D&O
What is the term applied to directors of a company who are not otherwise affiliated with that company and who do not have a pre-existing relationship with the company?
A. Inside directors
B. Independent directors
C. Side-A only coverage
D. Outside directors
C. Side-A only coverage
Acts such as sexual harassment, wrongful termination, and unlawful discrimination are referred to as
A. Wrongful employment practices.
B. Reasons to fire an employee.
C. Torts.
D. Reasons to quit a job.
A. Wrongful employment practices.
What is the unique term for the named insured in a fiduciary liability policy?
A. Employee organization
B. Benefit organization
C. Fiduciary organization
D. Sponsoring organization
D. Sponsoring organization
A legal rule that provides that a director will not be personally liable for a decision involving business judgment, provided the director made an informed decision and acted in good faith...
Business judgment rule
Jean is a director on the board of an apparel promotional company. Towards the company, Jean owes a duty of
A. Undivided loyalty.
B. Profitability.
C. Undivided time.
D. Divided loyalty.
A. Undivided loyalty.
Which one of the following captions describes the Coverage C insuring agreement of a directors and officers (D&0) policy?
A. Direct Coverage
B. Corporate Reimbursement Coverage
C. Entity Coverage
D. Indemnification Coverage
C. Entity Coverage
What are the two ways that an employment practices liability (EPL) policy defines "wrongful acts?"
A. Broad form and named perils
B. Named perils and named exclusions
C. "All-risks" and named perils
D. Broad form and "all-risks"
A. Broad form and named perils
If an employer has both an employee benefits liability (EBL) coverage and fiduciary liability coverage, why is it important to check the wording in both policies' Other Insurance provisions?
A. To be sure that the two policies will not create a conflict in the event of a claim covered by both policies
B. To be sure that both policies will pre-rate the payment of any covered claim
C. To be sure that the insured employer is paying an adequate premium for the coverage
D. To be sure that both policies will pay the full amount of any covered claim
A. To be sure that the two policies will not create a conflict in the event of a claim covered by both policies
The duty to act in the best interests of another...
Fiduciary duty
Directors and officers are considered to have met their duty of care if they have met two different standards. Which one of the following is one of these standards?
A. Be involved in establishing the goals and policies of the corporation
B. Act in a manner believed to be in the corporation's best interests
C. Maintaining and enforcing the corporate charter and bylaws
D. Approve important financial matters and corporate reports
B. Act in a manner believed to be in the corporation's best interests
Which one of the following statements is true regarding the use of deductibles and coinsurance in directors and officers (D&O) liability policies?
A. Substantial deductibles often apply to Coverage B, with a small or no deductible applicable to Coverage A.
B. Most D&O policies include a percentage deductible that disappears after a claim has reached a certain amount.
C. Because there is no "valuation" in D&O insurance, D&O policies do not contain a coinsurance provision.
D. D&O policies do not have deductibles but generally impose a substantial coinsurance penalty for underinsurance.
A. Substantial deductibles often apply to Coverage B, with a small or no deductible applicable to Coverage A.
A small non-profit homeless shelter provides its services to a local community. Several homeless occupants allege that the shelter director administers preferential treatment in the distribution of food, toiletries, and cots based upon race. This claim against the shelter would be covered under a(n)
A. Directors & officers policy with both Coverage A and Coverage B.
B. Directors & Officers liability policy with no employment practices exclusions.
C. Employment practices liability policy with a broad form definition of wrongful acts.
D. Employment practices liability policy with added third-party discrimination coverage.
D. Employment practices liability policy with added third-party discrimination coverage.
In most ways, fiduciary liability policies closely resemble D&O and employment practices liability (EPL) policies. Which one of the following is true about fiduciary liability policies?
A. Covered legal defense expenses are provided in addition to the policy limits.
B. The definition of a wrongful act includes acts of any plan participant or beneficiary.
C. The policy provides liability coverage for all participants or beneficiaries of the plan.
D. To be covered, claims must be first reported during the policy period.
D. To be covered, claims must be first reported during the policy period.
The event that triggers coverage under a claims-made coverage form; the first making of a claim against any insured during either the policy period or an extended reporting period...
Claims-made coverage trigger
Which one of the following federal laws gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for a limited period of time under certain circumstances?
A. Employee Retirement Income Security Act (ERISA)
B. Consolidated Omnibus Budget Reconciliation Act (COBRA)
C. Fair Labor Standards Act (FLSA)
D. Family Medical Leave Act (FMLA)
C. Consolidated Omnibus Budget Reconciliation Act (COBRA)
ABC Corporation encourages its directors and officers to serve as outside directors for local not-for-profit organizations and consequently ABC wishes to provide the D&O coverage for them for this service. Why might ABC obtain a separate policy called an outside directors liability policy rather than include the exposure on its corporate policy?
