AINS 103: Practice Quiz-All Chapters
For most businesses, which peril poses the greatest risk of a large or total
property loss? - ANS For most businesses, fire poses the greatest risk of a large
or total property loss.
Extra expenses are expenses, in addition to ordinary expenses, that an
organization incurs to mitigate the effects of a business interruption. Which one
of the following is an example of an extra expense? - ANS Cost to rent temporary
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office space.
An electrical contractor was hired to install a new 100-amp fuse box in the Smith's
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home. During installation, the contractor inadvertently left a small screwdriver in
a duct space behind the panel. Three weeks later, the screwdriver caused an
electrical short which led to a fire. Which one of the following loss exposures best
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categorizes the electrical contractor's legal liability exposure for the fire
damages? - ANS Completed operations liability.
Upon entering a restaurant, a customer grasped a handrail that broke off,
causing the customer to fall and break his wrist. This is an example of which one
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of the following types of commercial general liability loss? - ANS Premises and
operations liability.
Inland marine insurance is insurance that covers: - ANS Many different classes
of property that typically involve an element of transportation on land.
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Workers compensation benefits include which one of the following? - ANS
Rehabilitation benefits.
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Bio-Pharma was a highly-regarded pharmaceutical company. That changed last
year when it was revealed that Bio-Pharma researchers had fabricated test results
of the company's new hypertension drug, and a company official bribed a key
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regulator to get the drug approved. These revelations led to a sharp decline in
sales of all of Bio-Pharma's drugs, a sharp decline in net income, and a decline in
Bio-Pharma's stock price. This scenario clearly indicates the value of a
corporation's...? - ANS Reputation.
When a clothing manufacturer decides to expand the sale of its clothing line by
offering internet purchases, it creates new exposures not otherwise covered, or
not fully covered, by a traditional policy. These include: - ANS Loss or damage
caused by computer viruses.
Sally is a commercial property claims adjuster. When she is first assigned a claim,
she reviews the commercial property part of the policy to make sure that the
,AINS 103: Practice Quiz-All Chapters
property that suffered the loss matches the description of the property insured.
She also reviews the kinds and amount of coverage provided. Which one of the
following components of the commercial property part will provide Sally with this
information? - ANS The commercial property declarations page contains
information such as a description of the property insured, the kinds and amounts
of coverage provided, and any optional coverages, among other information.
Billy owns a baseball souvenir store in Cooperstown, NY. He insured his store
under a Building and Personal Property Coverage Form (BPP) with a $275,000 limit
and a $1,500 deductible. A large fire in the store caused significant damage
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amounting to $310,000 in covered damages. How much would Billy's insurer pay
under his BPP? - ANS $275,000. $310,000 - $1,500 = $308,500, which exceeds the BPP
limit. The insurer will pay $275,000. The deductible is subtracted from the loss, not
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the limit.
Which one of the following is one of the covered causes of loss in the commercial
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property policy Causes of Loss—Basic form? - ANS Explosion is a covered cause
of loss under the basic form. All the others are additional causes of loss covered
by the broad form (and they are also covered under the special form).
Which one of the following is correct with respect to the Increased Cost of
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Construction additional coverage of the Building and Personal Property Coverage
Form (BPP)? - ANS It provides a small amount of insurance to cover the increased
cost to comply with ordinances or laws regulating the repair, rebuilding, or
replacement of covered buildings.
Which one of the following would be considered an extra expense under the
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Business Income (and Extra Expense) Coverage Form of the commercial package
policy? - ANS The increased cost of rent at a temporary location.
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Dooley's Restaurant is insured under a commercial package policy (CPP) with the
Business Income (with Extra Expense) Coverage Form. The business suffered a
$400,000 loss of business income when it was forced to suspend operations after
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flood waters damaged the basement and first floor of the restaurant. Which one
of the following is an acceptable reason for the CPP insurer to deny the business
income claim? - ANS The policy's covered causes of loss did not include flood.
Which one of the following would be covered under the Extra Expense insuring
agreement of the Business Income (and Extra Expense) Coverage Form? - ANS
Costs to move to a temporary location.
Richard's Clothing Store has a $500,000 Business Income (and Extra Expense)
Coverage Form on which there is an 80 percent coinsurance clause. A fire swept
through the store. Richard's Clothing Store estimates that its net income plus all
operating expenses for the policy period would have been $1,875,000. The
, AINS 103: Practice Quiz-All Chapters
estimated business income loss is $300,000. How much will the insurer pay? - ANS
$100,000. The coinsurance factor would be the amount of insurance carried
($500,000) divided by the amount of insurance required (80 percent of $1,875,000).
The factor is 1/3. This, multiplied by the loss, yields $100,000 that the insurer will
pay.
Joe's Cleaning Service is having a very good year, with close to a 30 percent
increase in sales. Joe is wondering if this growth will affect his general liability
premium at the end of the policy period. Which one of the following sections of
the general liability coverage form will provide this information? - ANS The CGL
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declarations form will include rating and premium auditing information.
A customer filed a suit against Patsy's Market, claiming that she was injured when
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she slipped and fell in the produce section. The customer claimed that she broke
her elbow, had to have surgery, and missed a week of work. The owner of Patsy's
Market told its commercial general liability (CGL) insurer that the produce area
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was always clean and that the claim was suspicious. After reviewing the medical
bills and video footage from the market, the insurer concluded that Patsy's
Market was probably liable for the customer's injury. The CGL insurer will most
likely attempt to do which one of the following? - ANS If the insurer's
investigation revealed that Patsy's Market was liable and that the damages were
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covered by the policy, it would likely try to negotiate an out of court settlement.
The Commercial General Liability (CGL) Coverage Form defines the term
"occurrence" as: - ANS An accident, including continuous or repeated exposure
to substantially the same general harmful conditions.
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The Commercial General Liability (CGL) Coverage B—Personal and Advertising
Injury Liability provides coverage for which one of the following? - ANS The
definition of personal and advertising injury in the CGL policy includes liability
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arising from false arrest.
Injury arising out of which one of the following offenses could be covered under
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Coverage B of the Commercial General Liability policy? - ANS Injury arising out
of false arrest could be covered under Coverage B of the Commercial General
Liability policy.
Shady Stories, a tabloid newspaper, prints a false story about a local politician.
Shady knows the story is false but thinks it will sell a lot of papers. The politician
claims damages from Shady. Shady's Commercial General Liability (CGL) Coverage
Form excludes coverage for this loss because the claim arose out of which one of
the following? - ANS Written material that was known to be false.
