a visitor that was injured in the library?
A. Mary would not be covered.
B. Mary would be an insured partner.
C. Mary would qualify as an insured.
D. Mary would be a named insured.
C. Mary would qualify as an insured.
Joe Motors is an automobile repair shop. Which one of the following would be the best way for the owner to maintain the goodwill of its customers?
A. Purchasing garage liability insurance.
B. Lowering the physical damage deductible under its business auto insurance.
C. Purchasing garagekeepers insurance.
D. Raising liability limits under its business auto insurance.
C. Purchasing garagekeepers insurance.
Bob, an employee of Tank's Trucks, is backing one of Tank's trucks toward the loading dock on the insured premises. Bob accidentally strikes Alice, another employee, while she is directing Bob toward the loading dock. Alice sues Bob for her injuries.
Which one of the following correctly indicates whether Bob is covered under Tank's unendorsed Business Auto Coverage Form (BACF) for liability coverage?
A. Bob is covered because employees are insureds for any use of an insured auto.
B. Bob is covered because Bob was driving a truck owned by the named insured.
C. Bob is not covered because fellow employees' suits are excluded.
D. Bob is not covered because Alice's health insurance should cover her medical expenses.
C. Bob is not covered because fellow employees' suits are excluded.
Which one of the following Business Auto Coverage Form (BACF) symbols requires that the insured notify the insurance company within 30 days of acquiring a new auto of the same type already insured for coverage to apply?
A. Symbol 1—Any auto
B. Symbol 2—Owned Autos Only
C. Symbol 5—Owned Autos Subject to No-Fault
D. Symbol 7—Specifically Described Autos
D. Symbol 7—Specifically Described Autos
The named insured under a Commercial General Liability (CGL) Coverage Form dies, and Sarah becomes a temporary custodian of the named insured's property. The coverage for Sarah under the deceased named insured's CGL form applies only to liability arising out of
A. Losses that occurred within 60 days after the death of the named insured.
B. The maintenance or use of the named insured's property.
C. The named insured's premises.
D. Contractual obligations.
B. The maintenance or use of the named insured's property
Lance purchased an electric knife from Sharp Objects. When he first used the knife to carve a turkey, it malfunctioned resulting in injury to Lance. Sharp Objects' Commercial General Liability (CGL) Coverage Form will do which one of the following?
A. Cover any damages payable as a result of Lance's injuries subject to both the each occurrence limit and the products-completed operations aggregate limits
B. Cover any medical expenses incurred by Lance under Coverage C as well as the damage to the knife under Coverage B
C. Cover any damages payable as a result of Lance's injuries up to the general aggregate limit
D. Cover the cost of replacing the knife but not cover Lance's injuries
A. Cover any damages payable as a result of Lance's injuries subject to both the each occurrence limit and the products-completed operations aggregate limits
Which one of the following statements about the general conditions under Section IV of the Business Auto Coverage Form is true?
A. The coverage territory is worldwide for autos rented with a driver.
B. Coverage for trailers follows the autos to which they are attached.
C. Bankruptcy of an insured relieves the insurer of any obligations under the form to that insured.
D. The premium shown in the declarations is the minimum amount the named insured will pay during the policy period.
B. Coverage for trailers follows the autos to which they are attached.
Under the Auto Medical Payments Coverage endorsement to the business auto policy, "occupying" a covered auto means
A. "Positioned" inside a covered auto.
B. Riding in, driving, or exiting a covered auto.
C. Being a passenger in a covered auto.
D. Entering into, riding in, or alighting from a covered auto.
D. Entering into, riding in, or alighting from a covered auto.
Which one of the following sets of information is used in private passenger auto premium calculations for commercial auto physical damage?
A. Condition and age of the vehicle
B. Insurance limit and type of coverage
C. Age and gender of the driver
D. The vehicle's original cost new and the rating territory
D. The vehicle's original cost new and the rating territory
Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio.
While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $250,000; ii) damage to the bike repair shop building rented to Dan - $125,000; iii) damage to the remainder of the building - $200,000; and iv) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000.
Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. The insuer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000; and the policy's general aggregate is $2,000,000.
Under the Commercial General Liability policy, how much will the insurer pay for Dan's business personal property?
