CHAPTER FOUR - COMMERCIAL GENERAL LIABILITY INSURANCE

 

Every individual and business is expected to exercise reasonable care in avoiding injury to others or in damaging their property, or in any other way, to wrongfully to cause them a loss.  For Commercial enterprises, losses can occur in many ways and the business can be liable for damages arising from the regular operation of their business. 

Many of these liabilities can be insured if the package includes the Commercial General Liability Coverage Part, with the Common Declarations, Common Policy Conditions, General Liability Declarations and the Nuclear Energy Liability Exclusion Endorsement (Broad Form).

The Commercial General Liability Policy can be written as a monoline policy, or combined with other coverage to make up a package policy.  The Commercial General Liability is offered in two versions:

1.         The Occurrence version.

2.         The Claims Made version.

 

The two forms are the same, with the exception of the “trigger” that initiates coverage:

The “Occurrence” version covers occurrences that take place when the policy is in effect, i.e. during the policy’s term,

The “Claims Made” provides that the policy that covers the claim is the policy that is in effect when the claim is actually made.

 

 

Under the claims - made policy, there would be coverage for claims actually made while the policy is in force.  However, the occurrence policy in force in any year in which the claimant was first exposed to the risk, or filed a claim, or the person died   - all could be required to provide coverage.

Either Form covers Bodily Injury and Property Damage Liability; Personal Injury,  Advertising Injury; and Medical Payments as discussed in more detail later in this section.

 

 

 

 

Typical Forms constituting Commercial General Liability Coverage.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TYPICAL BUSINESS LIABILITY COVERAGES

 

 

ILLUSTRATION:

 

 

OCCURRENCE FORM

 

Like other Commercial risk policies, the Commercial General Liability Form includes a section on Declarations which identify the risk, and a section on Policy Conditions.  These conditions define:

• Transfer of Rights or Recovery Against Others (Subrogation)
• Separation of Insureds (Policy applies to each named Insured)
• Other Insurance (Policy is Primary unless other coverage is Primary, and then they will share in the loss, unless the other policy covers fire, windstorm, hail, explosion, riot, aircraft, vehicles, smoke, builders and other similar coverage.  Also excludes if the policy covered use of auto, aircraft or watercraft.)
• Premium Audit (coverage is written with estimated advance premium.)
• Insured’s Duties in Event of Loss (Insured required to give notice, to furnish the names of any witnesses, and to cooperate fully in the investigation.)
• Legal Action Against the Company (No action brought against the company until the Insured complies with all of the policy’s terms.)
• Bankruptcy (Bankruptcy will not relieve the Company of its liability.)

 

 

COVERAGE A   -   BODILY INJURY AND PROPERTY DAMAGE LIABILITY

COVERAGE

The bodily injury or property damage must be caused by an occurrence defined as an “accident.”  “Accident” can also describe continuous or repeated exposure to basically the same harmful conditions.

Defense, Supplementary Payments:

• All sums the insured is legally obligated to pay, including expenses incurred in the defense of the suit and the cost of Bail Bonds.
• Expenses incurred by Insured because of cooperation with the Company in the investigation or defense of the suit.
• Costs of defense to Insured.
• Interest on pre-judgment award, or all interest on any judgment accruing after the entry of the judgment as set forth in the policy provisions.

EXCLUSIONS

 

Care, Custody, Control Exclusion   -   Policy does not apply to property damage to any property that is owned, leased, rented or occupied by the insured.  Obviously this provision does not allow an insured to “sue himself.”

Alcoholic Beverage Exclusion   -   Does not cover bodily injury or property damage for which the insured could be held liable by reason of causing or contributing to the intoxication of any person, or furnishing alcoholic beverages to underage or intoxicated persons.

Employers Liability   -   Does not cover bodily injury for which the insured has any obligation under Workers Compensation, disability benefits, or unemployment compensation  or similar law.

 

Pollution Exclusion   -   Policy provides no coverage for bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.  The list of possible descriptions of points of pollution, types of pollutants, or origination of pollutants is quite detailed, as is the description of “pollutant.”  Because of the significant exposure and detailed description of this exclusions, the exclusion should be carefully studied in compliance with state requirements. 

