CPCU 552 CP AND L FINAL EXAM 2026
LIABILITY AND LEGAL PRINCIPLES
ASSESSMENT STUDY GUIDE COMPLETE
QUESTIONS AND ANSWERS
◉ Part Two of the Workers Compensation and Employers Liability
Policy (WC&EL) is the employers liability portion of the policy.
Under this portion of the policy the insurer would pay for Answer:
Common law liability for occupational injury to employees,
◉ Some state no-fault laws preserve the tort system but require
insurers to offer personal injury protection (PIP) insurance that
provides specified first-party benefits. This is referred to as Answer:
An add-on no-fault law.
◉ Loss reduction techniques are intended to reduce the Answer:
Severity of losses.
◉ Tom and Jerry own a General Motors vehicle dealership, and they
have purchased an Auto Dealers Coverage Form (ADCF) with the
False Pretense Coverage endorsement. In January, Chuck (one of
their salespeople) makes a deal with Max for a new car. Chuck gives
Max $30,000 for his two trade-in vehicles and Max drives away with
a new car worth $40,000. Later that week, the dealership business
,office discovers that Max did not have proper title to either of the
trade-in vehicles, and now the dealership cannot sell them.How
much, if anything, will Tom and Jerry's ADCF pay towards the loss
suffered by the taking of these two cars? Answer: Tom and Jerry's
ADCF will pay $25,000 for this loss - the maximum amount payable
under the False Pretense endorsement for losses caused by any one
person in a year.
◉ Larry is an employee of XYZ Company and works solely in State A
which is the only state listed on XYZ's workers compensation policy.
XYZ obtained a small job in neighboring State B and while Larry is
working in State B he injured himself. Which one of the following
would be the response from XYZ's workers compensation insurer to
Larry's claim for benefits? Answer: It would provide State A workers
compensation benefits to Larry
◉ QRS, LLC has been a small town's largest employer for a long time.
When the owner of QRS, LLC died, the company was forced to lay off
25 percent of its workforce, because the proper life insurance was
not in force for the owner. These mass lay-offs resulted in bad
publicity in the town paper and much negativity directed at the
company in various town meetings. The employment practices
liability (EPL) policy in force for QRS, LLC provided money to cover
QRS's costs to retain a PR firm.Such costs are called Answer:
Reputation management costs.
,◉ Mitchell is a highway contractor whose company is covered with a
workers compensation policy and an unendorsed Business Auto
Coverage Form (BACF). Which one of the following losses would be
covered by his business auto policy? Answer: An employee runs over
a subcontractor's equipment with an owned auto.
◉ Which one of the following statements is true about an excess
policy? Answer: It provides coverage no broader than is provided by
underlying polices.
◉ Although professional liability policies for financial and legal
professionals contain many of the same provisions of those for other
professionals, there are important differences. Which one of the
following would be covered under the professional liability policies
for financial and legal professionals that contain the broadest
definition of professional services? Answer: Claims arising from any
professional service performed for others for a fee
◉ An excess liability insurance policy that covers a claim in excess of
the underlying limits only if the loss is covered by the underlying
policy is called Answer: A following-form excess policy
◉ A dealership keeps a customer's auto overnight. The auto, while
on premises, is damaged by hail. The dealership has garagekeepers
coverage on a legal liability basis on an Auto Dealers Coverage Form.
The customer has a Liability-only policy. The customer asks the
dealership to pay for the hail damage, but the claim is denied by the
, insurer. The only way the dealership's policy would have paid the
claim is if the dealership had purchased Answer: One of the
garagekeepers direct coverage options.
◉ The Broad Form Products Coverage endorsement can be used
Answer: To delete the Auto Dealers Coverage Form (ADCF) exclusion
for defective products.
◉ Cox Corporation recently had a covered personal liability
judgment against it for $5 million. It has an underlying commercial
general liability policy with a $1 million limit, which is the amount
required by the umbrella insurer. The umbrella policy has a $10
million limit with a $10,000 SIR. How much is the ultimate net loss
to the umbrella insurer? Answer: The ultimate net loss to the
umbrella insurer is $4,000,000.
◉ The Supplementary Payments section of the Commercial General
Liability (CGL) Coverage Form contains provisions concerning the
insurer's duty to defend indemnitees of the insured, but only if
specific conditions are met. Which one of the following is one of
these conditions? Answer: The indemnitee and the insured must ask
the insurer to conduct and control the defense.
◉ Which one of the following statements about the Liquor Liability
Coverage Form is true? Answer: It contains an each common cause
limit as well as an aggregate limit.
