CHAPTER 11
An excess policy that applies to a loss that exceeds the underlying policy limits only if the loss is specifically covered under the terms of the excess policy is known as a
A. Following-form policy.
B. Combination policy.
C. Drop-down policy.
D. Self-contained policy.
D. Self-contained policy.
An umbrella liability policy performs which one of the following basic functions?
A. It covers only those claims that are not covered by the insured's primary policies.
B. It provides additional limits above the each occurrence limits of the insured's primary policies.
C. It is designed to eliminate restrictions in primary policies.
D. It eliminates the need for primary coverage.
B. It provides additional limits above the each occurrence limits of the insured's primary policies.
The type of cyber insurance policy that is best for an organization that handles a lot of money and is worried about a hacker diverting funds from its accounts is
A. A cyber crime policy.
B. An electronic data protection policy.
C. A notification or remediation policy.
D. A business interruption policy.
A. A cyber crime policy.
Which one of the following is a characteristic of a site-specific environmental impairment liability policy?
A. It provides coverage on a claims-made basis.
B. It may be used to demonstrate an owner’s proof of ability to pay claims resulting from the release
C. It excludes coverage for bodily injury claims against the insured.
D. It typically provides coverage for acid rain, war, and nuclear liability.
A. It provides coverage on a claims-made basis.
Aircraft liability coverage can be structured as a single limit, or separate limits may apply to
A. Bodily injury for crew members liability, bodily injury for passengers and others (excluding crew members) liability, and property damage liability coverages.
B. Bodily injury excluding passengers liability, passenger bodily injury liability, and property damage liability coverages.
C. Coverages for liability for bodily injury of individual persons who are injured in an aircraft loss, excluding crew members, and for property damage.
D. Coverages for liability for bodily injury of individual persons who are injured in an aircraft loss, including crew members, and for property damage.
B. Bodily injury excluding passengers liability, passenger bodily injury liability, and property damage liability coverages.
Professional liability and management liability policies can provide duty-to-defend coverage in the same manner as the typical commercial general liability policy. However, some professional liability policies provide defense costs reimbursement coverage requiring that the insurer do which one of the following?
A. Submit to arbitration procedures regarding defense costs
B. Pay defense costs on behalf of the insured as expenses are submitted by the insured's attorney, rather than as part of the total claim settlement amount
C. Establish a minimum defense cost amount within 30 days of claim notification
D. Reimburse the insured for defense expense covered by the policy
D. Reimburse the insured for defense expense covered by the policy
The Commercial General Liability (CGL) policy provides that the insurer may, at its discretion, settle any claim or suit. In contrast, professional liability and management liability policies typically have what is referred to as a "hammer clause." This clause is invoked when the insured does not agree to a proposed settlement. The hammer clause has the effect of doing which one of the following?
A. Mandating settlement within 180 days of triggering the hammer clause
B. Compelling the insured to agree to the settlement proposed by the insurer
C. Requiring the insured to submit the claim to arbitration procedures
D. Forcing the insurer to make a subsequent settlement offer within 60 days of the initial offer
B. Compelling the insured to agree to the settlement proposed by the insurer
Which one of the following statements is true of a contractors pollution liability (CPL) policy?
A. It is available with a claims-made coverage trigger only, and not an occurrence trigger.
B. It addresses the environmental insurance needs of contractors performing environmental remediation services on contaminated sites.
C. It covers property damage, cleanup costs and defense costs, but does not cover bodily injury.
D. It provides coverage for radioactive matter, claims arising out of the insured’s products, and damage to sites owned by the insured.
B. It addresses the environmental insurance needs of contractors performing environmental remediation services on contaminated sites.
A multinational enterprise may purchase admitted coverages and combine them with difference in conditions (DIC) and differences in limits (DIL) coverages written to wrap around the admitted coverages, thereby accomplishing which one of the following?
A. Reducing the likelihood of having frequent small claims
B. Eliminating all coverage gaps
C. Reducing the need for surplus lines insurance
D. Maintaining uniform coverage for all the insured's locations
D. Maintaining uniform coverage for all the insured's locations
Fiduciary bonds are commonly required of a person who does which one of the following?
A. Wishes to appeal an adverse court decision
B. Holds property in trust for the benefit of others
C. Disputes the ownership of personal property
D. Acts as treasurer for public funds
B. Holds property in trust for the benefit of others
B. Bodily injury excluding passengers liability, passenger bodily injury liability, and property damage liability coverages.