 

Companies have several options to provide pollution coverage, which are accomplished through the use of Endorsements:

 

• Pollution Liability Coverage Endorsement   -   deletes the pollution exclusion in regards to bodily injury and property damage.
• Pollution Liability Coverage Form   -   Provides for cleanup costs imposed by the government.  This Endorsement is quite lengthy and detailed and should be studied carefully before recommendation.
• Pollution Liability Limited Coverage Form   -   Provides the same coverage as the Form immediately above, except coverage is limited to bodily injury and property damage.

 

Aircraft, Auto, Watercraft Exclusion   -   Policy does not cover bodily injury or property damage arising out of the usage or ownership of any aircraft, auto or watercraft,

Mobile Equipment Exclusion   -   No coverage provided for bodily injury or property damage arising out of transportation of mobile equipment.

War, Insurrection, Rebellion, Revolution   -   No coverage for bodily injury or property damage due to these causes.

Damage to Impaired Property   -   Does not provide coverage for property owned or created by the insured, if the property cannot be used or is less useful because it is defective or dangerous due to fault of the insured.

Loss of Use, Withdrawal, Recall   -   Does not provide coverage for damages for expenses involved in any recall, withdrawal, etc., of the insured’s product or work or impaired property if it has been recalled because of defect, etc.

ILLUSTRATION:

ILLUSTRATION:

 

ILLUSTRATION:

ILLUSTRATION:

 

 

 

COVERAGE B   -   PERSONAL AND ADVERTISING INJURY LIABILITY

If the insured so wishes, this entire coverage or the Advertising coverage alone may be omitted by endorsement.

COVERAGE

PERSONAL INJURY

   Defined as other than bodily injury arising out of:

• Malicious prosecution,
• False arrest, detention,
• The wrongful eviction from premises that an individual occupies, or wrongful entry into, or the right of private occupancy of said premises, or
• The publication of material that violates the right to privacy of an individual, whether written or oral, or that slanders or libels a person, or an organization, or discredits the products or services of another.

ADVERTISING INJURY 

   Defined as an injury that arises out of the publication of material violating a persons rights or libels or slanders a person, organization or its goods or services, or misappropriates advertising ideas or style or copyright infringement.

ILLUSTRATION:

EXCLUSIONS

(Typical Exclusions as shown below, are self explanatory.)

• False Material
• Violation of Law
• Assumed Liability
• Prior Publication
• Breach of Contract
• Failure of Goods to Perform
• Incorrect Price
• Advertising Business  (No coverage for those in advertising, broadcasting, publishing or telecasting) 

 

COVERAGE C   -   MEDICAL PAYMENTS

This coverage may be omitted from the Commercial General Liability policy at the option of the insured.

Coverage C provides payment for expenses set forth in the policy which are caused by an accident, regardless of fault or legal obligation of the insured to pay.  This coverage closely resembles a Medical Reimbursement policy.

MEDICAL EXPENSES  

  The policy provides for payments for

 

      First Aid at the accident scene

 

 

 

 

                                                Medical

 

 

 

 

   Surgical

 

 

 

 

 

 

 

                                          X - Ray

 

 

 

 

 

     Dental services

 

 

 

 

 

                                                Ambulance

 

 

 

 

       Hospital

 

 

 

 

 

                                                Professional                                                            Nursing

 

 

 

 

 

Funeral Services

 

 

 

  -   all subject to the limits of the policy.

EXCLUSIONS:

• War, Rebellion, Etc.
• Employers Liability
• Excluded Persons  (Does not cover the insured or anyone on insured’s premises or persons taking part in athletics)
• Other Excluded Persons  (Does not pay for Bodily Injury to any person who is injured on the premises which is owned or rented by the insured, which the person normally occupies.)
• Persons Eligible for Benefits  (Does not cover expenses for Bodily Injury if they are eligible for Workers Compensation or Disability Benefits under a similar law.)

 

ILLUSTRATION:

 

 

PRODUCTS LIABILITY   -   COMPLETED OPERATIONS

If a  person is injured or their property damaged because of some manufactured goods, the manufacturer of such goods may be held liable.  Even though a product may not be “inherently dangerous”, courts have held that a product that causes serious injury will be held to be dangerous simply because it has demonstrated that it has the power to be dangerous if it contains defects.

