Understanding Concurrent Dates and Nonconcurrency Situations in Insurance Policies, Exams of Commercial Law

Download Understanding Concurrent Dates and Nonconcurrency Situations in Insurance Policies and more Exams Commercial Law in PDF only on Docsity! CIC Commercial Multiline Exam Questions and Answers 2024 Update. Identify and describe the three primary purposes of excess liability/umbrella policies (LO1) - Correct answer 1. Provide additional limits that are excess over underlying limits of insurance 2. Provide primary coverage when underlying policy does not respond because its aggregate limits of insurance are exhausted. 3. Provide broader coverage than the existing underlying insurance Excess liability coverage forms and commercial umbrella liability policy - Correct answer 1. Follow forms - Hella short - "basically what underlying says but more money" - does NOT provide broader coverage 2. Excess liability - own insuring agreement and stuff - could be the same, narrower, broader 3. Commercial umbrella liability policy - own insuring agreement and stuff - Broader coverage Define "Self-Insured Retention" (SIR) and apply it (LO2) - Correct answer SIR is the dollar amount listed in the declarations paid by the named insured before the excess insurance becomes applicable Applies only when the excess policy provide broader insurance protection Does not apply when the umbrella drops down over exhausted limits or when exceed over underlying limits. SIR may be written per occurrence or policy period basis Explain the importance of concurrent dates and be able to provide solutions for non- concurrency situations (LO3) - Correct answer Concurrent date’s means the policy period of the excess/umbrella policy are the same as those of the underlying insurance policies The declarations of the excess liability has a schedule of underlying insurance that indicates the required limits that are to be in effect at its effective date. The underlying limits must be unimpaired at the effective debate of the excess liability Describe the underlying insurance requirements of excess liability/commercial umbrella policies and apply the in a practical applications. (LO4)*** - Correct answer Coverage Most insures typically require CGL, Business Auto and Employer Liability Other liability policies may be required for other known exposure such as aircraft, Liquor liability, and watercraft Limits of Insurance Limits required by varies by insurer Some exposures require higher underlying limits The required limits must be in full effect at the effective date of the policy period P a g e 1 | 22 Compare and contrast the insuring agreement known as pay on behalf and indemnify (LO5) - Correct answer Pay on Behalf of - The insure has stricter control of defense, investigation or settlements - The insurer pays damages directly to third party on behalf of -The insure has the duty to defend when the underlying does not provide coverage Indemnify - Strict indemnity (insured uses their own funds directly to pay claims and insurer reimburses) - based on legal obligations to pay (insured still has control but indemnity is based on legal obligation to pay - insurer write checks to insured) Types of damages, defense costs, and ultimate net loss in Excess liability and umbrella policies What is the coverage area - Correct answer damages? - follow form follows underlying - Excess liability/commercial umbrella (pay because of bodily injury and property damage as defined or pays because of personal advertising injury as defined) Defense - Duty to defend - Not duty to defend in some cases (still right to defend) - Defense cost included within the SIR is often referred to as first dollar defense Ultimate net loss (different ways to pay this- what the court says must be paid) - All sums paid or payable in settlement - All sums paid or payable as damages Coverage area - Worldwide or anywhere in universe, could also be limited Exclusions for excess and umbrella - Correct answer - aircraft - Watercraft - Contractual liability - Liquor liability - Pollution - Damage to property - Damage to your work - imparted property - Electronic data liability - Professional - Uninsured and underinsured motorists - Employment related practices Layering options for excess liability and umbrella policies - Correct answer 1. Single 2. Layering 3. Quota share 4. Buffer layer Identify common cyber exposures (LO1) - Correct answer - data storage both active and at rest - Collection of private information on employees, clients, vendors, etc. - A website and or social media presence P a g e 2 | 22 Security Breach - Correct answer - does not include confidential corporation information in the CCC of the insured - Person not authorized has access to personal information - Authorized person uses personal information