Insurance Coverage and Liability Quiz

Questions and Answers

All of the following correctly describe underwriting considerations when evaluating the extent of an insured's liability exposure to the public, EXCEPT:

Differences in exposure between two premises may be the result of location, type of business, and time in business.

In many cases, the hazards inherent in an insured's operations bear little or no relation to the extent to which the public is exposed to them.

The underwriter must consider the legal status of persons likely to be on the insured's premises.

The presence of heavy traffic automatically means that the premises has an excessive exposure. (correct)

When evaluating an insured with primarily a premises exposure, the underwriter need not be concerned with the property damage liability exposure.

True

What factors may cause differences in exposure between two premises?

Location, type of business, and time in business.

A contractor was hired by a railroad to work on a bridge adjacent to railroad tracks. Which one of the following types of insurance coverage would best respond to claims against the railroad arising out of the contractor's work?

A Railroad Protective Liability Coverage Form purchased by the contractor Signup and view all the answers

XYZ contractor, covered under an unendorsed Commercial General Liability (CGL) Coverage Form, is installing kitchen cabinets in a customer's home. Which one of the following best explains how coverage under the contractor's CGL Coverage Form applies in this case?

Premises and operations liability applies because the contractor was in the process of installing the cabinets. Signup and view all the answers

Which one of the following is an example of injury or damage arising from an occurrence that would be covered by the products and completed operations liability portion of the Commercial General Liability (CGL) Coverage Form?

A defective gas range manufactured by the insured explodes causing injury. Signup and view all the answers

Which one of the following statements about owners and contractors protective liability coverage is true?

It covers the property owner for damage arising from the contractor's operations. Signup and view all the answers

Pedestrian Wilma was injured as a result of a contractor's negligence when the contractor failed to adequately warn the public of a hazard when paving a road. Any resulting liability claim by Wilma against the contractor would be considered to have arisen from the contractor's:

Premises and operations liability exposure. Signup and view all the answers

The five classifications the Commercial Lines Manual (CLM) uses to refine the general liability classification process include all of the following, EXCEPT:

Not-for-profit Signup and view all the answers

When classifying and pricing manufacturing or processing operations, underwriters should follow all of the following guidelines, EXCEPT:

If a manufacturer sells its own products through its own retail operations, classify and rate only the manufacturing operations. Signup and view all the answers

Weaver Brothers owns three buildings in Boston. Each building contains eight apartment units that are rented out to college students. Which one of the following major business groups found in the Commercial Lines Manual (CLM) would apply for Weaver Brothers' operations?

Building or premises Signup and view all the answers

James Smith operates a wholesale nursery that sells only to retail nursery and garden shops. In Commercial Lines Manual classification terminology, Mr. Smith is a:

Distributor. Signup and view all the answers

Best Builders is a commercial building contractor. The company often hires subcontractors to perform certain activities on a job. According to the Commercial Lines Manual (CLM), the work performed by subcontractors should be separately classified under Contractors - subcontracted work (91583) only if which one of the following is true?

The subcontractor maintains adequate separate insurance coverage. Signup and view all the answers

In addition to salaries and wages, the ISO Commercial Lines Manual's definition of 'payroll' includes all of the following, EXCEPT:

Gratuities and severance pay Signup and view all the answers

Courtland Incorporated owns a four-story plus basement office building. The dimensions of each floor are 120 feet long by 60 feet wide. The basement contains the heating and air-conditioning units, and other building maintenance equipment. It is only used by the building maintenance employees. Which one of the following is the appropriate exposure to use when calculating Courtland Incorporated's commercial general liability premium?

28,800 Signup and view all the answers

The commercial general liability premium for Springer's Pools and Spas (Springer's) is based on gross sales. A customer purchases a $2,000 spa from Springer's. Because the customer is willing to pay cash, Springer's gives the customer a 10 percent discount and waives the $150 freight charge. The customer pays $1,800 plus $108 in sales tax for a total of $1,908 in cash. Which one of the following represents the amount for this sale that should be included in Springer's gross sales calculation?

$2,150 Signup and view all the answers

Palmer & Sons Electrical has a total of twenty-four employees. In addition to the two executive officers, there are two administrative employees in the office, and twenty electricians. Payroll is the premium base for commercial general liability (CGL) insurance for electrical contractors. The payroll used to calculate the CGL premium for Palmer & Sons should include all of the following, EXCEPT:

The payroll for the two administrative employees in the office Signup and view all the answers

For general liability insurance purposes, in addition to salaries and wages, the ISO Commercial Lines Manual's definition of 'payroll' includes which one of the following?