Courts are also holding service persons and repair persons liable for failure to take precautions that would have avoided an accident that created bodily injury or property damage.

Also, a seller or marketer may be liable for a defect in the goods that they market, even though the seller or marketer had nothing to do with the manufacture or packaging of the product, and it is still in the original container.

COVERAGES

Bodily Injury and Property Damage   -   Bodily injury and property damage arising out of the insured’s product or work occurring away from the insured’s premises or as a result of work that the insured has completed.

ILLUSTRATION:

 

Completed Work   -   Work is considered completed when all of the work called for in the insured’s contract has been completed.

Tools, Uninstalled Equipment, Abandoned Materials   -   Products Liability Coverage does not apply to Bodily Injury or Property Damage arising out of tools, uninstalled equipment or abandoned or unused materials.  (These would be covered under Coverage A   -  Bodily Injury and Property Damage Liability, premises coverage)

 

Property Damage Defined   -   Defined as physical injury to tangible property, including loss of use of property or loss of use of tangible property that is not physically injured.

Warranties   -   Covers warranties or representations regarding the suitability of the insured’s product(s).

 

 

 

COMMERCIAL GENERAL LIABILITY FORM  -   “CLAIMS MADE” VERSION

Like the Occurrence form, the claims  -  made version covers situations which are defined as accidents, including continuous and repeated exposure to substantially the same general harmful conditions.

Retroactive Date   -   If a date is inserted, this date will rule as a cutoff point on occurrences which take place before the inserted retroactive date.

ILLUSTRATION:

 

Other “Tail” Endorsements   -   An endorsement is available that provides for a 5 - year period (referred to as “tail” period) which is applicable to certain specified accidents, products or locations.

COVERAGE AMOUNTS

Liability claims must be limited and the relationship between the limits must be established.  When property damage occurs, there usually is one occurrence (such as a fire), but with liability there can be numerous claims, such as with product liability when a defect in a product can produce claims with several injured customers.

Limit of Insurance in Declarations   -   The basic limit shown in the policy is the maximum amount the company will pay regardless of the number of claimants, insureds or number of suits brought.

 

ILLUSTRATION:

 

Each Occurrence Limit   -   Each occurrence has its own limit (Occurrence means an accident including continuous or repeated exposure to substantially the same harmful conditions).

ILLUSTRATION:

 

General Aggregate Limit   -   Theoretically, there could be an almost endless number of occurrences, so the policy places a limit over all coverages.  This means that the policy will not cover   Generally, there are two aggregate limits, i.e. a general aggregate and a products-completed operations hazard aggregate.  The difference is that for the products-completed aggregate, the liability and medical expense limits apply;  for the general (or all-other) aggregate, frequently the limits are doubled.

ILLUSTRATION:

Individual Aggregate Limit   -   Various individual locations can have separate aggregate limits by endorsement.

Fire Damage Limit   -   The limit is set for damages under Coverage A because of loss arising out any one fire to rented premises.

Medical Expense Limit   -   Medical expenses are included in the General Aggregate Limit, but it also has a maximum limit on Medical Payments (Coverage C) which will be paid to any one person because of bodily injury.

Supplementary Payments   -   Provides for the payment of supplementary payments in excess of payment obligations under various coverages.

 

 

ADDITIONAL COMPREHENSIVE LIABILITY POLICIES

Farmers Comprehensive Liability Policy  (Covers farmers liability for personal and farming activities in a single form)

Professional Liability Insurance  (The Commercial General Liability Policy excludes liability for bodily injury or property damage arising out of rendering, or failing to render, professional services).  Issued to various professions, such as Advertisers, Army Post Exchanges, Baths, Beauty Shops, Barbers, Colleges, Hospitals, etc., etc.  Some of the more widely sold Professional Liability covers are:

 

Physicians, Surgeons and Dentists Professional Liability Policy   -   This is a well recognized policy, with ever - increasing rates and with regulatory bodies attempting to cope with these premium hikes.  In must places, these professionals are required to carry Malpractice insurance.  These regulations vary so widely from jurisdiction to jurisdiction that is it imperative that state requirements be closely scrutinized before offering this type of coverage to prospective clients.

