Commercial Insurance Exam 1

  • 1. If an owner is insured under a building and personal property coverage form, when is the property considered vacant?
  1. When the structure is being renovated as the result of a fire.
  2. When the insured’s operation is halted due to a strike.
  3. When there is insufficient personal property present to conduct customary operations.
  4. When less that 31% of the total space is rented to others or in use by the insured.
  • 2. If a tenant is insured under a building and personal property coverage form, when is the property considered vacant?
  1. When the structure is being renovated as the result of a fire.
  2. When the insured’s operation is halted due to a strike.
  3. When there is insufficient personal property present to conduct customary operations.
  4. When less that 31% of the total space is rented to others or in use by the insured.
  • 3. If the vacancy permit endorsement is added to a building and personal property coverage form, the vacancy conditions under the basic policy is:
  1. Waived only for designated perils during the permit period.
  2. Waived during the permit period.
  3. Waived during the policy period.
  4. Waived only for designated perils during the policy period.
  • 4. Under a building and personal property coverage form, if the insured building has been vacant for more than 60 days, what effect will this have on a property/fire loss?
  1. There is no effect.
  2. The loss is excluded.
  3. The amount of the loss will be reduced by 60%.
  4. The amount of the loss will be reduced by 15%.
  • 5. Under a building and personal property coverage form, if the insured building has been vacant for more than 60 days, what effect will this have on a vandalism loss?
  1. There is no effect.
  2. The loss is excluded.
  3. The amount of the loss will be reduced by 60%.
  4. The amount of the loss will be reduced by 15%.
  • 6. Which perils may be excepted from the vacancy permit endorsement?
  1. Building glass breakage and attempted theft.
  2. Sprinkler leakage and building glass breakage.
  3. Vandalism and sprinkler leakage.
  4. All of the above may be excepted.
  • 7. Both the commercial general liability policy and the business auto policy have definitions of the term “automobile” and “mobile equipment”.  These definitions:
  1. Are the same, showing the policy writers are not very imaginative.  This has no effect on gaps or overlaps between the two policies.
  2. Are the same, thus avoiding overlaps or gaps in coverage between the two policies.
  3. Are very different, thus avoiding overlaps or gaps in coverage between the two policies.
  4. Are very different, however, this has no effect on gaps or overlaps between the two policies.
  • 8. Both the commercial general liability policy and the business auto policy have definitions of the term “automobile” and “mobile equipment”.  These coverage’s:
  1. Are the same, showing the policy writers are not very imaginative.  This has no effect on gaps or overlaps between the two policies.
  2. Are the same, thus avoiding overlaps or gaps in coverage between the two policies.
  3. Are very different, thus avoiding overlaps or gaps in coverage between the two policies.
  4. Are very different, however, this has no effect on gaps or overlaps between the two policies.

9. Extra expense insurance covers:

  1. Increased expense of repairing property to appreciated assets
  2. The extra expense that a business incurs to continue a business while damage to the premises are being restored
  3. The loss of profit a business incurs when it is shut down after a loss by a covered peril
  4. Payroll and other overhead incurred when a business is shut down after a loss

10. A plate glass/glass coverage form is needed by some insureds. Which of the following statements about the coverage for the peril of glass breakage in commercial property for a “building and personal property” basic, broad and special causes of loss forms is true?

  1. There is limited glass breakage coverage in both of the broad and special forms
  2. There is limited glass breakage coverage in the basic form
  3. No policy limits apply to glass breakage coverage in the special form, all named perils
  4. There is no glass breakage coverage in the broad or special forms
  • 11. Which of the following types of coverage would pay for losses which occurred during the policy period and are found for up to one year after policy termination?
  1. Occurrence
  2. Loss sustained
  3. Claims made
  4. Discovery
  • 12. Which coverage is needed to protect physicians, surgeons, and dentists for their professional activities?
  1. Commercial general liability                                   
  2. Employer’s liability
  3. Malpractice coverage                                              
  4. Errors and omissions coverage

13. The equipment dealer’s coverage form covers all of the following types of property, except:

  1. Dealer’s new stock
  2. Dealers used stock
  3. Motor vehicles designed for highway use
  4. Customer’s equipment in for servicing

14. A reporting form is used for property insurance

  1. To maintain the correct limits of coverage without over or under insuring when the value or volume of the property varies during the policy term
  2. To report losses and adjust insurance in force to conform
  3. When the insured’s premises are subject to periodic safety inspections
  4. To establish a guaranteed amount of insurance based upon a report of values submitted before the beginning of the policy term

15. All of the following contribute to the rising cost of Worker’s Compensation Insurance, except:

  1. The growing population
  2. Employers who fail to secure the payment of workers compensation as required by law
  3. Under-reported payroll by employers
  4. Fraudulent claims

16. A commercial property policy can provide coverage for all of the following, except:

  1. Tangible losses
  2. Indirect losses
  3. Intangible losses
  4. Direct losses

17. Which of the following types of coverage would be needed to cover a contractor’s bulldozers which are used in the contractor’s business but are not held for sale?

  1. Older truck cargo floater
  2. Annual transit policy
  3. Contractor’s equipment floater
  4. Installment sales floater

18. Under a builders risk form, how much insurance is required to pay any loss without a penalty for underinsurance?

  1. 100% of the completed value
  2. 80% of the value at the time of the loss
  3. 100% of the value at the time of the loss
  4. 80% of the completed value

19. Under a commercial property coverage form, all of the following properties are included in the definition of “building,” except:

  1. Personal property used to maintain the premises
  2. Patio     
  3. Permanently installed fixtures
  4. Outdoor fixtures

20. Carmen is driving her own car on behalf of her employer. Carmen’s negligent operation of her car injures a member of the public. The employer may be held liable because of what is called:

  1. Vicarious liability
  2. Gross negligence
  3. Absolute liability
  4. Contributory negligence

21. Which of the following perils is insured against in the Special form but not in the Basic form?

  1. Fire                                                            
  2. Internal explosion
  3. Lightning                                                      
  4. Collapse

22. Which of the following types of policies pays for bodily injury or property damage which occurs or is discovered during the policy period?