A. $0
B. $25,000
C. $125,000
D. $250,000
A. $0
Acme Manufacturing Company is insured under two primary Commercial General Liability (CGL) policies. Policy A has an each-occurrence limit of $1,000,000 and Policy B has an each-occurrence limit of $2,000,000. Acme submitted a claim for $2,400,000 arising from a single occurrence for an incident that is covered by both policies. How much of the claim is payable under Policy B if the loss payment is based upon contribution by equal shares?
A. $1,000,000
B. $1,400,000
C. $1,600,000
D. $2,000,000
B. $1,400,000
The insured is a sole proprietor who owns a business auto insured by a Business Auto Coverage Form with a personal injury protection (PIP) endorsement. While driving the car, she was in an accident in which the following losses were incurred:
Assuming adequate limits and that no other insurance policies apply, how much can she recover pursuant to the PIP endorsement?
A. $10,000
B. $15,000
C. $19,000
D. $39,000
B. $15,000
Allen, a sole proprietor, is crossing the street when he is struck by a passing uninsured auto. He sustains $2,500 in medical bills, $3,000 damage to the laptop he was carrying, and $1,000 in lost wages. Allen's business auto policy has $100,000 liability limit and $5,000 medical payments limit. Assuming there is no other coverage, how much will his business auto policy pay?
A. $2,500
B. $3,500
C. $5,500
D. $6,500
A. $2,500
Which one of the following statements is true if the named insured is an individual under the Commercial General Liability (CGL) Coverage Form?
A. His or her spouse is also an insured only when specifically listed on the declarations page.
B. Coverage is provided for any business owned by the insured's spouse.
C. Both the named insured and spouse are covered for their non-business activities.
D. Coverage applies only to claims arising from the conduct of a business owned solely by the named insured.
D. Coverage applies only to claims arising from the conduct of a business owned solely by the named insured.
Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio.
While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $150,000; ii) damage to the bike repair shop building rented to Dan - $250,000; iii) damage to the remainder of the building - $300,000; iv) damage to Jane's business personal property - $80,000 and v) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000.
Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. Dan's insurer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000 and the policy general aggregate is $2,000,000.
Under the Commercial General Liability policy, how much will the insurer pay for all damages?
A. $780,000
B. $850,000
C. $930,000
D. $1,000,000
A. $780,000
Dan owns a bike repair shop which is located on the first floor of a 3 story building owned by Jane. Jane uses the third floor for her own business and rents out the second floor to a graphic design studio.
While doing some bike repair work, Dan accidentally started a fire which spread throughout the entire building. The damage from the fire consisted of : i) damage to Dan's business personal property - $125,000; ii) damage to the bike repair shop building rented to Dan - $250,000; iii) damage to the remainder of the building - $300,000; and iv) bodily injury to a customer of the graphic design studio on the 2nd floor - $300,000.
Dan's bike repair shop is insured by a Commercial General Liability policy (occurrence version) with no deductible and no endorsements. The insurer has determined that Dan is legally liable for all the damages. The policy's each occurrence limit is $1,000,000; the Damage to Premises Rented to You limit is $100,000; and the policy's general aggregate is $2,000,000.
Under the Commercial General Liability policy, how much will the insurer pay for damage to the bike repair shop building rented to Dan?
A. $0
B. $100,000
C. $150,000
D. $250,000
B. $100,000
The insured is a sole proprietor who owns a business auto insured by a Business Auto Coverage Form with a personal injury protection (PIP) endorsement. While driving the car, she was in an accident in which the following losses were incurred:
Assuming adequate limits and that no other insurance policies apply, how much can she recover pursuant to the PIP endorsement?
A. $10,000
B. $15,000
C. $19,000
D. $39,000
B. $15,000
Pain and suffering and auto physical damage are not covered under PIP.
Joe has a Business Auto Coverage Form with a $100,000 policy limit. In a claim that results in an $80,000 court award along with $50,000 for expenses due to defending the claim, what is the total amount that will be paid under Joe's Business Auto Coverage Form?
A. $50,000
B. $80,000
C. $100,000
D. $130,000
D. $130,000
The purpose of the Representations condition of the Commercial General Liability (CGL) Coverage Form is to
A. Allow the insured to obtain legal representation of the insured's choosing when policy interpretation is required.
B. Ensure that the producer properly binds coverage according to the policy insuring agreements.
C. Encourage the named insured to read the policy declarations and ensure that the representations made during policy negotiations are correct.
D. Certify the veracity and authenticity of statements of both the insurer and the insured.
C. Encourage the named insured to read the policy declarations and ensure that the representations made during policy negotiations are correct.