P&C General Practice 4 — Questions and Answers
Question 1: A contractor completes work on a building, and three months later a structural failure injures a tenant. Under a CGL policy, which coverage would respond to this claim?
- Products and completed operations coverage (Correct answer)
- Premises and operations coverage
- Professional liability coverage
- Umbrella liability coverage
Correct answer: Products and completed operations coverage
Products and completed operations coverage applies to bodily injury or property damage arising from work that has been completed or abandoned, making it the appropriate CGL coverage part here.
Question 2: Which of the following best describes the 'other insurance' provision in a property policy?
- It specifies how payment is shared when two or more policies cover the same loss (Correct answer)
- It excludes coverage if the insured has any other policy with a different insurer
- It requires the insured to exhaust all other policies before this policy pays
- It obligates the insurer to pay the full loss regardless of other coverage
Correct answer: It specifies how payment is shared when two or more policies cover the same loss
The 'other insurance' provision coordinates payment between multiple policies covering the same loss, typically using contribution by equal shares or pro rata methods.
Question 3: An insurer that operates in a state without being licensed to do so is called a/an:
- Non-admitted insurer (Correct answer)
- Surplus lines insurer
- Alien insurer
- Domestic insurer
Correct answer: Non-admitted insurer
A non-admitted insurer has not received a certificate of authority from the state insurance department to transact business in that state.
Question 4: Under workers' compensation insurance, which benefit covers the cost of treating a work-related injury?
- Medical benefits (Correct answer)
- Temporary total disability benefits
- Permanent partial disability benefits
- Death benefits
Correct answer: Medical benefits
Medical benefits under workers' compensation pay for all reasonable and necessary medical treatment related to a covered work injury or occupational disease.
Question 5: A building valued at $400,000 is insured for $240,000 under a policy with an 80% coinsurance requirement. If a $100,000 loss occurs, how much will the insurer pay?
- $75,000 (Correct answer)
- $100,000
- $80,000
- $60,000
Correct answer: $75,000
The coinsurance formula: (amount carried ÷ amount required) × loss = ($240,000 ÷ $320,000) × $100,000 = 0.75 × $100,000 = $75,000.
Question 6: Which part of a commercial property policy defines the geographic locations and specific buildings or business personal property that are covered?
- Declarations page (Correct answer)
- Causes of loss form
- Conditions section
- Exclusions section
Correct answer: Declarations page
The declarations page identifies the named insured, policy period, covered locations, described property, limits of insurance, and premium — the foundational 'who, what, where, and when' of the policy.
Question 7: What is the primary purpose of a 'liberalization clause' in an insurance policy?
- Automatically extends broader coverage to existing policies when the insurer broadens its standard forms without additional premium (Correct answer)
- Allows the insured to cancel the policy at any time without penalty
- Requires the insurer to increase limits annually in line with inflation
- Gives the insured the right to add new coverages within 30 days of a loss
Correct answer: Automatically extends broader coverage to existing policies when the insurer broadens its standard forms without additional premium
A liberalization clause provides that if the insurer broadens coverage without charging additional premium, existing policyholders automatically receive the improved coverage.
P&C General Practice 4
A contractor completes work on a building, and three months later a structural failure injures a tenant.
Under a CGL policy, which coverage would respond to this claim?