A. Claims are not as likely to be made against a not-for-profit company as under the corporate policy.
B. As a not-for-profit, the rate will be much less than adding the coverage to the corporate policy.
C. Coverage for separate entities is not available under the basic corporate D&O policy.
D. Claims paid will not reduce the aggregate limit of liability under the regular corporate policy.
D. Claims paid will not reduce the aggregate limit of liability under the regular corporate policy.
Which one of the following explains the difference between the "broad form" and the "named perils form" definition for wrongful acts in the employment practices liability insurance policy?
A. The named perils form provides for wrongful acts on an "all-risks" basis while the broad form provides coverage for a brief listing.
B. The named perils form provides indemnity and defense cost while the broad form provides "all-risks" coverage.
C. The named perils form provides a listing of offenses while the broad form provides a general description.
D. The named perils form provides coverage on a claims made basis while the broad form provides coverage on an occurrence basis.
C. The named perils form provides a listing of offenses while the broad form provides a general description.
Some fiduciary liability policy exclusions differ from those in other professional liability policies. Which one of the following is an exclusion under a typical, unendorsed fiduciary liability policy?
A. Obligations to pay for losses resulting from a failure to collect required employee contributions
B. Obligations for certain penalties imposed by ERISA
C. Obligations to pay claims made for acts that occur after the retroactive period
D. Obligations to cover claims arising under COBRA
A. Obligations to pay for losses resulting from a failure to collect required employee contributions
Insurance that covers the fiduciaries of an employee benefit plan against liability claims alleging breach of their fiduciary duties involving discretionary judgment...
Fiduciary liability insurance
Fiduciary liability loss exposures arise mainly when beneficiaries of a plan make a claim against the plan officials for breach of their fiduciary duties. Which one of the following is a specific duty of a plan fiduciary?
A. To act in a way that is solely in the best interests of the organization providing the benefits
B. To minimize actions that comply with the plan documents but may not be in compliance with the law
C. To ensure that the plan's investments are sufficiently diversified to minimize the risk of large losses
D. To carry out duties in such a way that no investment plans will lose money for the beneficiaries
C. To ensure that the plan's investments are sufficiently diversified to minimize the risk of large losses
A company carries a directors and officers (D&O) liability insurance policy containing a typical definition of loss and a $1,000,000 annual aggregate limit. The company suffers a covered loss resulting in payment of $300,000 of indemnity, $200,000 of defense costs, and criminal fine of $25,000. After this loss, the company's remaining annual aggregate limit would be
Select one:
A. $475,000.
B. $500,000.
C. $675,000.
D. $700,000.
B. $500,000.
ABC Company is a small, family-owned business that has never purchased employment practices liability (EPL) insurance. Susan is a temporary worker at ABC, having been placed there by Temporary Placements Company. Susan is a member of a fundamentalist religious group that requires that she wear some unusual clothing. The people at ABC have always tolerated Susan's clothing and have never expressed any problems or concerns about it.
Recently, Gerald purchased ABC and at the same time purchased an unendorsed EPL policy that covers actions by employees against the firm. Gerald comes from a very conservative background and when he discovers that Susan is not an employee of the company he tells her that, because of her unusual beliefs and clothing, she is no longer welcome at ABC.
Susan sues ABC and Gerald, claiming wrongful termination and religious discrimination. Will ABC's EPL policy provide coverage for this action?
A. No, ABC's EPL policy will not provide coverage for this action, because it does not include independent contractors in the definition of employee
B. Yes, ABC's EPL policy will provide coverage for this action, but only after the case has been decided in court
C. No, ABC's EPL policy will not provide coverage for this action, because it excludes religious discrimination
D. Yes, ABC's EPL policy will provide coverage for this action, because Susan is a "de-facto employee"
A. No, ABC's EPL policy will not provide coverage for this action, because it does not include independent contractors in the definition of employee
An employer's fiduciary liability policy has a one year term beginning on June 1. On July 15, a claim is filed as a result of a lawsuit by an employee alleging a breach of the employer's obligation in benefits administration. The suit alleges the employer negligently failed to collect required contributions from the employee in February of the same year, resulting in the employee's health insurance being canceled and several medical expenses being denied. The provisions of the fiduciary liability policy will respond by
A. Providing coverage due to the claim being reported after the policy inception and meeting the definition of a wrongful act.
B. Denying coverage because the loss occurred prior to the policy inception.
C. Denying coverage due to the exclusion related to collection of employee contributions.
D. Providing coverage because the claim was made after the policy inception date.
C. Denying coverage due to the exclusion related to collection of employee contributions.
An act of a corporation that exceeds its chartered powers...
Ultra vires
An employee benefit plan fiduciary has a duty loyalty, meaning that
A. The fiduciary’s actions must be solely in the best interests of the plan and all of its participants and beneficiaries.
B. The fiduciary must ensure that the plan’s investments are sufficiently diversified to minimize the risk of large losses.
C. The fiduciary must act according to the plan documents and applicable law.
D. The fiduciary must carry out the duties with the care, skill, prudence, and diligence of a prudent person familiar with such matters.
A. The fiduciary’s actions must be solely in the best interests of the plan and all of its participants and beneficiaries.