CHAPTER 9
Purchasing workers compensation insurance from a private insurer is one way employers demonstrate their ability to pay their financial obligations to injured workers. Which one of the following is another acceptable method of meeting this obligation?
A. Using a Comprehensive General Liability Coverage Form
B. Meeting state requirements to qualify as a self-insurer
C. Keeping a reserve of easily accessible funds
D. Purchasing insurance from a federal fund
B. Meeting state requirements to qualify as a self-insurer
Which one of the following does employers liability cover?
A. Liability for damage to employees' property caused by its negligence
B. Liability for suits alleging negligence on the part of its employees
C. Liability for damages arising out of its employment practices
D. Its liability for an employee's occupational injury or disease that is not covered by a workers compensation statute
D. Its liability for an employee's occupational injury or disease that is not covered by a workers compensation statute
The seasonal increase provision, commonly included in businessowners policies, functions somewhat like the peak season endorsement used with the commercial property coverage part. However, the BOP seasonal increase provision differs from the peak season endorsement in that
A. It doubles the business personal property limit.
B. The insured must report fluctuating values monthly.
C. It is not subject to insurance-to-value requirements.
D. The seasonal increase provision applies automatically.
D. The seasonal increase provision applies automatically.
Which one of the following statements is correct with respect to crop-hail insurance?
A. It typically excludes coverage for fire, windstorm, and damage caused by livestock or vehicles.
B. It may also cover harvested crops against named perils while being transported to the first place of storage.
C. It is usually included in the ISO Farm Property—Farm Personal Property Coverage Form.
D. It is offered by the federal government and covers crops against loss caused by hail and often other perils.
B. It may also cover harvested crops against named perils while being transported to the first place of storage.
Which one of the following statements is correct with respect to experience rating of workers compensation insurance?
A. In all states, the minimum annual premium required to qualify for experience rating is $50,000.
B. The past period used in experience rating is usually the single year prior to policy inception.
C. The experience rating computation produces an experience modification, or mod, which serves as a rate multiplier.
D. The insured receives either a refund or a bill for an additional premium after the end of the period, depending on the losses during that period.
C. The experience rating computation produces an experience modification, or mod, which serves as a rate multiplier.
Which one of the following would always be excluded under employers liability insurance?
A. An employee files a claim for depression resulting from harassment at work.
B. Occupational disease an employee was exposed to during the policy period but didn't fully develop until after retirement.
C. Claims by family members of injured employees for care and loss of services.
D. A U.S. citizen injures himself while traveling overseas on a business trip.
A. An employee files a claim for depression resulting from harassment at work.
The workers compensation policy contains uniform provisions even though benefits vary by state. It is possible to use a single policy to provide varying benefits by state for which one of the following reasons?
A. The applicable workers compensation laws are incorporated by reference in the policy.
B. The extraterritorial provisions cover the differences in benefits.
C. Part Two—Employers Liability Insurance covers the differences in benefits.
D. The specific benefits payable in each state are outlined in separate schedules attached to the policy.
A. The applicable workers compensation laws are incorporated by reference in the policy.
The ISO commercial property program offers three causes of loss forms–basic, broad, and special. Most insurers' businessowners policies (BOPs) provide
A. A named perils form, similar to the broad form, and a special form.
B. A choice among basic, broad, and special form coverage.
C. Named perils coverage with the option to add an endorsement for special form coverage.
D. Coverage on a named perils basis only.
A. A named perils form, similar to the broad form, and a special form.
Which one of the following statements is correct with respect to the ISO's Farm Property—Farm Personal Property Coverage Form?
A. It has the advantage that an underwriter cannot decline to cover any property that is eligible for coverage under manual rules.
B. Coverage E—Scheduled Farm Personal Property applies to only those classes of farm personal property for which a specific limit of insurance is shown in the declarations.
C. The coverage provided for eligible classes of property is quite broad and is not subject to restrictions or sublimits.
D. The classes of property that can be insured under Coverage E include growing crops, and trees, plants or shrubs grown for commercial purposes.
B. Coverage E—Scheduled Farm Personal Property applies to only those classes of farm personal property for which a specific limit of insurance is shown in the declarations.
Which one of the following coverages is often included or available as an option in a businessowners policy (BOP)?