 

 

Insurance Agents and Brokers Professional Liability Insurance (Errors and Omissions)   -   Policy covers claims by members of the insuring public or carriers represented by the insured, and will also defend suits alleging negligent acts which are covered by the policy, and all court costs and reasonable expenses incurred by the insured.

 

 

Beauty Shop and Barber Shop Liability Insurance   -   Policies cover any professional service while within the premises, resulting from work, treatment or operation, or the use of any preparation or appliance in connection with the operation of a beauty shop.

 

 

Morticians Professional Liability Insurance   -   Covers the usual bodily injury, sickness, disease or death, but in addition, covers mental anguish as an insurable occurrence.

 

 

 

Directors and Officers Liability Policy   -   Covers suits brought by stockholders or others against corporate directors and officers for acts or omissions of the corporation officers or directors.

 

 

Data Processing  Errors and Omissions Insurance   -   Pays all sums which the insured shall become legally obligated to pay as damages because of any claim arising out of any negligent act, error or omission of the insured in the performance of data processing services for others.

 

ILLUSTRATION (PHYSICIANS, SURGEONS, & DENTISTS LIABILITY):

 

ILLUSTRATION (INSURANCE AGENTS & BROKERS LIABILITY):

 

 

ILLUSTRATION (BEAUTY SHOP AND BARBER SHOP LIABILITY):

 

 

ILLUSTRATION (MORTICIANS PROFESSIONAL LIABILITY INSURANCE):

 

ILLUSTRATION (DIRECTORS & OFFICERS LIABILITY POLICY):

 

ILLUSTRATION (DATA PROCESSING ERRORS AND OMISSIONS):

  

 

BUSINESS INCOME COVERAGE FORMS

 

The Commercial Property Policy covers buildings or personal property against directphysical loss by a loss described in the policy.  The term “Direct Loss”, is construed to mean both the damages directly caused by a covered loss, but also any damage suffered as a proximate cause.  As an example, a fire loss (covered loss under a Commercial Property Policy) would also include losses caused by smoke from the fire, collapse of the structure as a result of the fire, water damage because of efforts to extinguish the fire, etc.,

There is no coverage for inconsequential or indirect losses. 

 

ILLUSTRATION:

 

COVERAGE

 

Even though a business may be fully covered for actual direct damages, such as by fire, if such a loss occurs, the business would either close or at the very least, restricted in their operations.  While going through the rebuilding process, generally income either stops completely or partially.  However the owners must continue to pay certain continuing expenses, such as rent, salaries, interest on debt, insurance, etc.  If the building was rental property, all rental income would cease.

Many times the business interruption losses exceed the actual property damage.  Many businesses, particularly manufacturing businesses, rely upon equipment and machinery being operative, and if they are damaged by fire, considerable expense may be incurred to replace or repair the machinery and equipment.

If a business goes for a substantial period of time without earnings, it can lose its credit standing which can be the death knell to many businesses.

The Business Income Coverage Form provides coverage on the loss of income due to interruption of business by an insured peril.

The Form covers actual losses of business income during the restoration period caused by DIRECT physical damage to the insured property, including personal property at the described premises, or in a vehicle within 100 feet of the premises.  This restoration period typically starts on the date of the actual physical loss and ends on the date that the property should be repaired according to the terms of the policy.

Business Income is defined as the NET profit (or loss) - before income taxes - that would have been earned if the loss had not occurred,

PLUS

normal operating expenses that continue during the loss period.

For rental property, the loss of rents sustained by a lessor, or the rents that a tenant would have to pay.

The coverage extends until the property is actually restored; however it must not exceed the time that the restoration should normally take, according to reasonable time and quality standards.

Once the property is restored, the insurers liability ends, even if the volume of sales (or production limits) is not what it was prior to the loss.

Future earnings are insured, even though the experience of the business may have been less than those projected for the future.

Typically, the indemnity period is the length of time it would take to replace the damage, even if it extends past the expiration of the policy.

 

ILLUSTRATION:

 

ILLUSTRATION:

Extra Expense - The policy covers extra expense the insured suffers as a result of extra cost because of the insured loss, such as having to operate at a substitute location, or increased costs at the business location.  Extra expenses on valuable papers or records damaged in the loss are covered.