in an unauthorized way Identify and apply the limits of insurance provision under the ISP commercial cyber insurance policy to a loss. (LO7) - Correct answer Policy Aggregate Limit of Insurance The most paid is the limit shown on deceleration page. The insurer's obligation or liability of any kind ends when the policy aggregate limit of insurance has been exhausted Aggregate Sublimit(s) of Insurance Subject to policy add grease limit of insurance Sublimit(s) shown in the Dec page are not in addition to the policy aggregate limit of insurance The insurer's obligation of liability of any kind ends when the aggregate Sublimit has been exhausted Identify and apply the deductibles of insurance provision under the ISP commercial cyber insurance policy to a loss. (LO7) - Correct answer Insurance Agreement 1, 2, 3, and 5 pays only the amount of loss in excess of the policy deductible amount shown in the declarations Under insuring agreement 4 business income and extra expense pays only the amount of loss that exceeds the greater of the deductible show or the amount of loss incurred the time deductible Underinsuring agreement 5 security breach liability pays only the amount of loss and defense expense in excess of policy deductible amount shown in the declarations Only the highest deductible amount applies in the even a loss is covered under more than one insuring agreement. Identify and apply the defense and settlement provision under the ISO commercial cyber insurance policy (LO8) - Correct answer Only applies to insuring agreement 6 Security Breach Liability Insurer has the right and duty to defend No coverage no defense Defense expenses are payable within and not in addition to the limits Identify and apply the exclusions under the ISO commercial cyber insurance policy. - Correct answer Exclusions are numerous and vary by insurer Lighting earthquake, hail, volcanic action or other acts of nature, War warlike action or insurrection Pathogenic biological or chemical materials nuclear radiation Bodily injury or physical damage to or destruction of tangible property including loss of use Unexplained or indeterminable failure malfunction or slowdown of the computer system or inability to access electronic data Any disruption due to insufficient capacity to process transaction or due to an overload of activity on computer system or network other than a cyber-incident. Any disruption of internet service or external telecommunication network Failure of reduction in or surge power Violation of RICO and its amendments of similar law Malfunction or failure of any atelier Oral of written material published with knowledge of falsity Contractual liability***** P a g e 5 | 22 Patent or trade secret violations Pollutions or pollution related h Prior or pending claims Employment practices related liability Awareness that any insured had prior to the effective date of the policy Conditions found in cyber policies by the insured and insurer before, during, and after a claim or loss - Correct answer - subrogation - Representations (must be correct) - Changes in exposure (acquisitions or creation of organization, acquisition of named insured, cessation of subsidiaries) - Other insurance (may be excess coverage) - Separation of insured’s (2 named insured’s for ex) - Duties in the event of claim or loss - Valuation (USD) - Confidentiality (cannot say you have extortion coverage) - Territory (worldwide, limited worldwide, universe) Identify and describe the sources of liability that can result in an employee not-related practices claim. (LO1) - Correct answer A. Workplace Torts - Workplace torts may be based on negligence (reasonable person: foreseeability) or intentional torts - Preserves full right of action if a federal case falters - Too many think it is only a federal issue and "right-to-work" protect them in certain states B. Breach of Contract - Written contacts (including employment contract and collective bargaining agreements) - Implied contracts (job offer letter, employee manual, oral promises, evaluations, tenure) C. Violation of Statutes Regarding Employment Practices - Some small businesses are exempt Examples of workplace torts (LO1) - Correct answer - Bullying, humiliation or other types of infliction of emotional distress - Invasion of privacy - Coercion - Libel, slander, defamation of character - Negligent hiring practices - Negligent supervision - Retaliation - Wrongful or negligent evaluations, criticism, demotions, discipline - Wrongful detention or imprisonment - Wrongful termination Determine whether a person or organization qualifies as an insured person in the event of a claim situation and whether an exclusion or limitation applies (LO2) - Correct answer Named Insured Organization indicated on the declarations Insured Persons Directors, officers trustees of the organization Employees Volunteer or an intern P a g e 6 | 22 Independent contractors Identify the key elements in an employment practices liability insurance policy insuring agreement. (LO3) - Correct answer 1. Pays sums the insured becomes legally obligated to pay as damages 2. Resulting from a "wrongful act" 3. Right and duty to defend any "suit" seeking damages for wrongful act 4. Consent to settle Describe the insurance protection that may be provided for liability to third parties under and EPLI policy. (LO4) - Correct answer 1. EPLI policies are typically written to provide coverage for claims filed by employees. 