A. Dishonest acts by the insured's partners, members, officers or managers
B. War, riot, or military action
C. Mechanical breakdown
D. Workers compensation
C. Mechanical breakdown
Exclusions are generally very common in all insurance policies. Which one of the following is a correct statement regarding the exclusions in Part One of the standard Workers Compensation and Employers Liability (WC&EL) Insurance Policy?
A. Part One exclusions only apply to federal claims.
B. Part One exclusions are limited by the National Council on Compensation Insurance (NCCI).
C. Part One excludes discrimination.
D. Part One contains no out right exclusions.
D. Part One contains no out right exclusions.
Which one of the following does Part Three—Other States Insurance of the Workers Compensation and Employers Liability Insurance Policy require the insured to do?
A. "Advise us within thirty days if you commence operations in any state listed in Item 3.A"
B. "Tell us at once if you begin work in any state listed in Item 3.C of the Information Page."
C. "Inform us if you are considering expanding operations into any state other than those in which you currently operate"
D. "Notify us immediately if you expand operations into any state with a monopolistic state workers compensation fund."
B. "Tell us at once if you begin work in any state listed in Item 3.C of the Information Page."
Which one of the following types of contractors would some insurers consider eligible for coverage under a businessowners policy?
A. A general contractor that supervises subcontractors
B. A contractor that specializes in installing insulation with annual receipts of $10 million
C. A wrecking and demolition contractor that occupies a home office building of 75,000 square feet in area
D. A small residential carpentry contractor
D. A small residential carpentry contractor
Which one of the following property coverages is often included or available as an option in a businessowners policy (BOP)?
A. Earthquake, landslide, and subsidence
B. Employee dishonesty
C. Flood
D. Nuclear hazard
B. Employee dishonesty
The Voluntary Compensation and Employers Liability Coverage Endorsement provides for which one of the following if an employee entitled to payment under the endorsement brings a suit under the common law?
A. The coverage provided by the endorsement reverts to employers liability insurance.
B. The insurer will pay the lesser of the workers compensation benefits that would have been payable, or the applicable policy limit.
C. Coverage under the endorsement ceases with respect to that employee.
D. The insurer is not obliged to defend the insured against the employee's suit.
A. The coverage provided by the endorsement reverts to employers liability insurance.
Warren works at Omega Corporation (Omega). One morning while walking to work, Warren is hit by another Omega employee riding her bicycle to work. He suffers a permanent partial disability. Which one of the following statements is correct with regard to Omega's workers compensation insurance?
A. It would not provide coverage because injuries occurring while traveling to or from work at a fixed location are generally not covered.
B. It would provide coverage only if a Voluntary Compensation and Employers Liability Coverage Endorsement is attached to the policy.
C. It would provide coverage because the injury would not have occurred if Warren had not been on his way to work.
D. It would provide coverage because the injury was caused by Warren's fellow employee.
A. It would not provide coverage because injuries occurring while traveling to or from work at a fixed location are generally not covered.
Part One of the Workers Compensation and Employers Liability Insurance Policy provides that the insured will reimburse the insurer for which one of the following?
A. Benefits paid to employees with pre-existing injuries.
B. Penalties required under a workers compensation law because of the employer's willful misconduct.
C. Common-law liability for occupational injury to employees.
D. Any benefits paid where the employer has failed to comply with policy conditions.
B. Penalties required under a workers compensation law because of the employer's willful misconduct.
Which one of the following best describes one of the major differences between liability coverage provided by the typical businessowners policy (BOP) and the Insurance Services Office (ISO) Commercial General Liability (CGL) Coverage Form?
A. Most BOPs include employers liability coverage; this benefits smaller insureds by eliminating the need for a separate employers liability policy.
B. The typical BOP provides much broader pollution liability coverage than does the typical CGL policy.
C. Hired and nonowned autos liability coverage is usually offered by BOPs, either as part of the form or by endorsement.
D. BOPs generally include liquor liability coverage, which is a particular benefit to bars and full-service restaurants.
C. Hired and nonowned autos liability coverage is usually offered by BOPs, either as part of the form or by endorsement.
All of the following statements regarding Coverage E—Scheduled Farm Personal Property of the ISO Farm Policy are true, EXCEPT:
A. The types of property that can be insured under Coverage E include farm products, farm equipment, and several other classes of farm personal property.
