CIC - Casualty Exam Questions and Complete Solutions Graded A+

  A Commercial General Liability (CGL) Policy may be written as a: - Answer: 1. monoline policy 2. multi-line policy called a Commercial Package Policy that includes other coverage parts such as Commercial Property Coverage, Inland Marine, Crime and Fidelity, etc. Commercial General Liability Coverage Form CG - Answer: 1. Section I - Coverages • Coverage A - Bodily Injury And Property Damage Liability • Coverage B - Personal and Advertising Injury Liability • Coverage C - Medical Payments 2. Section II - Who Is An Insured 3. Section III - Limits Of Insurance 4. Section IV - CGL Conditions 5. Section V - Definitions Commercial General Liability Declarations CG DS 01 10 01 - Answer: • Named Insured, Mailing Address, Policy Period • Limits Of Insurance • Form Of Business. Could be more than one type depending on multiple named insureds. • Business Description Endorsements - Answer: Used to modify the CGL Coverage Form. May be amendatory or to meet contractual obligations. May also be used to broaden, or to limit and/or exclude coverage. Premises Liability - Answer: Applies to owners, landlords, and tenants and arises out of the ownership, maintenance, or use of the named insured's premises Examples: A customer slips and falls on the named insured's premises. A guest drowns at a named insured hotel's swimming pool. Business Operations Liability - Answer: Liability arises from activities involved in the operation of an organization including service and repair activities usually done on the premises of others, while the activity is being conducted Examples: A named insured contractor accidentally cuts utility lines while digging a trench. A named insured contractor accidentally starts a fire while doing some welding. Products Liability - Answer: Arises out of the sale, distribution or manufacture of the named insured's product Examples: A named insured (store or distributor) can be held liable if a consumer is injured by a food item, a pharmaceutical item, or some other product sold by the named insured. A named insured manufacturer can be held liable if a defective product causes bodily injury or property damage to others. Completed Operations Liability - Answer: Liability arises from activities involved in the operation of an organization including service and repair activities usually done on the premises of others, after the activity has been concluded Examples: A named insured installs a new water heater. After installation, the water heater leaks causing damage to the homeowners flooring. A named insured contractor repairs some stairs and balconies at an apartment complex. A week after completion, one of the balconies collapses causing injury to a tenant. Contractual Liability - Answer: Arises from one party assuming responsibility of another party Example: Lease agreements; construction contracts, etc. Contingent Liability - Answer: Arises out of work performed for the named insured by someone else Example: Can protect a named insured from acts of others, other than insureds, such as independent contractors Personal Injury Liability - Answer: Liability arising from intentional torts, such as libel, slander, wrongful eviction Advertising Liability - Answer: Liability caused by harm from such things as misappropriation of advertising ideas, style of doing business or infringement of copyright Second Paragraph - Preamble - Answer: Defines how the Named Insured and Insurer will be identified in the CGL Coverage Form • "You" is the person or organization named on the Declarations AND • "You" also refers to any other persons or organizations not listed on the Declarations that may qualify as a named insured Third Paragraph - Preamble - Answer: Defines the term "insured" as those persons or organizations qualifying as such under Section II - Who Is An Insured of the CGL Coverage Form Fourth Paragraph - Preamble - Answer: Indicates that certain words and phrases in quotations have a special meaning A Person Or Organization Must Qualify As An Insured In Order To Be Provided Insurance Protection - Answer: 1. Named insureds (those listed on Declarations or Schedule attached thereto) and those who qualify as named insureds 2. Automatic insureds (those who qualify as insured under Section II - Who Is An Insured) 3. Non-automatic insureds - those added by endorsement • A CGL Policy written using the ISO Coverage Form requires an endorsement in order to provide additional insured status to other persons or organizations • Some insurers may grant additional insured status by a provision in their coverage form Note: Additional Insured Concepts and Endorsements will be discussed at a later section of this Institute Paragraph 1 - Section II - Who Is An Insured - Answer: The Named Insured ("you") designated in the declarations is an insured. There are also some