2. Coverage may not apply to a claim against the insured by a third party. Which are usually individuals that the business have contact with such as customer clients, vendors, contractors, volunteers.... 3. Some EPLI policies provide this coverage by endorsement while the majority of coverage forms have a separate insuring agreement for third party liability. 4. Coverage may be limited to only certain types of third parties and not all third parties. 5. BEWARE coverage may be limited to certain wrongful acts such as discrimination and/or harassment claims. Exclusions for EPLI - Correct answer - criminal, fraud, malicious acts - Contractual liability - Workers comp, disability benefits, and similar laws - Violations of certain federal acts - Strikes and lockouts - Prior or pending litigation - Prior events or activities - Wage and hour violations Apply the definition of wrongful act as contained in an EPLI policy. (LO5) - Correct answer many coverage broad range of wrongful acts, but each policy defines (named peril coverage) Wrongful acts no standard definition may include: Discrimination Sexual Harassment Retaliation Wrongful termination Wrongful employment practices Breach of employment Failure to grant tenure Workplace tort Discrimination Wrongful demolition, termination.... Apply the defense provision of EPLI Policies (LO6) - Correct answer - Most include right and duty to defend - No duty to defend if a wrongful act is not covered - Some EPLI policies give the insured the right to select defense, it big. - The insurer typically has the right to investigate and settle not the insured - *** Cost of defense is within the limits - Defense expenses tee typically are in excess of the deductible or retention P a g e 7 | 22 NOT EMPLOYEES: AGENTS, BROKERS, FACTORS, CONSIGNEES, INDEPENDENT CONTRACTORS Endorsements used to modify the definition of employee - Correct answer 1. Volunteer Workers as employees- meant for Gov't workers or nonprofit groups when working as fund solicitors during franchise campaigns 2. Employee theft- named employees have more coverage 3. Exclude designated person or classes of persons as employees 4. Include designated agents as employees 5. Include computer software contractors as employees Exclusion and endorsements applicable to all 7 insuring agreements for crime - Correct answer 1. Theft or dishonest acts committed by you, your partners or members - Eras plan coverage amendments (protects employees benefits) - include partners as employees - include members of a LLC as employees 2. acts committed by your employees learned of by you prior to the policy period 3. Acts committed by your employees, managers directors, trustees, or reps (be already covered in employee theft) 4. Confidential or personal information - erase plan coverage amendments 5. Data security breach 6. Indirect loss (income you "would" have received 7. Legal fees, costs, expenses 8. Virtual currency - include virtual currency as money Policy exclusions pertaining to insuring agreement A.1. Employee Theft - Correct answer -inventory shortages discovered by inventory or profit loss computation - trading (can add trading coverage) - Warehouse receipts (can add warehouse receipts coverage) - erase plan. Coverage amendments (deletes trading and warehouse receipts exclusion in relation to employee benefits) insuring agreement for A.2 forgery or alteration - Correct answer - pay for loss resulting from forgery or alteration of OUTGOING checks, drafts, or promissory notes Describe and apply the coverage’s, exclusions, limitations, and definitions pertaining to Insuring Agreement A.3. - Inside the Premises- Theft of Money and Securities - Correct answer Coverage’s: -Theft on premises or financial premise -Disappears OR Destruction -damage to premises P a g e 10 | 22 -damage to locked safe, vault, cash register Has to be inside the described and occupied premises of the Named Insured Limitations- Does not extend past the door of the premises (no 100ft rule) Insuring agreement for A.4 inside the premises - robbery or safe burglary of other property - Correct answer coverage - pay for loss to tangible property other than money and