CIC COMMERCIAL MULTILINE 420+ EXAM
QUESTIONS & CORRECT ANSWERS
What is bailment?
A relationship where one party (the bailee) accepts property of another (the
bailor) for a particular purpose
Types of Bailment
1) Gratuitous bailment for the benefit of the bailor
2) Gratuitous bailment for the benefit of the bailee
3) Bailment for the mutual benefit of the bailor and bailee
In a gratuitous bailment for the benefit of the bailor, the bailee owes the bailor a
_____________ duty of care. What's an example of this type of bailment?
low; a restaurant coat check service
In a gratuitous bailment for the benefit of the bailee, the bailee owes the bailor a
_____________ duty of care. What's an example of this type of bailment?
higher; a business borrowing equipment from a neighboring business
Most commercial relationships involve what type of bailment?
Bailment for the mutual benefit of the bailor and bailee
What is the expected duty of care under bailment for the mutual benefit of the
bailor and bailee?
A reasonable duty of care which can be clarified, expanded, or limited by contract
Bailee coverage can be written to apply on what two bases?
1) Legal Liability Basis
2) Direct Damage Basis
Legal Liability Coverage Basis
,Coverage applies only if the bailee is legally liable for the damage (i.e. negligence)
Direct Damage Coverage Basis
Coverage applies regardless of whether the bailee is legally liable for the loss.
What property is covered under a bailee policy?
Property of others in the Named Insured's care, custody, and control for
processing
What property is NOT covered under a bailee policy?
1) Aircraft or watercraft
2) Contraband
3) Furs or fur-trimmed garments
4) Money and securities
5) Property accepted without a charge for services
6) Self-propelled vehicles designed for highway use
7) Jewelry, precious stones, and precious metals
What type of supplemental coverages can added to a bailee policy?
1) Property In Storage
2) Off-Site Property
3) Transit
4) Pollutant Cleanup and Removal
What is typically considered coverage territory for a bailee policy?
The United States, its territories and possessions, Canada, and Puerto Rico
What is the limit for property in storage under a bailee policy?
$5,000
T or F: Property of others at the bailee's described premises is subject to a
different limit than off-site property and property in transit.
True
What is the limit for off-site property and property in transit provided by
supplemental coverages on a bailee policy?
,$5,000
What must be true for property in storage to be covered under a bailee policy?
1) Performed processing work on the property
2) At a premises described on the "schedule of coverages"
3) A storage receipt has been issued
General Bailee Policy Exclusions
1) Earthquakes
2) Flood
3) Nuclear
4) War
5) Loss of Use
T or F: Under a bailee policy, damage by pollutants is typically excluded unless
certain specified perils are involved.
True
What are examples of specified perils that must be involved for pollutants
coverage to be included under a bailee policy?
1) Fire
2) Windstorm
3) Vandalism
What are some specific exclusions that apply to bailee coverage?
1) Pollutants
2) Criminal, Fraudulent, Dishonest, or Illegal Acts
3) Mechanical Breakdown, Temperature or Humidity Changes, Electrical Currents,
Wear and Tear, Contamination, or Deterioration
4) Processing Work
5) Theft From An Unattended Vehicle
6) Voluntary Parting
What must be true for theft from an unattended vehicle to be covered under a
bailee policy?
Visible signs of forced entry into a securely enclosed and locked vehicle
, T or F: For several exclusions on a bailee policy, coverage applies when their is
resultant damage from certain causes of loss.
True
What is the most common valuation of losses for a bailee policy?
Actual Cash Value
T or F: Actual cash value considers physical depreciation of the property.
True
In the event of a loss to one part of a pair or set, what is covered under a bailee
policy?
The value of the damaged item or a reasonable proportion of the value of the
entire set
What loss payment options are available to an insurer when settling claims under
a bailee policy?
1) Pay the value of the lost or damaged property
2) Pay the cost of repairing or replacing the lost or damaged property
3) Rebuild, repair, or replace the property with other property of equivalent kind
and quality
4) Take all or any part of the property at the agreed or appraised value
What are some issues with relying on property coverage for construction
projects?
1) Values at risk are constantly changing
2) Exposures to certain causes of loss change
3) Insurable interest varies, shifting from contractor to project owner
4) Coverage gaps (bridges, roadways, patios, and other paved surfaces,
excavations, grading, or filling, and underground pipes and drains)
5) Little coverage for off-premises property
6) Issues concerning covered perils
7) Business income and extra expense exposures
What are the two ways to structure a builders risk policy?