ILLUSTRATION:

Civil Authority - If the Insured had a store in a shopping center, and an adjacent business suffered severe damage, creating damage to parking and utilities to the Insured’s business which was not otherwise damaged.  Because of this damage, all access to the Insured’s store and others close to the damaged property was denied for several days while repairs are made.  The policy will cover loss of business income during the period of time access to the insured’s store was denied by civil authorities.

The Business Income policy will pay for the loss of business income due to direct physical loss at the insured premises because of a covered loss to new buildings and material used for alterations or construction.

Newly Acquired Locations - Coverage is available for loss of business income at any location acquired by the Insured at any other location, subject to certain limits of time and amount.

EXCLUSIONS

The Business Income policy incorporates the exclusions of the basic Commercial Property Policy, plus

• Ordinance or Strikes - The policy will not pay for any increase in the time to rebuild, repair or replace the property, because of mandate by an ordinance or from interference by a strike at the premises, subject to certain policy provisions.
• Pollution - The restoration period specifically excludes any increased time because of any law regulations or controlling environmental damage. 

 

Business Income coverage can be written under one of three forms - Basic, Broad or Special.

LIMITS

As indicated above, the extension to cover Newly Acquired Locations is in addition to the limit of insurance in the policy.

On the other hand, the following Additional Coverages do NOT increase the limits of liability shown in the policy Declarations:

• Extended Business Income,
• Extra Expense,
• Alterations and New Buildings, and
• Civil Authority.

Electronic Media and Records - There are special limits on payment for loss of business income due to direct physical damage to electronic media and records.

Actual Loss Sustained -  The loss is measured by determining what the earnings of the business would have been after a loss if the loss had not occurred, taking into consideration the income prior to loss.

The Business Income Coverage Form is liable only for the actual loss sustained and will therefore pay the Insured the amount of the earnings that would have been realized had no loss occurred, less the amount of non - continuing expenses.

ILLUSTRATION:

Business Income Coverage Form pays for all loss of earnings, even if the business is losing money from operations.  Whether profitable or non-profitable, almost all businesses have ongoing expenses that must be met.  Since young businesses will usually suffer more by such a loss than a more established business, this Business Income Coverage is popular with the newer businesses.

Coinsurance Clause -  The Insured may be required to carry insurance in an amount equal to at least the stated percentage times the sum of the net income and all operating expenses that would have been earned in the 12 months following the effective date of the policy.

If the Insured carries less than this required amount, the liability of the Company is reduced proportionately, according to the provisions of the policy.

The formula used in applying the coinsurance clause is

                        C/R x L = % of Loss Paid

where C = amount of insurance in force at the time;  R = the amount of insurance required (the stipulated percentage of the net income and the operating expenses in the 12 month period following the inception of the policy;  L = the amount of the loss.

ILLUSTRATION:  (of inadequate insurance)

 

ILLUSTRATION:  (of adequate insurance)

 

Ordinary Payroll Limitation -  If a business suffers a loss and will probably sustain losses from business interruption, however the loss will be of a short duration, the insured may continue to pay all of his employees in order to keep from losing them.  However, if the loss appears to continue longer than anticipated, he may wish to release the unskilled laborers and other more replaceable employees.

A special endorsement is available under the Business Income policy that will allow the Insured to determine the number of days that full payroll will be needed, and the number or classification of employees that will be exempted.  For these purposes, ordinary payroll includes all employee benefits, FICA payments, union dues, etc.

OPTIONAL COVERAGES

Several options are made available:

• Limitation of the maximum period of indemnity.
• Limitation of the monthly limit of indemnity.
• Fluctuating values.
• Agreed value coverage.
• Premium Adjustment Form -  Allows the Insured to have a policy for an amount larger than his estimate of his future earnings by filing a statement of actual earnings at the end of the policy year.  The actual premium is then adjusted on the basis of the true experience.

ILLUSTRATION: 

• Building Ordinance - Increased Period of Restoration - The Basic Business Income Coverage Form does not cover losses sustained during a restoration period when the restoration period is increased because of any law, ordinance,  or regulation of construction or repair.  Once the period of restoration has expired, the coverage is terminated, regardless of the longer time it may take to completely rebuild.  Coverage against a loss suffered during this additional period of time can be insured by special endorsement.
• Business Income From Dependent Properties -  Many firms are dependent upon other firms for essential materials.