LIABILITY AND LEGAL PRINCIPLES
ASSESSMENT STUDY GUIDE COMPLETE
QUESTIONS AND ANSWERS
◉ Part Two of the Workers Compensation and Employers Liability
Policy (WC&EL) is the employers liability portion of the policy.
Under this portion of the policy the insurer would pay for Answer:
Common law liability for occupational injury to employees,
◉ Some state no-fault laws preserve the tort system but require
insurers to offer personal injury protection (PIP) insurance that
provides specified first-party benefits. This is referred to as Answer:
An add-on no-fault law.
◉ Loss reduction techniques are intended to reduce the Answer:
Severity of losses.
◉ Tom and Jerry own a General Motors vehicle dealership, and they
have purchased an Auto Dealers Coverage Form (ADCF) with the
False Pretense Coverage endorsement. In January, Chuck (one of
their salespeople) makes a deal with Max for a new car. Chuck gives
Max $30,000 for his two trade-in vehicles and Max drives away with
a new car worth $40,000. Later that week, the dealership business
,office discovers that Max did not have proper title to either of the
trade-in vehicles, and now the dealership cannot sell them.How
much, if anything, will Tom and Jerry's ADCF pay towards the loss
suffered by the taking of these two cars? Answer: Tom and Jerry's
ADCF will pay $25,000 for this loss - the maximum amount payable
under the False Pretense endorsement for losses caused by any one
person in a year.
◉ Larry is an employee of XYZ Company and works solely in State A
which is the only state listed on XYZ's workers compensation policy.
XYZ obtained a small job in neighboring State B and while Larry is
working in State B he injured himself. Which one of the following
would be the response from XYZ's workers compensation insurer to
Larry's claim for benefits? Answer: It would provide State A workers
compensation benefits to Larry
◉ QRS, LLC has been a small town's largest employer for a long time.
When the owner of QRS, LLC died, the company was forced to lay off
25 percent of its workforce, because the proper life insurance was
not in force for the owner. These mass lay-offs resulted in bad
publicity in the town paper and much negativity directed at the
company in various town meetings. The employment practices
liability (EPL) policy in force for QRS, LLC provided money to cover
QRS's costs to retain a PR firm.Such costs are called Answer:
Reputation management costs.
,◉ Mitchell is a highway contractor whose company is covered with a
workers compensation policy and an unendorsed Business Auto
Coverage Form (BACF). Which one of the following losses would be
covered by his business auto policy? Answer: An employee runs over
a subcontractor's equipment with an owned auto.
◉ Which one of the following statements is true about an excess
policy? Answer: It provides coverage no broader than is provided by
underlying polices.
◉ Although professional liability policies for financial and legal
professionals contain many of the same provisions of those for other
professionals, there are important differences. Which one of the
following would be covered under the professional liability policies
for financial and legal professionals that contain the broadest
definition of professional services? Answer: Claims arising from any
professional service performed for others for a fee
◉ An excess liability insurance policy that covers a claim in excess of
the underlying limits only if the loss is covered by the underlying
policy is called Answer: A following-form excess policy
◉ A dealership keeps a customer's auto overnight. The auto, while
on premises, is damaged by hail. The dealership has garagekeepers
coverage on a legal liability basis on an Auto Dealers Coverage Form.
The customer has a Liability-only policy. The customer asks the
dealership to pay for the hail damage, but the claim is denied by the
, insurer. The only way the dealership's policy would have paid the
claim is if the dealership had purchased Answer: One of the
garagekeepers direct coverage options.
◉ The Broad Form Products Coverage endorsement can be used
Answer: To delete the Auto Dealers Coverage Form (ADCF) exclusion
for defective products.
◉ Cox Corporation recently had a covered personal liability
judgment against it for $5 million. It has an underlying commercial
general liability policy with a $1 million limit, which is the amount
required by the umbrella insurer. The umbrella policy has a $10
million limit with a $10,000 SIR. How much is the ultimate net loss
to the umbrella insurer? Answer: The ultimate net loss to the
umbrella insurer is $4,000,000.
◉ The Supplementary Payments section of the Commercial General
Liability (CGL) Coverage Form contains provisions concerning the
insurer's duty to defend indemnitees of the insured, but only if
specific conditions are met. Which one of the following is one of
these conditions? Answer: The indemnitee and the insured must ask
the insurer to conduct and control the defense.
◉ Which one of the following statements about the Liquor Liability
Coverage Form is true? Answer: It contains an each common cause
limit as well as an aggregate limit.