A. "All-risks"--not in flight aircraft coverage
B. With the engine removed, the aircraft is covered under Jake's Building and Personal Property coverage
C. "All-risks"--ground and flight aircraft coverage
D. "All-risks"--not in motion aircraft coverage
D. "All-risks"--not in motion aircraft coverage
A network administrator assists a client in performing upgrades to its computer hardware. The administrator makes several errors during the process and the client loses money when its system malfunctions repeatedly for the next two weeks. The client sues the network administrator and his company for loss of business income. Which one of the following insuring agreements is necessary to cover the administrator and his company against the suit under a cyber liability insurance policy?
A. Technology errors and omissions liability
B. Privacy liability
C. Electronic media liability
D. Network security liability
A. Technology errors and omissions liability
Which one of the following statements is true regarding insurance coverage for foreign operations?
A. Commercial insurance policies usually provide worldwide coverage.
B. Voluntary workers compensation policies do not provide coverage for endemic diseases.
C. Small to mid-sized businesses in the United States frequently must concern themselves with loss exposures that exist outside of the usual coverage territory in standard U.S. coverage forms.
D. Voluntary workers compensation policies exclude coverage for transportation expense to return disabled or deceased employees to the United States.
C. Small to mid-sized businesses in the United States frequently must concern themselves with loss exposures that exist outside of the usual coverage territory in standard U.S. coverage forms.
Which one of the following is true regarding disclosures and endorsements pertaining to the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA 2015)
A. Terrorism coverage for losses from terrorist attacks that use nuclear materials is mandated even when such coverage is not provided in an insured's base policy.
B. Insurers must notify insureds of the insurers' portion of the premium, but not the federal share of compensation, attributed to certified acts of terrorism.
C. The disclosures and endorsements for commercial property-casualty insurance forms and for workers compensation policies were developed by Insurance Services Office, Inc. (ISO).
D. The endorsements define an insured loss as any loss resulting from an act of terrorism, and for purposes of workers compensation coverage, the endorsements include acts of war.
D. The endorsements define an insured loss as any loss resulting from an act of terrorism, and for purposes of workers compensation coverage, the endorsements include acts of war.
Contractor Jerry provides a bid bond guaranteeing he will enter into a construction contract if his bid is accepted by business owner Sue. If Jerry's bid is accepted, but he fails to enter into a construction contract, the issuer of the bid bond would pay Sue which one of the following?
A. Nothing, since Jerry did not enter into a construction contract
B. The difference between the amount of Jerry's bid and the next lowest bid accepted plus additional expenses incurred due to Jerry's default
C. The full amount of Jerry's bid
D. The bond's "penalty" amount
B. The difference between the amount of Jerry's bid and the next lowest bid accepted plus additional expenses incurred due to Jerry's default
Which one of the following criteria may not always apply to an "act of terrorism" certified by the United States secretary of the Treasury, in consultation with the secretary of Homeland Security and U.S. attorney general?
A. It is a violent act or an act that is dangerous to human life, property, or infrastructure.
B. It resulted in damage within the U.S.
C. It is an act of terrorism.
D. It was committed by an individual or individuals as part of an effort to coerce the civilian population of the U.S. or influence U.S. government policy or conduct through coercion.
B. It resulted in damage within the U.S.
Which one of the following statements concerning site-specific environmental impairment liability insurance policies is most accurate?
A. Defense costs are usually excluded from site-specific environmental impairment liability policies to keep the premiums lower.
B. Site-specific environmental impairment liability policies are typically written on an occurrence basis, but may be endorsed to provide coverage on a claims made basis.
C. Site-specific environmental impairment liability policies typically cover only losses that arise from pollution conditions beyond the policy site listed in the declarations, but may be endorsed to cover on-site cleanup.
D. Because of the potential for virtually unlimited losses, site-specific environmental impairment liability policies typically cover only bodily injury and not property damage.
C. Site-specific environmental impairment liability policies typically cover only losses that arise from pollution conditions beyond the policy site listed in the declarations, but may be endorsed to cover on-site cleanup.