Overtime, holiday, and vacation pay. Signup and view all the answers

Which one of the following insureds would be legally required to exercise the highest degree of care for individuals on its premises?

A retail toy store Signup and view all the answers

Olivia is a commercial lines underwriter. She is in the process of reviewing several different applications for commercial general liability (CGL) coverage. Which one of the following businesses would Olivia expect to have a higher frequency of property damage losses than bodily injury losses?

Plumbing contractor Signup and view all the answers

Food for All is a grocery store located in the suburbs of Maryland. It is a free-standing building with its own parking lot. In addition to typical grocery products, Food for All has a prepared food section with seating for customers. The store often blocks off a section of the parking lot on weekends and provides carnival-like activities for children with adult supervision. Which one of the following would be considered a common hazard related to Food for All's premises and operations liability loss exposures?

Snow and ice removal from parking lot and sidewalks Signup and view all the answers

Durham Insurance has insured Camp Hill Auto Parts (Camp Hill) for commercial general liability coverage for over three years. Camp Hill has always operated as a wholesale distributor of auto parts. They have a large inventory in their warehouse and are known for providing prompt delivery service to service stations in the area. During the current policy year, Camp Hill decided to convert a section of the warehouse to a retail store. They now sell auto parts to the general public. Which one of the following members of the staff at Durham Insurance is least likely to discover this midterm change in operations at Camp Hill?

Underwriter Signup and view all the answers

A building's heating and electrical systems would fall into which one of the following categories of physical hazards relating to premises and operations liability loss exposures?

Common hazards Signup and view all the answers

Paradox Construction is a residential building contractor. Employees are often assigned to the task at hand, which may include carpentry, painting, electrical, or clean-up work. Paradox Construction does not keep track of payroll by the various task classifications. According to the Commercial Lines Manual (CLM), which one of the following is the proper way to classify payroll for these construction workers?

The classification with the highest rate should be used Signup and view all the answers

Martin, a commercial lines underwriter, is reviewing the general liability application for Shelton Manufacturing. The company processes recyclable plastic into a variety of products. Which one of the following guidelines should Martin follow when classifying Shelton Manufacturing's operations?

Martin should base the classification on the intended use of the final product. Signup and view all the answers

When classifying and pricing manufacturing or processing operations, underwriters should follow which one of the following guidelines?

For pricing purposes, exclude the value of any transfers of component parts or interim processes within the operations of the same named insured. Signup and view all the answers

Which one of the following is one of the five classifications the Commercial Lines Manual (CLM) uses to refine the general liability classification process?

Contracting or servicing Signup and view all the answers

Which one of the following is correct with respect to the classification of contracting risks?

If a worker performs several duties and separate payroll records are not kept, the highest rate applies. Signup and view all the answers

Which one of the following statements regarding gross sales as a rating basis for general liability insurance is true?

Gross sales include revenue earned from operations performed during the policy period. Signup and view all the answers

All of the following regarding gross sales as a rating basis for general liability insurance are true, EXCEPT:

Gross sales are the same as receipts. Signup and view all the answers

The ISO Commercial Lines Manual's definition of the premium base 'gross sales' is the gross amount of money charged by the named insured, by the concessionaires of the named insured, or by others trading the insured's name for various specifically named sources of funds collected. Which one of the following is one of those sources of funds?

Rentals Signup and view all the answers

The Park Slope Theater is a local performing arts center with a seating capacity of 1,000. A variety of musical and theatrical groups perform at the theater, which is open six days a week. Which one of the following is the most appropriate premium base for Park Slope Theater's commercial general liability (CGL) insurance?

Number of persons admitted Signup and view all the answers

The ISO Commercial Lines Manual's definition of the premium base 'gross sales' is the gross amount of money charged by the named insured, by the concessionaires of the named insured, or by others trading the insured's name for all of the following, EXCEPT:

Sales taxes Signup and view all the answers

Which one of the following physical hazards would be considered a special hazard of the class?

Cooking in a restaurant Signup and view all the answers

Which one of the following is an underwriting consideration when evaluating the extent of an insured's liability exposure to the public?

The hazards inherent in an insured's operations are directly related to the extent to which the public is exposed to them. Signup and view all the answers

Study Notes