CCS Business Insurance & Liability 3 — Questions and Answers
Question 1: A chimney sweep's van is used to transport equipment to job sites. Which policy is required to cover an accident while driving to a customer's home?
- General liability insurance
- Commercial auto insurance (Correct answer)
- Inland marine insurance
- Business owner's policy
Correct answer: Commercial auto insurance
Commercial auto insurance is required for vehicles used for business purposes; a personal auto policy typically excludes coverage during business use.
Question 2: What is an 'additional insured' endorsement on a liability policy?
- A second policyholder who splits premium costs
- A provision extending liability coverage to another party, such as a property management company (Correct answer)
- An endorsement that doubles the policy limits
- A clause covering unlicensed employees
Correct answer: A provision extending liability coverage to another party, such as a property management company
An additional insured endorsement extends the named insured's liability coverage to another specified party, often required by property managers or general contractors.
Question 3: If a chimney sweep causes a house fire due to negligent work, and the homeowner's insurance pays the claim, what legal doctrine may allow the homeowner's insurer to sue the sweep?
- Contributory negligence
- Subrogation (Correct answer)
- Indemnification waiver
- Assumption of risk
Correct answer: Subrogation
Through subrogation, the homeowner's insurer steps into the homeowner's shoes and can sue the negligent chimney sweep to recover the amount paid on the claim.
Question 4: A chimney sweep uses a drone to inspect tall chimneys. What coverage gap might exist in a standard chimney sweep liability policy?
- Drone use is never insurable
- Standard policies may not cover drone-related liability; a separate unmanned aircraft endorsement may be needed (Correct answer)
- Drones are covered under workers' compensation
- General liability automatically covers all equipment the sweep owns
Correct answer: Standard policies may not cover drone-related liability; a separate unmanned aircraft endorsement may be needed
Standard general liability policies often exclude or have limited coverage for unmanned aircraft (drones), requiring a specific endorsement or separate policy.
Question 5: What is the purpose of a 'waiver of subrogation' clause that a property owner might ask a chimney sweep to sign?
- It prevents the sweep's insurer from suing the property owner if the insurer pays a claim on the sweep's behalf (Correct answer)
- It releases the sweep from all liability for damages
- It transfers ownership of the sweep's equipment to the property owner
- It waives the sweep's right to collect payment for completed work
Correct answer: It prevents the sweep's insurer from suing the property owner if the insurer pays a claim on the sweep's behalf
A waiver of subrogation prevents the sweep's insurer from pursuing the property owner in a recovery action, protecting the owner from being sued by the sweep's insurance company.
Question 6: How does a Business Owner's Policy (BOP) benefit a small chimney sweep business compared to buying policies separately?
- A BOP eliminates the need for workers' compensation
- A BOP bundles general liability and commercial property coverage at a lower combined premium (Correct answer)
- A BOP provides unlimited liability coverage
- A BOP replaces the need for commercial auto insurance
Correct answer: A BOP bundles general liability and commercial property coverage at a lower combined premium
A BOP combines general liability and commercial property insurance into one package, typically at a cost savings compared to purchasing each policy individually.
Question 7: A chimney sweep discovers during a job that a gas fireplace has a dangerous defect unrelated to their work. What is the sweep's professional obligation?
- Complete the job and say nothing to avoid liability
- Notify the homeowner immediately and document the finding in writing (Correct answer)
- Refuse payment until the defect is fixed
- Call the gas company without informing the homeowner
Correct answer: Notify the homeowner immediately and document the finding in writing
Documenting and disclosing discovered hazards protects the sweep from liability for pre-existing conditions and fulfills a professional duty to warn the homeowner.
CCS Business Insurance & Liability 3
A chimney sweep's van is used to transport equipment to job sites.
Which policy is required to cover an accident while driving to a customer's home?