Chapter 2

Question 1

Why were the 80s such a bad time for insurers?

Answer 1

1. Disproportionately high court awards
2. Environmental disasters
3. Aviation disasters
4. Inadequate assessment of risks
5. Latent (hidden) bodily injury claims

Question 2

What are the 5 sections of a CGL policy?

Answer 2

I - Coverages
i) bodily injury and property damage
ii) personal and advertising injury
iii) medical payments
iv) tenants’ legal liability
II - who is an insured
III - limits of insurance
IV - conditions
V - definitions

Question 3

Bodily Injury

Answer 3

BI, sickness or disease (including death at any time) sustained by a person, associated with external causes and does not include mental anguish

Question 4

What is included in property damage?

Answer 4

1. Tangible property
2. Loss of use of damaged tangible property
3. Loss of use of tangible property that is not damaged

Question 5

There are 8 key features of BI/PD. Name 3.

Answer 5

1. Coverage is provided for BI/PD only
2. Payment is made only for those sums the insured becomes legally liable to pay.
3. Insurer is liable for payments of compensatory damages only, not including punitive.
4. Coverage provided only for losses which occur during the policy period
5. Injury/damage must be caused by an occurrence.
6. Loss must occur in coverage territory.
7. Insurer’s right to defend any action.
8. The insurer can a) investigate any claim and b) settle any claim at it’s discretion.

Question 6

BI/PD insures three types of liabilities:

Answer 6

1. Tort liability (negligence, nuisance, trespass)
2. Certain contractual liability
3. Statutory liability (imposed by legislation, i.e., common duty owed by the Occupiers Liability Act)

Question 7

Occurrence

Answer 7

An accident, including continuous exposure to substantially the same general harmful conditions.

Question 8

There are two conditions for limited worldwide coverage for products liability. What are they?

Answer 8

1 - the plaintiff must demonstrate that the products originated/were sold in the Canada or US
2 - the suit must be brought in Canada or the US

Question 9

There are two conditions for limited worldwide coverage for other business activities. What are they?

Answer 9

1 - the person’s home must be located in Canada or the US and they must only be on a short trip
2 - the legal action must commence in Canada/US

Question 10

T/F, the following is excluded from BI/PD: BI/PD intentionally caused, including when using reasonable force to protect property or persons

Answer 10

False, its excluded except when using reasonable force to protect persons or property

Question 11

T/F, the following is excluded from BI/PD: contractual liability

Answer 11

True, except lease agreements, railroad work, easements, bylaw adherence, elevator maintenance, or contracts where tort liability is assumed

Question 12

T/F, the following is excluded from BI/PD: punitive damages

Answer 12

True

Question 13

T/F, the following is excluded from BI/PD: bodily injury

Answer 13

false, except for from spouse/family members

Question 14

T/F, the following is included in BI/PD:

Answer 14

BI from autos, snowmobiles, etc.c

Question 15

T/F, the following is excluded from BI/PD: Watercraft

Answer 15

True, except those ashore on a premises you own/rent, that is <8m long, and not being used to carry passengers for a charge

Question 16

T/F, the following is included in BI/PD: property you own/rent/occupy, loaned to you, in your custody/care, etc.

Answer 16

False

Question 17

T/F, the following is excluded from BI/PD: property damage to your product or your work

Answer 17

True, except when work is performed by a subcontractor on your behalf

Question 18

T/F, the following is included in BI/PD: defects or dangerous conditions in your work or delay/failure by you to complete a contract

Answer 18

False

Question 19

T/F, the following is included in BI/PD: Costs for disposing, recalling, replacing or repairing your product

Answer 19

False

Question 20

What should you advise the insured to do in the event their product is damaged/recalled, etc.?

Answer 20

1. Withdraw the product or work
2. Recall the product
3. Inspect it
4. Repair or replace it
5. Remove or dispose of it

Question 21

T/F, the following is included in BI/PD: electronic data

Answer 21

False

Question 22

T/F, the following is included in BI/PD: personal and advertising injury

Answer 22

False

Question 23

T/F, the following is included in BI/PD: professional services

Answer 23

False

Question 24

T/F, the following is included in BI/PD: abuse

Answer 24

False

Question 25

Personal Injury

Answer 25

Injury, including consequential physical injury arising out of one or more: a) false arrest, detention or imprisonment b) malicious prosecution c) libel/slander d) wrongful entry e) oral/written publication of material that violates a person's right of privacy

Question 26

What is meant by Medical Payments?

Answer 26

The insurer agrees to voluntarily pay for medical expenses incurred by third parties such as first aid, ambulance, surgical, dental and financial

Question 27

What are the three advantages of medical payments?