securities - Damage to premises or its exterior from actual or attempted robbery - includes damage to locked safe, vault, register, cash box located inside the premises from actual or attempted robbery Describe and apply the coverage’s, exclusions, limitations, and conditions pertaining to Insuring Agreement A.5. Outside the Premises - Correct answer Covered Property: Money Securities Other property Cause of loss: Theft Disappearance Destruction Limitations: -outside the premises -must result from robbery or attempted robbery -Must be in custody of messenger or an armored motor vehicle company Exclusions to insuring agreements a.3, a.4, a.5 - Correct answer Exclusions: -accounting errors, -exchange or purchases -Fire (except to money) -Money Operated Devices -Voluntary Parting -Motor Vehicles -Vandalism -transfer or surrender of property Describe and apply the coverage’s exclusions, limitations and conditions pertaining to Insuring Agreement A.6. Compute and Funds Transfer Fraud. ** - Correct answer 1.) Fraudulent data causes money to be transferred to another by way of employee acting in good faith after receiving orders from software contractor 2.) Loss resulting from a fraud instruction to a financial institution to transfer money FROM the insured’s account EXCLUSIONS: ** -authorized access to transfer money -Use of Credit/debit cards -exchanges or purchases - Fraudulent instructions P a g e 11 | 22 Fraudulent impersonation (protection for voluntary parting door to frequent impersonation) -inventory shortages In fraudulent impersonation endorsement, the insured has a choice of 3 levels of verification of transactions - Correct answer - all transfer instructions must be verified - All transactions over a certain amount must be verified - Verification is not required Examples of crime coverage conditions (applicable to all insuring agreements) - Correct answer - additional premises or employees - Consolidation- merger or acquisition - Duties in event of a loss - Employee benefit plans - Extended period to discover loss (loss sustained) - Extended period to discover loss (discovery form) - Joint insured - Ownership of property, interest covered (client’s property endorsement to cover theft of client’s property by identified employee) Identify the sources of liability that can result in an employee not-related practices clay - Correct answer A. Workplace Torts Workplace torts may be based on negligence or intentional torts Preserves full right of action if a federal case falters Both large and small employers have significant exposure Too many think it is only a federal issue and "right-to-work" protect them in certain states Negligence Intentional torts B. Breach of Contract Written contacts (including employment contract and collective bargaining agreements) Implied contracts (job offer letter, employee manual, oral promises, evaluations, tenure) C. Violation of Statutes Regarding Employment Practices Examples of workplace torts - Correct answer Bullying, humiliation or other types of infliction of emotional distress Invasion of privacy Coercion Libel, slander, defamation of character Negligent hiring practices Negligent supervision Retaliation Wrongful or negligent evaluations, criticism, demotions, discipline Wrongful detention or imprisonment Wrongful termination Determine whether a person or organization qualifies as an insured person in the event of a claim situation and whether an exclusion or limitation applies - Correct answer Named Insured Organization indicated on the declarations Insured Persons Directors, officers trustees of the organization Employees P a g e 12 | 22 What right does the insurer have if the customer sues the named insured? - Correct answer - value of lost or damaged property - cost to repair the damaged property - rebuild, repair, replace property with like kind or quality (buffing) - take any part of the property at an appraised or the agreed value The insurer has the right to adjust the loss with the customer or the named insured on the owner’s behalf If the customer sues the named insured, the insurer has the right (not duty) to defend and if they do then they will pay all costs incurred in that defense Describe the interests covered under a Bailee Coverage Form - Correct answer Interests- Named insured on policy Bailee- their responsibility for the value of goods of the bailer in their CCC- Investment, time and materials invested - Usually there is a provision that allows the settlement of a claim directly with the bailer Baylor- may have their own coverage on goods bailer policy will contain provision that prevents protection from any Bailee - written on an open peril basis, extensions are extensive selected exclusion commonly found in policies providing bailment coverage - Correct answer - theft of property left