CPCU 552 QUESTIONS AND ANSWERS
The term "you" is used throughout the Commercial General Liability Coverage Form.
"You" is defined to include:
A) The named insured shown in the declarations.
B) The named insured shown in the declarations and any employees of the named
insured.
C) The named insured and any officers or directors of the named insured's organization.
D) All persons or entities who have any type of liability protection under the policy. -
Answer -A
Smart Endeavors, a retail clothing store, hired ABC Contractors to install a new air
conditioning system in one of its stores. ABC misrouted some wires during the
installation process, which caused the wires to overheat and caused a fire. The air
conditioning unit had to be rewired, which cost $1,000. Smart Endeavors' building
sustained $30,000 worth of damage and $40,000 worth of inventory was damaged by
smoke. Smart Endeavors was closed for two weeks and lost $10,000 in profits during
that period. ABC has liability insurance under a standard Commercial General Liability
(CGL) Coverage Form with $1,000,000 per occurrence limits. Which one of the
following statements concerning coverage for damages under Coverage A of the CGL is
most accurate?
A) ABC will pay $81,000 for all of the physical damage to the building and inventory, the
air conditioning rewiring costs, and Smart Endeavors' lost profits.
B) ABC will pay - Answer -C
EXPLANATION: ABC will pay $80,000 for the fire damage to the building and inventory
as well as the lost profits, but the CGL excludes the cost of work that was incorrectly
performed, so the $1,000 rewiring costs are excluded.
Which one of the following statements concerning the Damage to Your Product and
Damage to Your Work exclusions in Coverage A of the Commercial General Liability
Coverage Form is most correct?
A) These exclusions only apply to products or work that are in the care, custody and
control of the named insured at the premises location listed in the declarations page.
B) There are two exceptions to this exclusion which are meant to provide limited
property damage coverage for minor claims that would fall below the deductible of the
named insured's property insurance policy.
C) The exclusions only apply to work or products that were damaged by subcontractors
or outside parties who are expected to have their own insurance coverage, but the
exclusions do not apply to damage done by the named insured.
D) These exclusions only apply to damage to the work or product itself, but do not apply
to any subsequent damage or injury th - Answer -D
,A plumbing contractor has a commercial general liability (CGL) policy that contains no
endorsements. Which one of the following claims would be covered by the CGL?
A) An improperly installed pipe was damaged when tested for leaks by an employee of
the plumbing contractor.
B) An employee of the plumbing contractor damaged a building while installing a
waterline.
C) An employee of the plumbing contractor was injured while installing a hot water
heater.
D) An employee of the plumbing contractor damaged a building with the contractor's
auto - Answer -B
For which one of these would the Damage to Your Product and Damage to Your Work
exclusion eliminate coverage?
A) A product that the insured incorrectly designed
B) Property damage caused by an insured's defectively produced product
C) Property damage caused by work performed on behalf of the insured by a
subcontractor
D) Property damage caused by an insured's incorrectly designed product - Answer -A
Bodily injury was caused to customers by fumes that escaped from heating equipment
belonging to the Reynolds Corporation. Which one of the following statements
describes the reason there would or would not be liability coverage for these injuries
under the corporation's unendorsed Commercial General Liability Coverage Form?
A) Coverage would be excluded because of the pollution exclusion.
B) There would be coverage because the pollution exclusion has an exception that
applies to bodily injury caused by fumes from heating equipment.
C) Coverage would be excluded because of the impaired property exclusion.
D) There would be coverage because the impaired property exclusion has an exception
that applies to bodily injury caused by fumes from heating equipment. - Answer -B
An employee of a manufacturing plant is injured by a defective blade manufactured by
the employer. Although workers compensation is considered the exclusive remedy for
an employee injured in the course of employment, the injured worker may be able to
sue the employer under the:
A) Occupational disease benefits law.
B) Third-party-over action coverage.
C) Contractual liability coverage.
D) Dual-capacity doctrine. - Answer -D
The insuring agreement in Coverage A of the standard Commercial General Liability
(CGL) Coverage Form includes language that addresses legal expenses for claims
,covered by the policy. Which one of the following statements regarding the insurer's
legal defense obligations is most accurate?
A) An insurer's duty to defend ends when the combined cost of legal expenses and
damages reaches the applicable policy limits.
B) An insurer's obligation to defend ends when the applicable limits of insurance have
been exhausted.
C) Legal expenses paid to outside, independent counsel end when the limits of
insurance are exhausted, but the insurer's obligation to defend using in-house counsel
continues without limit.
D) There is a separate limit established for legal expenses, and once that limit is
reached the insurer's duty to defend ends, even if no damages have yet been awarded.
- Answer -B
Which one of these is an insured contract within the meaning of the definition of
"insured contract" in the CGL coverage form?
A) A warranty contract for product performance
B) An indemnification contract with an architect for injury or damage arising out of his or
her professional services
C) A builders contract covering the building of a single-family residence
D) An indemnity agreement with a municipality covering the use and maintenance of a
sign - Answer -D
A robber comes into a bank and threatens to hurt one of the bank's customers if he
does not give him cash. One of the bank's employees pushes the customer out of the
way and restrains the robber. In doing so, the employee injures the robber. Under the
bank's unendorsed Commercial General Liability policy, the robber's injury is:
A) Covered because the employee was using reasonable force to protect the customer.
B) Not covered because the injury was expected or intended.
C) Not covered because the injury was caused by an employee.