Answer 27

1. Chances of permanent disfigurement or disability are much lower when immediate medical attention is obtained 2. Negligence claims reduced 3. Legal confrontation avoided

Question 28

What are the exclusions of Medical Payments?

Answer 28

The insured, insured's employees, persons working on behalf of the insured, anyone participating in athletics

Question 29

What is Tenants Legal Liability?

Answer 29

Liability for situations in which the insured is a tenant, meant to cover property and operations damages.

Question 30

How is Tenants Legal Liability limited? What should the coverage amount to?

Answer 30

Limited to the payment of only those losses for which the insured is found liable in tort. Coverage should be no less than the value of the building or portion of the building the insured is occupying.

Question 31

Tenants Legal Liability Exclusions

Answer 31

Asbestos, fungi/spores, nuclear energy, pollution liability, war, terrorism

Question 32

What is the exception to the pollution liability exclusion of the Tenants Legal Liability agreement?

Answer 32

Smoke and fumes from a hostile fire

Question 33

T/F: Supplementary Payments are included in the total limit for BI/PD

Answer 33

False

Question 34

What are Supplementary Payments?

Answer 34

additional claims/related expenses a) insurer's costs (legal, scene reconstruction, expert witnesses) b) cost of bonds to release attachments c) reasonable expenses incurred by the insured at the insurer's request d) court costs/interest on judgement amount

Question 35

What factors into the determination of premium for BI/PD?

Answer 35

Premises and operations liability (sq. footage of the building, occupancy, payroll, location), products liability (types of products sold, sales volume, sales territory), completed ops (types of work performed, gross receipts). Tenants liability usually 35% of the building rate. Usually no extra cost for personal and advertising liability or medical.

Question 36

Policies can be in the name of:

Answer 36

1. Individuals 2. Partnerships and LLCs 3. Organizations other than partnerships and LLCs

Question 37

Persons Insured include:

Answer 37

a) owners, partners, spouses, directors and officers b) employees and volunteers c) real estate managers d) those with temporary custody after the insured's death e) upon the death of the insured, a legal representative appointed with control

Question 38

How does automatic coverage work for businesses formed or acquired during the policy period?

Answer 38

They are automatically included unless a policy already exists, and they have either 90 days or until the policy expires.

Question 39

Aggregate limits

Answer 39

the most the policy will pay during the policy period for all claims

Question 40

Occurrence limits

Answer 40

the most paid in one occurrence. encompasses all BI/PD, medical payments, and tenants legal. when the policy has a $1M occurrence limit, if the combined amounts exceed $1M they will only pay $1M.

Question 41

"Your product" is defined as:

Answer 41

1) products manufactured, sold, handled, distributed or otherwise disposed by the insured 2) their containers, materials, parts, equipment, etc. 3) warranties/representations made respecting the fitness, quality, durability, performance or use

Question 42

"Your work" is defined as:

Answer 42

1) work actually done by the insured 2) work performed on behalf of the insured by subcontractors 3) material, parts or equipment furnished in connection with such work or operations 4) warranties/representations made respecting the fitness, quality, durability, performance or use of the work

Question 43

What should you consider as to how much insurance is "enough"?

Answer 43

the extend of previous court awards made to businesses of a similar type, inflation, existence of insurance, and territory of operations

Question 44

What are the three theories as to when a loss occurred?

Answer 44

1 - exposure theory: the injury occurred when the person was in physical contact with the harmful substance 2 - exposure in residence theory - injury occurred/continued after exposure has ceased 3 - manifestation theory - the injury to have occurred only when recognized/diagnosed

Question 45

Which type of claims have the longest tail?

Answer 45

Latent bodily injury cases because there is a potential for stacking several terms of a policy

Question 46

Who has Professional Liability exposure?

Answer 46

Medical Professionals Advice and counselling (lawyers, real estate agents, engineers, architects)

Question 47

What is the basis of legal action for professional liability?

Answer 47

a) tort - when the advice was wrong b) contract - the plaintiff must prove the professional failed to perform at the required level

Question 48

What are the three types of performance of a professional?

Answer 48

Complete/satisfactory, substantial, and material breach

Question 49

Directors & Officers Liability

Answer 49

Protects against liability for losses arising out of the failure to properly exercise legal duties

Question 50

What is the purpose of umbrella policies?

Answer 50

1 - inadequate limits 2 - inadequate coverages

Question 51

What is the purpose of self-insured retention?

Answer 51

Serves as a deductible for losses not anticipated, and encourages the insured to get coverage against obvious exposures excluded under the primary.