Business Insurance & Liability Flashcards

A chimney sweep's employee is injured when a ladder collapses on a job site. Which insurance is primarily responsible for covering the employee's medical bills and lost wages?

Answer: Workers' compensation insurance

Workers' compensation insurance provides medical and wage-replacement benefits to employees injured on the job, regardless of fault.

What is 'errors and omissions' (E&O) insurance, and when would it apply to a chimney sweep?

Answer: Professional liability coverage for claims arising from mistakes or failure to perform professional duties correctly

E&O insurance covers claims alleging that the sweep provided negligent advice or failed to perform their professional duties correctly, such as missing a critical safety defect.

A chimney sweep is sued for a job performed three years ago. The sweep's current insurer says the claim isn't covered. What policy feature would have protected the sweep in this situation?

Answer: An occurrence-based policy

An occurrence-based policy covers incidents that happened during the policy period regardless of when the claim is filed, protecting against late-reported claims from past jobs.

Which of the following best describes 'inland marine insurance' for a chimney sweep?

Answer: Coverage for tools and equipment while in transit or at a job site away from the business premises

Inland marine insurance covers movable property like tools and equipment while being transported to job sites or used at locations other than the insured's own premises.

A homeowner claims the chimney sweep's work caused a gas leak two weeks after service. What should the sweep's first step be upon receiving the complaint?

Answer: Contact the insurance carrier and document the complaint without admitting liability

Notifying the insurer promptly and documenting the complaint without admitting fault is critical; late reporting can jeopardize coverage and admissions can void policy protections.

What is the purpose of a 'hold harmless agreement' that a chimney sweep might sign with a property management company?

Answer: It transfers liability risk to the sweep, protecting the property manager from claims arising from the sweep's work

A hold harmless agreement (indemnification clause) requires the sweep to assume liability for claims arising from their work, shielding the property management company from related lawsuits.

A chimney sweep mistakenly quotes a job at half the actual cost. Is this typically covered by general liability insurance?

Answer: No, general liability covers bodily injury and property damage, not business errors or financial losses

General liability covers bodily injury and third-party property damage; financial losses from pricing errors, contract disputes, or business mistakes require professional liability (E&O) coverage.