C. Coverage E applies to only those classes of farm personal property for which a specific limit of insurance is shown in the declarations.
D. Coverage E is subject to an 80 percent coinsurance provision.
D. Coverage E is subject to an 80 percent coinsurance provision.
Which one of the following statements is correct with respect to the business income and extra expense coverage provided by the businessowners policy (BOP)?
A. Typically, it is subject to coinsurance, monthly limitation, or a total dollar limit.
B. The coverage can be added to the BOP by endorsement and is subject to an additional premium.
C. Business income loss and extra expenses are usually payable for up to 12 months following a covered loss.
D. It is generally subject to special underwriting requirements, such as a completed business income worksheet.
C. Business income loss and extra expenses are usually payable for up to 12 months following a covered loss.
Frederico is a punch press operator at Tillson-Jones Manufacturing (TJM). When his press malfunctions, Frederico's hand and arm are badly mangled and he suffers a below-the-elbow amputation. Frederico sues the manufacturer of the punch press for his injuries and is awarded damages. The manufacturer then sues TJM to recover the damages it paid to Frederico, alleging poor maintenance of the equipment, insufficient employee training, and negligence in not requiring employees to use safety guards. TJM is insured under a Workers Compensation and Employers Liability Insurance (WC&EL) Policy. Which one of the following best describes how TJM's insurer would respond?
A. It would deny coverage because the WC&EL policy responds only to suits by employees against their insured employer.
B. It would reimburse the equipment manufacturer for damages paid up to the value of the benefits Frederico would have received under the state workers compensation law.
C. It would defend TJM against the manufacturer's suit and pay any common-law damages that TJM becomes legally obligated to pay.
D. It would pay any applicable workers compensation benefits to Frederico for his injury and advise TJM to report the manufacturer's suit to TJM's CGL insurer.
C. It would defend TJM against the manufacturer's suit and pay any common-law damages that TJM becomes legally obligated to pay.
Which one of the following statements is correct with regard to the United States Longshore and Harbor Workers Compensation Act (LHWCA)?
A. Workers compensation and LHWCA exposures must be covered and rated separately.
B. Insurers are required by law to provide LHWCA coverage for insureds that request it.
C. The LHWCA coverage endorsement automatically extends coverage to the United States, its territories and possessions, and Canada..
D. An employer cannot be simultaneously subject to both the LHWCA and the state workers compensation law.
A. Workers compensation and LHWCA exposures must be covered and rated separately.
Which one of the following best describes the "property not covered" provisions of the businessowners policy (BOP)?
A. The BOP form typically excludes wharves and docks.
B. Many of the "property not covered" items listed in the BOP are specifically excluded because they relate to types of businesses that are not eligible for BOP coverage.
C. In most BOPs, the list of property not covered is far more extensive than the comparable list of excluded property in the Building and Personal Property Coverage Form (BPP).
D. The BOP has a relatively short list of "property not covered" because the insureds eligible for a BOP are generally lower-risk, more homogenous types of businesses.
D. The BOP has a relatively short list of "property not covered" because the insureds eligible for a BOP are generally lower-risk, more homogenous types of businesses.
Regarding property coverage under the businessowners policy, which one of the following statements is true?
A. Businessowners policies never include an insurance-to-value provision.
B. One of the distinguishing features of most businessowners policies is the automatic inclusion of business income and extra expense coverage.
C. The businessowners policy offers three causes of loss forms, including the basic, broad, and special forms.
D. The standard valuation provision in the businessowners policy is actual cash value.
B. One of the distinguishing features of most businessowners policies is the automatic inclusion of business income and extra expense coverage.
Which one of the following statements is correct with respect to Coverage G—Barns, Outbuildings and Other Farm Structures of the ISO farm program?
A. It provides similar coverage to Coverage B–Other Private Structures Appurtenant to Dwellings.
B. It covers both the structure and its contents for each building specifically listed on the form.
C. It can be used to insure all buildings located on a farm premises.
D. Coverage G is used to insure all types of farm buildings and structures other than the dwelling and private garages.
D. Coverage G is used to insure all types of farm buildings and structures other than the dwelling and private garages.