Insurance Principles and Coverages Flashcards

Under a commercial general liability (CGL) policy, which coverage part pays for bodily injury or property damage the insured is legally obligated to pay arising from business operations?

Answer: Coverage A — Bodily Injury and Property Damage Liability

Coverage A of the CGL is the primary liability coverage, paying damages the insured owes to third parties for BI or PD from ongoing operations.

A TRIP candidate studies 'named perils' versus 'open perils' coverage. What is the key difference?

Answer: Named perils cover only the perils listed; open perils cover all perils except those excluded

Named perils policies only respond to specifically listed causes of loss, while open perils (all-risk) policies cover any cause not expressly excluded.

A trucker is required by the FMCSA to maintain minimum liability limits. Which form filed with regulators confirms the trucker meets this financial responsibility requirement?

Answer: MCS-90 endorsement

The MCS-90 endorsement is attached to a motor carrier's auto liability policy and guarantees minimum statutory coverage to members of the public injured by the carrier.

Which valuation method pays the cost to repair or replace damaged property with new materials of like kind and quality, without deducting for depreciation?

Answer: Replacement cost value

Replacement cost value covers the full cost of repair or replacement with new property without reducing the settlement for depreciation.

What is a 'claims-made' policy, and how does it differ from an 'occurrence' policy?

Answer: Claims-made covers claims first made during the policy period; occurrence covers events that occur during the policy period

A claims-made policy triggers when the claim is first reported during the policy period, while an occurrence policy triggers when the loss-causing event occurs.

An insurer denies coverage because the insured concealed a prior loss history on the application. Which legal doctrine supports the insurer's denial?

Answer: Doctrine of utmost good faith / material concealment

Insurance contracts require utmost good faith; concealing material facts allows the insurer to void the policy or deny coverage.

A freight broker obtains contingent cargo liability insurance. Under what circumstances would this coverage typically respond?

Answer: When the motor carrier's own cargo policy fails to pay a valid claim

Contingent cargo coverage is secondary protection for freight brokers that responds only when the underlying motor carrier's cargo policy fails or is insufficient.