persons or organizations that qualify as automatic insureds. They have a relationship with the type of named insured indicated on the Declarations and are automatically included as insureds under Section II - Who Is An Insured, Paragraph 1. a. If named insured is an individual, then the individual and spouse are insureds, but only with respect to the conduct of the named insured's business b. If named insured is a partnership or joint venture, then the members, partners, and spouse(s) are insureds, but only with respect to the conduct of the named insured's business c. If the named insured is a Limited Liability Company (LLC), includes: • Members as insureds, but only with respect to the conduct of the named insured's business • Managers as insureds, but only with respect to their duties d. If the named insured is some other type of organization (corporation, municipalities, etc.), includes: • Executive officers with respect to their duties as executive officers "Executive officer" is a defined term • Directors as respects to their duties as directors • Stockholders with respect to their liability as stockholders e. If named insured is a trust, includes the trustees as an insured, but only within the scope of their duties as trustees Paragraph 2 - Section II - Who Is An Insured - Answer: Others are also included as automatic insureds under Section II - Who Is An Insured, Paragraph 2: a. "Employees" and "volunteer workers" are both defined terms • Insured status for an employee applies only for acts within the scope of employment or while conducting the named insured's business • Insured status for a volunteer worker applies only while performing duties related to the named insured's business • "Leased worker" and a "temporary worker" are defined terms b. Real estate managers, other than named insured's employees or volunteer workers, • While acting as such for the named insured c. Persons or organizations with proper temporary custody of the named insured's property if the named insured dies, but only with respect to liability arising out of: (1) The maintenance or use of that property; AND (2) Until the named insured's legal representative has been appointed. d. Legal representative if the named insured di • But only with respect to such duties • Legal representative has rights and duties of named insured Paragraph 3 of Section II - Who Is An Insured - Answer: Applies to newly acquired or newly formed organizations if acquired or formed by the named insured. Note: Does NOT include newly acquired or newly formed partnerships, joint ventures, or limited liability companies These organizations qualify as a named insured if no other similar insurance available: a. Until the end of the policy period or 90th day, whichever is earlier b. Excludes prior bodily injury or property damage that occurs before the organization is acquired or formed c. Excludes personal and advertising injury offenses committed before the organization is acquired or formed The last paragraph of Section II - Who Is An Insured - Answer: Indicates who is NOT an insured • No person or organization is an insured with respect to current or past partnerships, joint ventures, or limited liability companies not shown as a Named Insured in the Declarations • Can create coverage gap • May need to write a separate policy for "discontinued products - completed operation insurance" WHO IS AN INSURED EXHIBIT - Answer: WHO IS AN INSURED EXHIBIT (Study this chart on Page 37 of PDF) Knowledge Check 1 - Answer: 1. Spouses of any type of named insured are automatically considered insureds. a. True b. False 2. A partnership is the only named insured listed on the CGL Declarations. A partner of the partnership buys a building in his/her own name during the policy period. A bodily injury loss occurs at that building, and the partner is sued for damages. Does the partner have insured status under the partnership's CGL Policy for this suit? a. Yes b. No 3. A nurse employed at a rehab center administers the wrong medication to a patient resulting in injury. A suit is filed against the nurse for damages. Does the nurse have insured status under the rehab center's CGL Policy? a. Yes b. No 4. A named insured acquires a corporation 30 days prior to the named insured's CGL Policy's expiration date. Which of the following is an accurate statement? a. In this scenario, the newly acquired corporation automatically qualifies as an insured but only until the end of the policy period b. Newly acquired corporations always have automatic insured status for 90 days c. No coverage at all for the newly acquired corporation unless added as a named insured 5. A newly formed joint venture is an automatic insured. a. True b. False Knowledge Check 1 Answers - Answer: 1. Spouses of any type of named insured are automatically considered insureds. False 2. A partnership is the only named