DC Business Insurance 2 — Questions and Answers
Question 1: A DC business has employment practices liability insurance (EPLI). Which claim would this policy cover?
- A customer slipping on a wet floor in the store
- An employee alleging wrongful termination or workplace discrimination (Correct answer)
- A contractor's injury at the business premises
- Property damage caused by an employee's vehicle
Correct answer: An employee alleging wrongful termination or workplace discrimination
EPLI covers claims by employees (or prospective employees) alleging wrongful termination, discrimination, harassment, or other employment-related wrongful acts.
Employment practices liability covers lawsuits from current, former, or prospective employees alleging violations of employment laws—discrimination (race, sex, age, disability), sexual harassment, wrongful termination, retaliation, or failure to hire. In DC, with strong employee protection laws, EPLI is essential for businesses of all sizes.
Question 2: Which DC business insurance provision ensures the insurer pays defense costs in addition to (not within) the policy limits?
- Defense inside the limits
- Defense outside the limits (supplementary payments) (Correct answer)
- Self-insured retention
- Duty to defend provision
Correct answer: Defense outside the limits (supplementary payments)
When defense costs are 'outside the limits,' also called supplementary payments, defense costs are paid in addition to the liability limit, so the limit is reserved for judgments and settlements.
CGL policies traditionally provide defense outside the limits—the insurer pays for the legal defense separately from (not reducing) the policy's liability limit. This is more favorable to the insured than 'defense inside limits' (used in E&O/D&O/cyber) where defense costs erode the policy limit.
Question 3: A DC general contractor requires all subcontractors to add them as an 'additional insured' on their CGL policies. What does this provide?
- The subcontractor's policy limits are doubled for the project
- The general contractor has coverage under the subcontractor's policy for claims arising from the subcontractor's work (Correct answer)
- The general contractor's own policy automatically extends to the subcontractor
- The subcontractor is exempt from workers' compensation requirements
Correct answer: The general contractor has coverage under the subcontractor's policy for claims arising from the subcontractor's work
Additional insured status extends the subcontractor's CGL policy to cover the general contractor for claims arising from the subcontractor's operations.
By requiring additional insured status, the general contractor can tender claims arising from the subcontractor's work to the sub's insurer. This is standard in DC construction contracts and protects the general contractor from losses caused by subcontractors. Certificates of insurance (COIs) evidence this coverage.
Question 4: What is a 'waiver of subrogation' endorsement in a DC commercial policy?
- The insurer waives the right to recover from the named insured for their own negligence
- The insurer agrees not to seek recovery from a specified third party (e.g., a general contractor) after paying a claim (Correct answer)
- The insured waives the right to file a claim against their own insurer
- The endorsement waives the premium payment for the first year
Correct answer: The insurer agrees not to seek recovery from a specified third party (e.g., a general contractor) after paying a claim
A waiver of subrogation endorsement prevents the insurer from pursuing a specified third party (often required by contract) for reimbursement after paying the insured's claim.
In many DC commercial contracts, one party requires the other to include a waiver of subrogation. Without it, if the insurer pays a claim and the loss was caused by the named third party, the insurer could sue that party to recover. The waiver eliminates this right by endorsement.
Question 5: A DC restaurant owner's liquor liability coverage would respond to which of the following claims?
- A kitchen fire caused by a gas leak
- A customer suing the restaurant for serving alcohol to a visibly intoxicated patron who then caused a car accident (Correct answer)
- A slip-and-fall by a customer in the bathroom
- A food poisoning claim by a customer
Correct answer: A customer suing the restaurant for serving alcohol to a visibly intoxicated patron who then caused a car accident
Liquor liability (Dram Shop) insurance covers claims arising from the insured's sale or service of alcohol to an intoxicated patron who then causes injury to a third party.
DC's Dram Shop Act allows injured third parties to sue alcohol-serving establishments for damages caused by overserved patrons. Liquor liability insurance (sometimes added to a CGL or purchased separately) covers these claims. Standard CGL policies contain a liquor liability exclusion for businesses in the alcohol trade.
Question 6: Which of the following best describes 'occurrence' versus 'claims-made' CGL coverage for DC businesses?
- Occurrence coverage applies to current events; claims-made applies to past events
- Occurrence covers claims for incidents that happen during the policy period regardless of when the claim is filed; claims-made covers claims filed during the policy period for incidents during the retro date or later (Correct answer)
- Claims-made is always broader than occurrence coverage
- There is no meaningful difference for DC purposes
Correct answer: Occurrence covers claims for incidents that happen during the policy period regardless of when the claim is filed; claims-made covers claims filed during the policy period for incidents during the retro date or later
Occurrence coverage triggers based on when the injury or damage happened (during the policy period). Claims-made triggers based on when the claim is filed (during the policy period) for incidents on or after the retroactive date.
Occurrence CGL policies cover events that occur during the policy period, even if the claim is filed years later. Claims-made policies (more common for professional liability and D&O) only cover claims filed while the policy is active for incidents occurring after the retroactive date. DC businesses should understand which trigger applies to avoid coverage gaps.
DC Business Insurance 2
A DC business has employment practices liability insurance (EPLI).
Which claim would this policy cover?