A network administrator assists a client in performing upgrades to its computer hardware. The administrator makes several errors during the process and the client loses money when its system malfunctions repeatedly for the next two weeks. The client sues the network administrator and his company for loss of business income. Which one of the following insuring agreements is necessary to cover the administrator and his company against the suit under a cyber liability insurance policy?
A. Technology errors and omissions liability
B. Network security liability
C. Privacy liability
D. Electronic media liability
A. Technology errors and omissions liability
Regarding coverage for international operations, which one of the following statements is true?
A. Standard forms for international operations workers compensation exposures are available.
B. Like homeowners policies, commercial insurance policies also provide worldwide coverage.
C. Voluntary workers compensation policies seldom include coverage for transportation expenses to return disabled or deceased employees to the United States.
D. Each insurer in the voluntary workers compensation insurance market develops its own policy wording.
D. Each insurer in the voluntary workers compensation insurance market develops its own policy wording.
The Federal Aviation Administration (FAA) Small Unmanned Aircraft Systems Regulations (Part 107) provide operational rules intended for
A. Operators on the use of unmanned aircraft systems weighing less than fifty-five pounds.
B. Manufacturers on the specifications for unmanned aircraft systems weighing less than fifty-five pounds.
C. Insurers on insurance specifications for unmanned aircraft systems weighing less than fifty-five pounds.
D. Service providers on the specifications of unmanned aircraft systems weighing less than fifty-five pounds.
A. Operators on the use of unmanned aircraft systems weighing less than fifty-five pounds.
Clarence entered into a contract bond that guarantees his insulation work will be free from defects in materials and workmanship for a specified period of five years after completion of the work. The type of bond used by Clarence is a
A. Performance bond.
B. Bid bond.
C. Maintenance bond.
D. License and permit bond.
C. Maintenance bond.
Aircraft liability coverage can be structured as a single limit, or separate limits may apply to
A. Bodily injury excluding passengers liability, passenger bodily injury liability, and property damage liability coverages.
B. Bodily injury for crew members liability, bodily injury for passengers and others (excluding crew members) liability, and property damage liability coverages.
C. Coverages for liability for bodily injury of individual persons who are injured in an aircraft loss, including crew members, and for property damage.
D. Coverages for liability for bodily injury of individual persons who are injured in an aircraft loss, excluding crew members, and for property damage.
A. Bodily injury excluding passengers liability, passenger bodily injury liability, and property damage liability coverages.
Which one of the following is true regarding the Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA 2015)?
A. TRIPRA 2015 requires all commercial property-casualty insurers to make coverage available for terrorism losses as defined by the act.
B. TRIPRA 2015 retained few of the provisions of TRIA and its amendments.
C. TRIPRA 2015 reauthorized the Terrorism Risk Insurance Act (TRIA) through 2030.
D. TRIPRA's changes to TRIA are designed to gradually increase the federal government's share of terrorism-related losses
A. TRIPRA 2015 requires all commercial property-casualty insurers to make coverage available for terrorism losses as defined by the act.
A fundamental difference between auto insurance and aircraft insurance is that
A. Underwriters have stricter requirements for pilots of manned aircraft, usually requiring a pilot's license, medical certification, and experience hours as a pilot-in-command, as compared with minimal auto insurance driver requirements.
B. Auto policies include medical payments coverage, but with aircraft policies, no medical payments coverage exists, so insurers must determine liability for payment of any aircraft injury claims.
C. Commercial auto policies have no coverage that is comparable to aircraft hull coverage.
D. Auto policies are divided into liability and physical damage sections, and aircraft insurance requires separate policies for each coverage.
A. Underwriters have stricter requirements for pilots of manned aircraft, usually requiring a pilot's license, medical certification, and experience hours as a pilot-in-command, as compared with minimal auto insurance driver requirements.
Aircraft liability coverage can be structured as a single limit, or separate limits may apply to
A. Bodily injury excluding passengers liability, passenger bodily injury liability, and property damage liability coverages.
B. Bodily injury for crew members liability, bodily injury for passengers and others (excluding crew members) liability, and property damage liability coverages.
C. Coverages for liability for bodily injury of individual persons who are injured in an aircraft loss, including crew members, and for property damage.
D. Coverages for liability for bodily injury of individual persons who are injured in an aircraft loss, excluding crew members, and for property damage.
A. Bodily injury excluding passengers liability, passenger bodily injury liability, and property damage liability coverages.