P&C Casualty Insurance and Liability 2 — Questions and Answers
Question 1: Under a standard Commercial General Liability (CGL) policy, which coverage part pays for bodily injury claims made by third parties on the insured's premises?
- Coverage A – Bodily Injury and Property Damage Liability (Correct answer)
- Coverage B – Personal and Advertising Injury
- Coverage C – Medical Payments
- Coverage D – Premises Legal Liability
Correct answer: Coverage A – Bodily Injury and Property Damage Liability
Coverage A of the CGL policy provides protection for bodily injury and property damage liability arising out of the insured's operations or premises.
Coverage A of the CGL policy is the primary liability coverage that responds to claims for bodily injury or property damage for which the insured is legally responsible. It covers incidents on the insured's premises as well as those arising from the insured's ongoing operations. Coverage B addresses personal and advertising injury, while Coverage C pays small medical bills without regard to fault.
Question 2: Which legal doctrine holds an employer liable for the negligent acts of an employee committed within the scope of employment?
- Res ipsa loquitur
- Respondeat superior (Correct answer)
- Contributory negligence
- Assumption of risk
Correct answer: Respondeat superior
Respondeat superior ('let the master answer') makes an employer vicariously liable for an employee's negligent acts performed during the course of employment.
Under respondeat superior, an employer is held vicariously liable for torts committed by employees acting within the scope of their employment. This doctrine is fundamental to casualty underwriting because it significantly expands a business's exposure beyond direct acts. Insurers assess this exposure when pricing commercial liability policies.
Question 3: An occurrence-based liability policy covers claims for injuries that:
- Are reported during the policy period regardless of when they occurred
- Occur during the policy period regardless of when they are reported (Correct answer)
- Are filed in court during the policy period
- Involve a named insured exclusively
Correct answer: Occur during the policy period regardless of when they are reported
Occurrence policies trigger coverage based on when the injury or damage takes place, not when the claim is reported or filed.
Under an occurrence-based policy, coverage is triggered by the incident happening within the policy period, even if the claim is not reported until years later. This contrasts with claims-made policies, which require the claim to be made during the policy period. Occurrence forms expose insurers to long-tail liabilities for events whose effects may not appear immediately, such as environmental contamination.
Question 4: The 'other insurance' clause in a liability policy is designed to:
- Eliminate the need for an umbrella policy
- Coordinate payment when multiple policies cover the same loss (Correct answer)
- Increase the policy limits automatically
- Exclude coverage for intentional acts
Correct answer: Coordinate payment when multiple policies cover the same loss
'Other insurance' clauses determine how a loss is shared when two or more policies apply to the same claim, preventing duplicate recovery above the actual loss.
When multiple liability policies could apply to a single loss, the other insurance clauses in each policy govern how the loss is allocated. Common approaches include pro-rata sharing (each policy pays proportionate to its limit), excess (one policy pays only after the other is exhausted), and primary/excess arrangements. These clauses prevent the insured from collecting more than 100% of the actual loss.
Question 5: Under the doctrine of strict liability, a defendant can be held liable even if:
- They acted with malicious intent
- They exercised reasonable care (Correct answer)
- The plaintiff was also negligent
- The injury occurred off the defendant's premises
Correct answer: They exercised reasonable care
Strict liability imposes responsibility regardless of fault or negligence; the mere act of engaging in the ultrahazardous activity or selling a defective product creates liability.
Strict liability applies to inherently dangerous activities (such as blasting or keeping wild animals) and product liability claims. A plaintiff does not need to prove negligence; they need only show that the activity or product caused harm. This doctrine significantly broadens exposure for manufacturers, contractors, and other businesses and is a key consideration in casualty underwriting.
Question 6: Which of the following best describes 'completed operations' coverage under a CGL policy?
- Coverage for damage caused while work is still in progress
- Coverage for bodily injury or property damage arising from work that has been completed (Correct answer)
- Coverage for the insured's own products stored on-site
- Coverage for professional errors in project design
Correct answer: Coverage for bodily injury or property damage arising from work that has been completed
Completed operations coverage responds to liability claims arising after the insured's work has been finished and the job site has been turned over to the customer.
Completed operations is part of Coverage A in the CGL policy and addresses the liability exposure that continues after a contractor or service provider finishes their work. For example, if a plumber installs a pipe that later bursts and floods a building, completed operations coverage would respond. This is separate from products liability, though both are subject to the products-completed operations aggregate limit.
P&C Casualty Insurance and Liability 2
Under a standard Commercial General Liability (CGL) policy, which coverage part pays for bodily injury claims made by third parties on the insured's premises?