QUESTIONS & CORRECT ANSWERS
What is bailment?
A relationship where one party (the bailee) accepts property of another (the
bailor) for a particular purpose
Types of Bailment
1) Gratuitous bailment for the benefit of the bailor
2) Gratuitous bailment for the benefit of the bailee
3) Bailment for the mutual benefit of the bailor and bailee
In a gratuitous bailment for the benefit of the bailor, the bailee owes the bailor a
_____________ duty of care. What's an example of this type of bailment?
low; a restaurant coat check service
In a gratuitous bailment for the benefit of the bailee, the bailee owes the bailor a
_____________ duty of care. What's an example of this type of bailment?
higher; a business borrowing equipment from a neighboring business
Most commercial relationships involve what type of bailment?
Bailment for the mutual benefit of the bailor and bailee
What is the expected duty of care under bailment for the mutual benefit of the
bailor and bailee?
A reasonable duty of care which can be clarified, expanded, or limited by contract
Bailee coverage can be written to apply on what two bases?
1) Legal Liability Basis
2) Direct Damage Basis
Legal Liability Coverage Basis
,Coverage applies only if the bailee is legally liable for the damage (i.e. negligence)
Direct Damage Coverage Basis
Coverage applies regardless of whether the bailee is legally liable for the loss.
What property is covered under a bailee policy?
Property of others in the Named Insured's care, custody, and control for
processing
What property is NOT covered under a bailee policy?
1) Aircraft or watercraft
2) Contraband
3) Furs or fur-trimmed garments
4) Money and securities
5) Property accepted without a charge for services
6) Self-propelled vehicles designed for highway use
7) Jewelry, precious stones, and precious metals
What type of supplemental coverages can added to a bailee policy?
1) Property In Storage
2) Off-Site Property
3) Transit
4) Pollutant Cleanup and Removal
What is typically considered coverage territory for a bailee policy?
The United States, its territories and possessions, Canada, and Puerto Rico
What is the limit for property in storage under a bailee policy?
$5,000
T or F: Property of others at the bailee's described premises is subject to a
different limit than off-site property and property in transit.
True
What is the limit for off-site property and property in transit provided by
supplemental coverages on a bailee policy?
,$5,000
What must be true for property in storage to be covered under a bailee policy?
1) Performed processing work on the property
2) At a premises described on the "schedule of coverages"
3) A storage receipt has been issued
General Bailee Policy Exclusions
1) Earthquakes
2) Flood
3) Nuclear
4) War
5) Loss of Use
T or F: Under a bailee policy, damage by pollutants is typically excluded unless
certain specified perils are involved.
True
What are examples of specified perils that must be involved for pollutants
coverage to be included under a bailee policy?
1) Fire
2) Windstorm
3) Vandalism
What are some specific exclusions that apply to bailee coverage?
1) Pollutants
2) Criminal, Fraudulent, Dishonest, or Illegal Acts
3) Mechanical Breakdown, Temperature or Humidity Changes, Electrical Currents,
Wear and Tear, Contamination, or Deterioration
4) Processing Work
5) Theft From An Unattended Vehicle
6) Voluntary Parting
What must be true for theft from an unattended vehicle to be covered under a
bailee policy?
Visible signs of forced entry into a securely enclosed and locked vehicle
, T or F: For several exclusions on a bailee policy, coverage applies when their is
resultant damage from certain causes of loss.
True
What is the most common valuation of losses for a bailee policy?
Actual Cash Value
T or F: Actual cash value considers physical depreciation of the property.
True
In the event of a loss to one part of a pair or set, what is covered under a bailee
policy?
The value of the damaged item or a reasonable proportion of the value of the
entire set
What loss payment options are available to an insurer when settling claims under
a bailee policy?
1) Pay the value of the lost or damaged property
2) Pay the cost of repairing or replacing the lost or damaged property
3) Rebuild, repair, or replace the property with other property of equivalent kind
and quality
4) Take all or any part of the property at the agreed or appraised value
What are some issues with relying on property coverage for construction
projects?
1) Values at risk are constantly changing
2) Exposures to certain causes of loss change
3) Insurable interest varies, shifting from contractor to project owner
4) Coverage gaps (bridges, roadways, patios, and other paved surfaces,
excavations, grading, or filling, and underground pipes and drains)
5) Little coverage for off-premises property
6) Issues concerning covered perils
7) Business income and extra expense exposures
What are the two ways to structure a builders risk policy?