insured listed on the CGL Declarations. A partner of the partnership buys a building in his/her own name during the policy period. A bodily injury loss occurs at that building, and the partner is sued for damages. Does the partner have insured status under the partnership's CGL Policy for this suit? No 3. A nurse employed at a rehab center administers the wrong medication to a patient resulting in injury. A suit is filed against the nurse for damages. Does the nurse have insured status under the rehab center's CGL Policy? No 4. A named insured acquires a corporation 30 days prior to the named insured's CGL Policy's expiration date. Which of the following is an accurate statement? a. In this scenario, the newly acquired corporation automatically qualifies as a named insured but only until the end of the policy period 5. A newly formed joint venture is an automatic insured. False Paragraph a. - Coverage A - CGL Insuring Agreement - Answer: 1st promise: Insuring Agreement: • Pay sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies (in other words, subject to terms and conditions). Legal liability is a responsibility or obligation to others which courts recognize and enforce. • "Bodily injury" (BI) means BI, sickness or disease, including death • "Property damage" (PD) a. Physical injury to tangible property, including all resulting loss of use b. Loss of use of tangible property that is not physically injured 2nd Promise: • Right and duty to defend against any suit seeking damages ─ But, no coverage, no defense ─ No consent to settle required ─ Duty to defend ends when the limit of insurance has been exhausted by judgments or settlements under Coverages A or B or medical expenses under Coverage C • "Suit" means a civil proceeding. Clarifies that it includes arbitration proceedings or alternative dispute resolutions Paragraph b. - Coverage A - CGL Insuring Agreement - Answer: (1) Coverage applies only if BI or PD is caused by an occurrence in the coverage territory (2) The BI or PD must take place (occur) during the policy period Coverage Territory: a. U.S. (including its territories and possessions), Puerto Rico and Canada; b. International waters and airspace between the above c. Anywhere in the world if: (1) Products made or sold in territory described in paragraph a., (2) Temporary business travel of a resident of the territory described in paragraph a.; or (3) Personal and advertising injury takes place through the internet, AND Suit must be brought in the U.S., including its territories and possessions, Puerto Rico and Canada; or there is an agreement to settle (3) Known injury or damage applicability • BI or PD known to have occurred prior to the policy period is NOT covered • If previously known, any continuation, change or resumption of such BI or PD is also not covered Paragraph c. - Coverage A - CGL Insuring Agreement - Answer: Clarifies that BI or PD that occurs during the policy period and was not known to have occurred prior to the policy period includes any continuation, change or resumption of that BI or PD after the end of the policy period. Policy A responds because: 1) Insured had knowledge of the damage that first occurred during Policy A's policy period 2) Damage includes any continuation, change or resumption of that "bodily injury" or "property damage" after the end of that, Policy A's, policy period. Policy B does not respond because the named insured knew about the property damage in 2017. - Answer: The named insured is a trust that owns an office building. In October 2017, the named insured under the CGL Policy, is notified about a water leak that developed in the roof area causing damage to a tenant's contents. The water leak continued to damage the tenant's contents into the following policy year. A claim is file by the tenant in 2018 for property damage. Which Policy will respond? Policy A: Policy Period: 01/01/2017 to 01/01/2018 In October 2017, insured was notified of the water leak and damage to the tenant's contents. Policy B: Policy Period: 01/01/2018 to 01/01/2019 Water leak and damage continues. Paragraph d. - Coverage A - CGL Insuring Agreement - Answer: An insured is deemed to have knowledge of BI or PD when any insured listed under Paragraph 1 of Who Is An Insured or any employee authorized to give or receive notice of a claim: (1) Reports to the company or another insurer (2) Receives a written or verbal demand or claim for damages (3) Becomes aware by any other means that BI or PD has occurred Paragraph e. - Coverage A - CGL Insuring Agreement - Answer: Damages include care, loss of services or death Person or organization must qualify as an insured Must meet the definitions of "bodily injury", "property damage", "occurrence", and "coverage territory" BI or PD must be caused by an occurrence BI or PD must take place (occur) in the coverage territory BI or PD must occur