Property & Casualty Insurance License Test Casualty Insurance Policies Questions and Answers 1 — Questions and Answers
Question 1: A contractor incorrectly installs a new roof on a home. One week after the job is finished, a heavy rainstorm causes the roof to leak, resulting in significant water damage to the home's interior and contents. Under the contractor's Commercial General Liability (CGL) policy, which hazard category would cover this loss?
- Premises Liability
- Products-Completed Operations (Correct answer)
- Operations Liability
- Contractual Liability
Correct answer: Products-Completed Operations
Products-Completed Operations hazard covers bodily injury and property damage that occurs away from the business premises and arises out of the insured's product or completed work. Since the damage occurred after the roofing job was finished and was a result of the faulty work, it falls under Completed Operations.
Question 2: Which of the following is a key feature of Uninsured Motorist (UM) coverage in a Personal Auto Policy?
- It covers damage to the at-fault driver's vehicle.
- It pays for the insured's bodily injuries caused by a driver who has no liability insurance. (Correct answer)
- It is mandatory in all states without exception.
- It primarily covers property damage to the insured's vehicle, with a high standard deductible.
Correct answer: It pays for the insured's bodily injuries caused by a driver who has no liability insurance.
Uninsured Motorist (UM) coverage is designed to protect the insured for their own bodily injuries (and in some states, property damage) when they are involved in an accident with an at-fault driver who illegally has no auto liability insurance. It essentially allows the insured to recover damages from their own insurance company.
Question 3: An employee is injured while operating machinery at work. The employer has a Workers' Compensation policy in force. The 'exclusive remedy' doctrine in Workers' Compensation means that:
- The employee can choose to receive workers' compensation benefits or sue the employer for a larger sum.
- The employer is protected from lawsuits by the injured employee, as workers' compensation is generally the employee's only recourse. (Correct answer)
- The employee can sue a third party, such as the machine manufacturer, but cannot receive any workers' compensation benefits.
- The employer can be sued for negligence in addition to the workers' compensation claim if safety violations are found.
Correct answer: The employer is protected from lawsuits by the injured employee, as workers' compensation is generally the employee's only recourse.
The exclusive remedy doctrine is a fundamental concept in workers' compensation. It establishes a trade-off where the employer agrees to provide no-fault benefits for work-related injuries, and in return, the employee gives up the right to sue the employer for negligence related to that injury.
Question 4: All of the following are typically included under Supplementary Payments in a Commercial General Liability policy EXCEPT:
- The cost of bail bonds up to a specified limit.
- Reasonable expenses incurred by the insured at the insurer's request.
- Settlement amounts or judgments up to the policy limit. (Correct answer)
- Pre-judgment and post-judgment interest.
Correct answer: Settlement amounts or judgments up to the policy limit.
Supplementary Payments cover costs associated with defending a claim and are paid in addition to the policy's liability limits. These include legal fees, bond premiums, and interest. The actual settlement or judgment amount paid to the claimant is considered 'damages' and is paid under the policy's limit of liability, not as a supplementary payment.
Question 5: After a covered auto accident, the insured is required to promptly inform the insurance company, protect the vehicle from further damage, and cooperate with the insurer's investigation. These responsibilities are detailed in which section of the Personal Auto Policy?
- Insuring Agreement
- Exclusions
- Conditions (Correct answer)
- Declarations
Correct answer: Conditions
The Conditions section of an insurance policy outlines the duties and obligations of both the insured and the insurer. The 'Duties After an Accident or Loss' condition specifies the steps the policyholder must take for a claim to be covered.
Question 6: A customer is injured when they slip and fall on a wet floor at a grocery store. The store's Commercial General Liability policy includes Coverage C - Medical Payments. Which statement about this coverage is true?
- It covers medical expenses for an employee injured on the job.
- It requires the injured customer to prove the store was legally negligent.
- It pays for medical and funeral expenses incurred within one year of the accident, regardless of fault. (Correct answer)
- It has a very high limit, typically matching the policy's overall liability limit.
Correct answer: It pays for medical and funeral expenses incurred within one year of the accident, regardless of fault.
Coverage C - Medical Payments in a CGL policy is a no-fault coverage. It pays for the medical expenses of third parties injured on the insured's premises or due to their operations, without regard to legal liability. This allows for prompt payment for minor injuries and can help avoid larger lawsuits. The coverage is subject to a relatively low per-person limit and a specific time frame for incurring expenses.
Property & Casualty Insurance License Test Casualty Insurance Policies Questions and Answers 1
A contractor incorrectly installs a new roof on a home.
One week after the job is finished, a heavy rainstorm causes the roof to leak, resulting in significant water damage to the home's interior and contents.
Under the contractor's Commercial General Liability (CGL) policy, which hazard category would cover this loss?