Conversely, a producer whose entire or major production is distributed or marketed through one or two outlets, or whose production is absorbed by a commodity assembled or completed elsewhere, would suffer serious losses and could bankrupt the firm, because of situation or interruption of operations at another location other than their own, even though their own firm has not been damaged by any loss.

Many shopping centers have one major store, considered the “magnet” store, and other businesses in the center is dependent upon business from customers of the magnet store.  If something happens to the magnet store, nearly all of the other stores in the center will suffer.  The policies of the other stores would not cover any such loss due to the magnet store.

Therefore a special endorsement is available to risks which face this exposure, covering either Contingent Locations or Recipient Locations

 

• Contingent Business Property  -  i.e. property operated by others, but the insured depends upon one of the following situations:

1.   Contributing locations - Those locations which delivery materials or services to the Insured.

2.   Recipient Locations - Those locations that accept the products manufactured or produced by the insured, or receives services from the Insured.

3.   Manufacturing Locations - Locations where products are manufactured for delivery to the Insured’s customers under contract.

4.   Leader Locations - Locations which, by their existence or proximity, attract customers to the insured’s business.

 

ILLUSTRATION:

 

Order of Civil Authority - Similar to the Basic Business Interruption policy, coverage is provided, typically not to exceed a two week period, for any income interruption because of a loss at any other locations as a result of regulations, laws, or ordinances.  This is quite limited in scope. 

Insurance On Loss Of Rents  -  Business Income Insurance can be written for owners of property who derive their income from leasing facilities to others.

Extra Expense Insurance:  The Business Income forms provides any extra expense the Insured assumes by speeding up the period of restoration in order to minimize the loss of income.

Certain businesses, such as newspapers, must be willing to spend whatever is necessary in order to continue its business without interruption.  A policy is available which is written with a limit of insurance, but also provides that no more than certain specified percentages of the limit are recoverable in 30 day increments.  For instance, an often used set of percentages is 40, 80, 100%, whereby the Company is liable for no more than 40% of the policy limit if the period of recovery is 30 days less; 80% when the period of recovery is over 30 days but less than 60 days; and 100% of the limit when the period of recovery is more than 60 days.

Tuition And Fees Insurance  -  Educational Institutions, such as Colleges, universities, private and parochial schools, that depend on tuition fees for financing, usually require a special form of the Business Income insurance.  Because arrangements for school attendance and tuition is received for this period, any loss this can cause a short suspension of classes could conceivably result in the loss of an entire year’s revenue.

 

ILLUSTRATION:

The policy is specifically designed to meet these problems as the insuring clause does not limit the recovery to the time to rebuild.  It provides that if a school suffers a covered loss, and the loss is rebuilt or replaced 30 days or less before the scheduled opening of the next school term, the policy will pay the actual loss of business income from tuition and fees, during the school term following.

 

ILLUSTRATION:

            Two forms of the endorsement are offered:

Tuition and Fees - Broad Form - The Broad Form endorsement covers not only tuition and fees but, also loss of, fees, research grants, income from bookstores and athletic events.

Tuition and Fees - Limited Form - The Limited Form covers only loss of tuition and fees.

Leasehold Interest Insurance: 

Many leases contain a clause which allows the landlord to cancel the lease if fire or other insured peril destroys or seriously damages the property.  This option to cancel in some leases applies only if the premises are rendered totally unfit for occupancy, while some clauses consider the premises as unfit for occupancy if they are substantially damaged, more than 50% destroyed, or some other criteria.  These clauses create a Leasehold Interest which a tenant would need to insure.

A tenant has a leasehold interest in property when they pay rent or lease for an amount that is less than the normal rental or lease value of the premises.  Therefore, the tenant will suffer financially if they can no longer use the present premises, as they will have to pay more for similar accommodations elsewhere.  The leasehold policy will pay the difference between the rent that had been paid and what comparable accommodations would cost at the time of the loss.

Some of the more common types of situations arising creating leasehold interest are:

• When the tenant paid a bonus of some sort when entering into the lease and the bonus will be forfeited if the lease is canceled.
• When the property has undergone large scale improvements which has enhanced the value of the property with subsequent increase in rentals, but the tenant occupied the premises prior to the improvements.
• When the tenant has invested heavily in improvements of the premises under the impression that the lease would continue for a long time, but the lease can be canceled in case of a loss.
• When a tenant sublets the premises to another for a higher amount than what the tenant is paying for the premises.