during the policy period (Includes continuation, change or resumption of BI or PD, if not known to have occurred prior to the policy period) Subject to the CGL Coverage Form terms and conditions - Answer: Summary of Requirements for Coverage A to Apply There are 6 of them a. True b. True c. False - Answer: 1. Indicate which of the following are true regarding the meaning of "property damage" as defined in the CGL Coverage Form. a. Physical injury to tangible property, includes all resulting loss of use of that property. b. Includes loss of use of tangible property that is not physically injured. c. Electronic data is considered tangible property. The CGL Policy extends coverage for this type of claim, if the responsibility for damages is determined from the suit filed and decided in the U.S., its territories and possessions, Puerto Rico and Canada - Answer: The named insured manufactures and sells kitchen appliances in the United States. A customer living in Mexico is injured while using an appliance manufactured by the named insured and files a lawsuit. Which statement accurately describes coverage? a. Yes b. No - Answer: The named insured, located in New York, is in the fashion business. In the following situations, does coverage apply to bodily injury or property damage caused by an employee while conducting the named insured's business in Europe under an unendorsed CGL Policy? a. A salesperson who resides in New York, travels to Europe for 10 days on business. A suit is filed in New York. b. An employee permanently resides in France to conduct the European sales for the named insured. A suit is filed in New York Coverage A Exclusions - Answer: Expected Or Intended Injury Contractual Liability Liquor Liability Workers' Compensation And Similar Laws Employer's Liability Pollution Aircraft, Auto Or Watercraft Mobile Equipment War Damage To Property Damage To Your Product Damage To Your Work Damage To Impaired Property Or Property Not Physically Injured Recall Of Products, Work Or Impaired Property Personal And Advertising Injury Access Or Disclosure Of Confidential Or Personal Information And Data-related Liability Recording And Distribution Of Material Or Information In Violation Of Law Expected Or Intended Injury EXCEPTION for bodily injury from the use of reasonable force to protect persons or property - Answer: Exclusion: "Bodily injury" or "property damage" expected or intended from the standpoint of the insured. This exclusion does not apply to "bodily injury" resulting from the use of reasonable force to protect persons or property. Contractual Liability Exclusion EXCEPTIONS. Coverage provided for: (1) Liability in absence of the contract (2) Liability assumed in a contract or agreement that is an insured contract and only with respect to injury or damage that occurs after the contract is executed ─ Provides for reasonable defense expenses incurred provided liability for the cost of that party's defense has also been assumed in the same insured contract ─ "Insured contract" is a defined term - Answer: ______ _______ arises from one party assuming responsibility of another party. Parties commonly involved: Tenant - Landlord Subcontractor - General Contractor Lessee - Lessor The ___________ ______________ exclusion precludes coverage for contractually assumed liability The named insured is a subcontractor, a window installer. The subcontractor agrees to hold harmless the General Contractor at a downtown construction project for liability arising from the operations caused in whole or in part by the subcontractor. A pedestrian, injured by a fallen glass pane, files a suit against the General Contractor. Injured Person -- Suit filed against the General Contractor -- Hold Harmless Agreement General Contractor - Indemnitee Subcontractor - Indemnitor -- Subcontractor -- Subcontractor's CGL insurer responds to the suit as the subcontractor agreed to hold harmless the General Contractor - Answer: Hold-Harmless Agreement Scenario Acronym - LEASE Plus • Lease of premises except ... • Easement or license agreement except ... • An obligation to indemnify a municipality as required by ordinance except ... • Sidetrack agreement • Elevator maintenance agreement • Plus, any other contract in which the named insured assumes the tort liability of another party to pay for BI or PD to a third person - Answer: What is included as an Insured Contract? (1) A railroad indemnity agreement (2) Architect, engineer or surveyor indemnity agreement (3) An agreement in which the insured, if an architect, engineer or surveyor assumes liability for injury or damage arising out of the insured's rendering or failure to render professional services (4) exclusionary endorsements: - Contractual Liability Limitation CG • Eliminates paragraph f. of the definition of insured contract - Amendment of Insured Contract Definition CG Note: CG 24 