overnight in or on a vehicle (unless inside locked building and signs of forced entry) - Loss resulting from miss-delivery - Voluntary parting with property due to trick, scheme, or fraud - Damage caused by processing performed by the Bailee 4 unique challenges for projects under construction (builders risk) - Correct answer - changing/increasing values and exposures - changing insurable interest as project develops - There is property to be covered that is no located on the property site (ex. warehouse for materials) - Projects in the course of construction are more susceptible to loss than are already completed building or structures Builders risk can be written to cover - Correct answer - new construction - Additions to existing building or structures - Renovations, repair, or remodeling Examples of people with insurable interest in builder’s risks policies - Correct answer - project owners - General contractor and subcontractors - Others like engineers, architects, mortgage lenders, suppliers, construction manager, etc. why is builders risk important and what are the five advantages disadvantages of a single policy - Correct answer part of a construction contract, important to determine whose responsibility It is to get builders risk, whose interests need to be covered, and it should include all parties P a g e 15 | 22 Ad- 1. Efficiency including avoidance of litigation 2. Fewer coverage disputes 3. All parties get a copy of policy 4. All parties have direct policy rights 5. Will limit subrogation efforts by insurer Dis- 1. Claim will be made to all insured’s 2. Misrepresentation, fraud may void coverage for ALL unless there is a provision that protect innocent insured’s 9 examples of exposures to loss when dealing with builders risk - Correct answer - building or structure under construction - Materials and supplies at a job site - Materials and supplies NOT at job site but at TEMP location - Temporary structures (dumpster or port potty) - Property in transit - Debris removal - Soft costs - Business income or rental value - Materials and supplies of others in the CCC of insured’s What does the commercial property coverage form say about builder’s risk? What does commercial inland marine say about builders risk - Correct answer - limits coverage? - Small limits if any for temp locations storage - Collapse is limited - Theft of materials is not covered - No standard policy - can negotiate to match exposures (broad covered property, broad covered perils) - Usually includes transit and temp storage locations Identify and apply Property Covered and Property Not Covered by this AAIS Builders Risk Coverage Form - Correct answer Property Covered: 1. Building/ Structure (materials and supplies that will be part of building or structure included) 2. Scaffolding, construction forms, fencing + other temp structures (contractors may cover the rented ones separately), foundations, excavations, filing, etc. 3. Property in transit to the job site Property Not Covered: 1. Contraband 2. Land 3. Not a permanent part of structure 4. Roadways + walkways w/in 1000 ft. 5. Existing property being renovated 6. Landscaping materials 7. water-born property P a g e 16 | 22 8. Aircraft, vehicles, watercraft Existing property being renovated in property not covered (builder’s risk) - Correct answer - only covers remodel materials not the existing building - can add this through endorsement - Rehab and renovation endorsement - 40% remodel cost of building- if higher then underwriting problem, collapse could occur 40%remodel cost of building- if lower then can add endorsement 3 coverage extensions in builders risk - Correct answer - debris removal - Emergency removal (preservation of property- limits to 10 days) - Limited fungus coverage Most common way to write a single location project for builder’s risk What is the other way to assign coverage for builders risk - Correct answer completed value basis (based on actual completed value of project, if it changes or material costs increase then value goes up) Reporting form basis (either based on estimated completed value of all projects or progress value) What are the supplemental coverage’s in builder’s risk - Correct answer - expense to re- erect scaffolding - Fire department service charge (1,000) - Pollutant cleanup and removal (10,000) - Temp storage locations (10,000) - transit (10,000) Excluded perils in builders risk - Correct answer - earth movement - Flood or any water movement - Ordinance or law - Sewer, septic tank, drain backup and water below surface - Defects, errors, and omissions - freezing (unless precautions were taken) - Materials and workmanship (guy drops hammer on marble) - Mechanical breakdown Does builders risk cover testing - Correct answer - yes if supplemental coverage was bought? - If not, then