 

Leasehold Interest Insurance protects the individual or firm against losses as outlined above, by insuring the difference between the actual rent being paid under the lease, and the usual and normal rental value of the premises when the premises are damaged by a covered cause of loss and the landlord exercises the cancellation option.

 

 

STUDY QUESTIONS

1.  During the Christmas rush season, an employee in the gift wrapping department of Durel’s Department Store, accidentally stabbed a customer with her scissors.  Which of the following is true regarding the business liability insurance carried by the Department Store:

        A.  The insurance will not cover the incident as it was performed by an
            employee and not the business owner.

        B.  The insurance will not cover the incident as the scissors were defective.

        C.  The insurance will cover the incident as it would be considered an
             indirect responsibility of an employee.

        D.  The insurance will cover the incident as it is considered as an accident
            and the liability policies cover all accidents.

 

2.    Company B is a competitor of Company A.  Company B spreads the word in the industry that Company A is on the rocks financially.  Company B has personal and advertising liability insurance.  The insurance would not pay if

        A.  the information published about the financial standing of Co. A was true.

        B.  Co. B published information intimating that Co. A. was having financial
           difficulties, and this information was untrue and Co. B knew it.

        C.  advertising of Co. B made statements about the private life of the 
            President of Co. A.

        D.  Co. B had made aspersions about the quality of the product Co. A sells.

 

3.  Which of the following statements is correct:

        A.  Coverage C provides Medical Payments in addition to Workers
            Compensation Insurance.

        B.  Medical expenses as the result of an accident are covered.

        C.  Expenses related to diabetes are covered.

        D.  Coverage C does not include any First Aid given at the scene of an
            accident.

 

4.  Medical Payments are ______________ of a Commercial General Liability Policy

        A.  a mandatory part

        B.  an optional part

        C.  never included as part

        D.  is part of the Commercial General Liability occurrence form but not of the
           Claims Made version.

 

5.  Which of the following statements regarding Products Liability is true:

        A.  A company can not be held liable for injuries suffered from a product
             that is normally not considered as “dangerous.”

        B.  A salesman cannot be held liable for defective goods if they did
             not participate in the manufacture.

        C.  Repairmen have been found liable for failure to take precautions that
             would have avoided and accident that created bodily injury.

        D.  Products liability – Completed Operations – provides coverage only on
            losses occurring on the insured’s premises.

 

6.  Products Liability Coverage – Completed Operations –applies to Bodily Injury or Property Damage arising out of

        A.  tools.

        B.  uninstalled equipment.

        C.  abandoned or unused materials.

        D   work that the insured has completed.

 

7.  Which of the following is not a  typical limit in a liability policy:

        A.  Each Occurrence limit.

        B.  Medical Expense limit.

        C.  Premium Increase limit.

        D.  Aggregate limits.

 

8.  Physicians, Surgeons and Dentist Professional Liability Policy is another name for

        A.  Directors Errors and Omissions.

        B.  Product Liability Insurance.

        C.  Medical Malpractice Insurance.

        D.  Physicians and Surgeons Property Floater.

 

9.  Doctor Johnson was appointed to the Board of Directors of Wainwright Pharmaceuticals.  His attorney strongly recommended that he purchase ________ so that he would not personally liable if the company introduces a new drug that has deleterious effects on consumers.

        A.  Product Liability Insurance

        B.  Directors and Officers Liability Insurance

        C.  Medical Malpractice Insurance

        D.  additional liability coverage under his homeowners policy

 

10  Comprehensive Liability Policies (CLP) are necessary because

        A.  the Commercial General Liability Policy excludes liability for bodily
             injury or property damages arising out of rendering professional
             services.

        B.  Barbers and Agents cannot work without liability insurance.

  C.  they keep the insureds from being sued.

  D.  by law, an insurer cannot issue CPP policies without also issuing CLP
            policies

 

ANSWERS TO STUDY QUESTIONS

 

1C     2B     3B     4B     5B     6D     7C     8C     9B     10A