26 to be discussed in the Additional Insured Section of this Commercial Casualty Institute - Answer: What is NOT included as an "insured contract"? Liquor Liability Exclusion Exclusionary endorsements: Amendment Of Liquor Liability Exclusion CG • Exclusion applies when there is a charge whether or not a profit is derived; applies when it is a gift if a license or permit is required; exclusion also applies to BYO establishments Note: Not applicable in MA, NJ, TX, and WA Amendment Of Liquor Liability Exclusion - Exception For Scheduled Premises Or Activities CG • Similar to CG 21 50; however, has an exception for scheduled premises or activities - Answer: • Excluded losses - arising out of the business of manufacturing, distributing, selling, serving or furnishing alcoholic beverages Note: The policy does not define "in the business of". • Exclusion applies to supervision, hiring, employment training or monitoring others or providing or failing to provide transportation to an intoxicated person • Implied Exception - "host" liquor liability coverage if the named insured is not in the businesses outlined above • BYO alcohol establishments are NOT considered to be in the liquor business Workers' Compensation And Similar Laws - Answer: Any obligation of the insured under a workers' compensation, disability benefits or unemployment compensation law or any similar law. Employer's Liability - Answer: Injury to an employee in the course of employment is excluded except for liability assumed under an insured contract a. No b. No c. Yes d. Yes - Answer: Which of the following are considered "insured contracts" according to the definition in the CGL Coverage Form? a. All contracts signed by the named insured. b. All liability assumed in a lease of premises. c. That part of a copy machine rental contract under which the named insured assumes the tort liability of another party for injury to a third party. d. That part of a construction contract to do roofing, under which the named insured assumes the tort liability of another party for injury to a third party. A named insured serves wine at an office holiday party for their clients. - Answer: 2. Which is an example of a host liquor exposure? a. The named insured, a tavern, allows employees to purchase alcoholic beverages after their shift. b. The named insured serves wine at an office holiday party for their clients. c. The named insured, a grocery store, sells beer and wine. d. The named insured, a hotel, includes alcoholic beverages as part of their room service menu. a. Covered b. Covered c. Excluded d. Excluded - Answer: Indicate which of the following occurrences are covered under Coverage A of an unendorsed CGL Policy. a. An employee of the named insured accidentally knocks over a large display causing severe injuries to a customer. b. An irate customer threatening other customers with a weapon is tackled and injured by an employee who was trying to protect the other customers. c. An employee suffers bodily injury due to a slip on the named insured's premises. d. A leased worker injures his back in a work-related injury. Pollution Exclusion Exceptions: (i) BI sustained within building and caused by smoke, fumes, vapor or soot from building heating equipment used to heat that building (ii) BI or PD if the named insured is a contractor performing operations at a premise where the owner has been added as an additional insured to the named insured contractor's CGL Policy (iii) BI or PD arising out of heat, smoke or fumes from a "hostile fire" (iv) BI or PD from arising out of the accidental release of fuels, lubricants or other operating fluids (v) BI or PD caused by the release of gases, fumes or vapors from materials brought into that building in connection with the operations being performed (vi) BI or PD arising out of heat, smoke or fumes from a hostile fire - Answer: Exclusion applies to BI or PD arising out of the discharge, dispersal, seepage, migration, release or escape of pollutants: (a) Excludes at or from any premises owned or occupied by, or rented or loaned to any insured (b) Excludes at or from any premises used by any insured for handling, storage, disposal, processing or treatment of waste (c) Excludes pollutants transported, handled, stored, treated, disposed of, or processed as waste (d) Excludes at or from any premises while performing operations if the pollutants are brought on or to premises in connection with the operations (e) Excludes operations to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or assess (aka environmental work operations) Pollution Exclusion Continued - Answer: Excludes cleanup costs arising out of regulatory requirements, or for claims by governmental authority for damages because of testing or clean up Exception: Cleanup costs may be provided IF the expense was included as part of the damages because of a covered claim