no but if it causes a covered loss then that is covered What are some coverage limitations for builders risk - Correct answer - occupancy and use (need to ask permission to continue coverage) - When coverage ceases List the events that will cause coverage to cease in a Builders Risk Policy - Correct answer -Policy cancellation or expiration -project is abandoned with no plans to finish -accepted by purchaser -90 days after completion -when insurable interest ceases (contractor gets paid) - When occupied in whole or in part or its intended use P a g e 17 | 22 Describe and apply the Supplemental Coverage’s found in this AAIS Contractors Equipment Floater - Correct answer *newly purchased Property -during policy period -ACV -30 day or exp. date or company is notified *Pollutant clean-up & removal --pays for cleanup if resulted from covered peril (land or water) - 180 days to report - Limited coverage for testing Identify and apply Perils Covered and Perils Excluded by this AAIS Contractors Equipment Floater - Correct answer Covered Perils- Open peril policy Excluded Perils- - Criminal, fraudulent, dishonest, or illegal acts -Mechanical breakdown -Missing property -pollutants -puncture, blowout, road damage -voluntary parting -weight of load Valuation for contractor’s equipment floaters and deductible optional approaches - Correct answer - actual cash value (most used) - Replacement cost, agreed value, loss to pair or set, loss to part - Per item/per occurrence - Flat - Percentage Settlement and endorsements (7) in contractor’s equipment floater - Correct answer settlement - Coinsurance is there - Per item coinsurance clause - Per schedule coinsurance clause Endorsements - rented, leased or loaned to others (need for example with subcontractors) - rented, leased, or borrowed from others (covers damage in your CCC) - Income coverage (as a result of direct damage from a covered caused of loss) - Rental reimbursement - Tools endorsement (on premises and job site) - Boom exclusion What perils are goods in transit subject to - Correct answer - collision and overturn - Spoilage - Vandalism - Fire - Explosion - Theft (ex. seafood) List the five exceptions to a common carrier's liability for the property of others in their possession - Correct answer 1.) Acts of nature (flood, windstorm, earthquake) P a g e 20 | 22 2.) Acts of public enemy 3.) Exercise of Public Authority 4.) Fault of negligence on part of shipper (poor packaging) 5.) Inherent vice (apples & dates) 3 types of carriers used to transport goods - Correct answer - common - Contact - Private Identify the advantages for the owner of the goods to purchase a transportation policy - Correct answer -Immediate payment for loss -insure will subrogate -broad coverage -purchase limits necessary for only your goods -inexpensive when compared to what the carrier may charge What is the difference between contract and common carrier - Correct answer - when adjusting claims the contract carrier looks at the contract and the common carrier looks at strict liability and defenses Identify and describe underwriting considerations used when writing various types of transportation policies - Correct answer -What's being transported -method of travel -distance of travel -territory traveled -freq. of theft -subrogation possibilities -financial condition -maintenance of vehicles -loss history What are the 2 ways to writing policies for goods in transit and where does coverage apply - Correct answer - annual - Trip (one time) - depends on who's shipping it, but during transit and when goods are located in a terminal Property covered and not covered in inland marine transportation policy - Correct answer property covered - Property in a terminal - Property in transit Not covered - Art, antiques, fur - Carrier for hire - Contraband - Exports and imports - Jewelry, stones, metals - Lease agreement (can't transfer insurance) - Mail - Live animals - Money and securities - Samples P a g e 21 | 22 - Storage Perils covered, excluded and optional coverage’s in inland marine transportation policy - Correct answer perils covered - open peril (named perils covered) Excluded - Criminal, fraud, illegal acts - Temperature/humidity - Voluntary parting - Spoilage - Improper packing/storage - Loading and unloading (be no longer in transit) Optional coverage’s - Packing or consolidating companies (Ex. FedEx) - Fraud or deceit (ex. voluntary parting due to fraud) - Loss of refrigeration or heating mechanical breakdown - return shipments Special provisions and settlements in inland marine transportation policy - Correct answer special provisions - Subrogation provisions - Permission to accept released bill of lading Settlements - Limits of insurance (deductibles, cat limits, separate limits for certain things may apply) P a g e 22 | 22