  1. Pollution liability policy
  2. Auto liability policy
  3. Claims made commercial liability policy
  4. Occurrence general liability policy

23. You are to meet with a small furniture manufacturer and make property and liability insurance recommendations. You have insured many risks of this type in the past and have a good idea of what their needs may be. There are several popular ways of determining business loss exposures. Which of the following ways are the least professional and the least likely to correctly identify the loss exposures? You:

  1. Take a walk through the business to observe operations and work flow, and ask their key people about the company and its operations.
  2. Meet with key people and complete a loss exposure questionnaire developed for their general type of risk
  3. Get a copy of all current policies and determine what coverage they have been carrying and how much they have been paying

24. A commercial lines program policy, common policy conditions, do not include which of the following as a condition?

  1.        Perils insured                                                
  2.        Inspections and surveys
  3.        Cancellation                                                                        
  4.        Examination of your books and records

25. Under an unendorsed commercial property coverage form with no optional coverages, on what basis are buildings valued?

  1. Guaranteed replacement cost
  2. Actual cash value
  3. Replacement cost
  4. Functional replacement cost

26. The named insured for a commercial package policy is “Jill Koslin and Edward Koslin DBA Coastline Photo Shop.” Under the terms of the common policy conditions of the commercial package policy, who is responsible for the premium payments?

  1. Jill Koslin
  2. Edward Koslin
  3. Coastline Photo Shop
  4. Both Jill and Edward have equal responsibility

27. If an insured discovers an occurrence 75 days after the expiration of a claim-made commercial liability policy, what must the insured have in order for the loss to be covered?

  1. Nothing; he is covered as long as the loss occurred during the policy period
  2. Supplemental extended reporting period endorsement
  3. An umbrella policy
  4. The loss will not be covered since it was not reported during the policy period

28. Which of the following is listed on a commercial general liability declarations as an aggregate limit?

  1. Property damage
  2. Products/completed operations
  3. Bodily injury
  4. Pollution liability limit

29. One example of a loss covered by business income insurance is a loss:

  1. Of profits due to a suspension of business operations because of a premises fire
  2. Represented by the difference between the actual cash value and present replacement cost
  3. Of perishables due to a delay in transporting
  4. Due to depreciation of parts of matched sets

30. Your insured has a ten year lease on his store. He has spent $50,000 on shelving, wall-to-wall carpeting, partitions, and lighting, etc., all of which are part of the building and cannot be legally removed. He is concerned that a fire might damage these changes that he has made and wants to make sure he is protected for their value. He should purchase:

  1. Coverage for improvements and betterments
  2. Accounts receivable coverage
  3. Coverage for legal liability
  4. $ 50,000 on the building

31. What clause is commonly used to require insureds to purchase insurance close to the value of the property?

  1. Deductible clause
  2. Co-insurance clause
  3. Valuation clause
  4. Reinsurance clause

32. Thomas Fry has insured a building under his commercial policy. The building was vacant for 75 consecutive days before a loss. The policy will not pay for the loss if caused by the perils of:

  1. Building glass breakage and vandalism
  2. Riot
  3. Fire
  4. Windstorm or hail

33. In an unendorsed claims-made general liability policy, how long does an insured have to report a claim which occurred during the policy period?

  1. Indefinitely
  2. 60 days
  3. 30 days
  4. 6 months

34. The commercial general liability (CGL) declarations page displays many different limits of insurance that apply to a policy. One limit shown is the insured’s general aggregate limit. Which of the following is a correct statement about the general aggregate limit? The general aggregate limit:

  1. Is the total of all the other sub-limits shown on the declaration page
  2. Does not include the products “” completed operations aggregate limit
  3. Is the total limit for any occurrence

35. The retro-active date of a claims-made professional liability policy is always:

  1. The date after which no more claims may be made under the policy
  2. The effective date for the current policy term
  3. The earliest date an event/loss may occur and still be eligible for recovery
  4. The date that the claims-made policy expires

36. Fred is a named insured on a commercial property policy insuring a commercial building. Fred burns the building down and is convicted of arson. Fred’s commercial property policy conditions state that:

  1. The mortgagee of the insured property can recover on this loss
  2. His partner, also an insured, has the right of recovery
  3. Fred’s spouse can recover on this loss
  4. None of the above have the right of recovery

37. The business income coverage form covers the actual loss of business income sustained due to necessary suspension of operations. The loss of income must:

  1. Be caused by one of the perils covered by the basic form regardless of which cause of loss form is attached
  2. Must result from damage to the insured premises or personal property. The cause of the loss is not limited to “insured perils.”
  3. Must result from damage to the insured premises. The cause of loss is not limited to “insured perils.”
  4. Be caused by an insured peril, otherwise there is no coverage

38. A commercial property causes of loss forms do not cover any losses caused by:

  1. Lightning
  2. Smoke damage from industrial operations
  3. Explosions
  4. Loss by removal from premises when insured perils endanger covered property

39. Professionals are exposed to liability for failure to properly perform their professional duties. Which of the following would be the least likely prospect for a professional liability policy?

  1. Dentist
  2. Pro basketball player
  3. Attorney         
  4. Architect

40. To determine the actual cash value of a commercial building for coinsurance purposes, use:

  1. Fair market value
  2. The actual cash cost of replacing the building
  3. The price the client paid for the property, less the value of the land
  4. The county assessor’s office figures