D) Covered because the employee has a duty to prevent illegal activity. - Answer -A
A sporting goods manufacturer recently issued a recall for defective basketballs. The
total cost of the recall exceeded $250,000, prompting the manufacturer to submit a
claim to its insurer for the recall expense. The manufacturer has an unendorsed
Commercial General Liability (CGL) policy. Which one of the following statements best
represents the insurability of this loss exposure on the manufacturer's CGL?
A) There is no coverage due to the exclusion for the Recall of Products, Work, or
Impaired Property.
B) Coverage is available at the discretion of the insurer. The cost of the recall must be
less than the anticipated cost of claims arising from the product defect.
C) The policy will only respond to claims for the recall of Products, Work, or Impaired
Property on an indemnity basis.
, D) The policy provides a $100,000 sub-limit for the recall of Products, Work, or Impaired
Property. - Answer -A
One of the exclusions in Part A of the Commercial General Liability Coverage Form is
for expected or intended injury. However, there is one exception to this exclusion that
applies to bodily injury arising from which one of the following?
A) An action of an employee
B) The use of reasonable force to protect persons or property
C) Self-inflicted injuries by a dissatisfied customer who is mentally ill
D) A person testing a new product as long as the person is not paid to conduct the test -
Answer -B
Which one of the following statements concerning the exclusions commonly found in
Coverage A of the ISO Commercial General Liability (CGL) Coverage Form is most
accurate?
A. The Contractual Liability exclusion for assumed liability only applies to liability
assumed by the named insured, but does not apply to any of the named insured's
employees.
B. The Expected or Intended Injury exclusion only applies if the intended injury occurs
on the premises of the named insured.
C. The Liquor Liability exclusion only applies if the insured is in the business of
manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.
D. Although there is a Pollution Exclusion in the basic CGL policy, the pollution
exclusion only applies to the intentional release of pollutants, so there would be
coverage for an accidental discharge by the insured. - Answer -C
The claims-made version of the Commercial General Liability Coverage Form is used
only in cases in which:
A) The possibility of long-tail claims is a major underwriting concern.
B) The occurrence version is not available due to loss experience.
C) The insured is purchasing for the first time.
D) Claims are expected to be fully developed within two years. - Answer -A
The Grey Corporation was founded three years ago and purchased an occurrence
version of the Commercial General Liability Coverage Form. Each year, the corporation
has changed insurers but has purchased the same type of form without any gaps in
coverage. During year 1, the company completed work that resulted in an injury to a
customer in year 2. However, the customer did not make a claim for damages until year
3. Which of Grey's forms will respond to this loss?
A) The form in force in year 1 when the work was completed
B) The form in force in year 2 when the injury occurred
C) The form in force in year 3 when the claim was made.
The term "you" is used throughout the Commercial General Liability Coverage Form.
"You" is defined to include:
A) The named insured shown in the declarations.
B) The named insured shown in the declarations and any employees of the named
insured.
C) The named insured and any officers or directors of the named insured's organization.
D) All persons or entities who have any type of liability protection under the policy. -
Answer -A
Smart Endeavors, a retail clothing store, hired ABC Contractors to install a new air
conditioning system in one of its stores. ABC misrouted some wires during the
installation process, which caused the wires to overheat and caused a fire. The air
conditioning unit had to be rewired, which cost $1,000. Smart Endeavors' building
sustained $30,000 worth of damage and $40,000 worth of inventory was damaged by
smoke. Smart Endeavors was closed for two weeks and lost $10,000 in profits during
that period. ABC has liability insurance under a standard Commercial General Liability
(CGL) Coverage Form with $1,000,000 per occurrence limits. Which one of the
following statements concerning coverage for damages under Coverage A of the CGL is
most accurate?
A) ABC will pay $81,000 for all of the physical damage to the building and inventory, the
air conditioning rewiring costs, and Smart Endeavors' lost profits.
B) ABC will pay - Answer -C
EXPLANATION: ABC will pay $80,000 for the fire damage to the building and inventory
as well as the lost profits, but the CGL excludes the cost of work that was incorrectly
performed, so the $1,000 rewiring costs are excluded.
Which one of the following statements concerning the Damage to Your Product and
Damage to Your Work exclusions in Coverage A of the Commercial General Liability
Coverage Form is most correct?
A) These exclusions only apply to products or work that are in the care, custody and
control of the named insured at the premises location listed in the declarations page.
B) There are two exceptions to this exclusion which are meant to provide limited
property damage coverage for minor claims that would fall below the deductible of the
named insured's property insurance policy.
C) The exclusions only apply to work or products that were damaged by subcontractors
or outside parties who are expected to have their own insurance coverage, but the
exclusions do not apply to damage done by the named insured.
D) These exclusions only apply to damage to the work or product itself, but do not apply
to any subsequent damage or injury th - Answer -D
,A plumbing contractor has a commercial general liability (CGL) policy that contains no
endorsements. Which one of the following claims would be covered by the CGL?
A) An improperly installed pipe was damaged when tested for leaks by an employee of
the plumbing contractor.
B) An employee of the plumbing contractor damaged a building while installing a
waterline.
C) An employee of the plumbing contractor was injured while installing a hot water
heater.
D) An employee of the plumbing contractor damaged a building with the contractor's
auto - Answer -B
For which one of these would the Damage to Your Product and Damage to Your Work
exclusion eliminate coverage?
A) A product that the insured incorrectly designed
B) Property damage caused by an insured's defectively produced product
C) Property damage caused by work performed on behalf of the insured by a
subcontractor
D) Property damage caused by an insured's incorrectly designed product - Answer -A
Bodily injury was caused to customers by fumes that escaped from heating equipment
belonging to the Reynolds Corporation. Which one of the following statements
describes the reason there would or would not be liability coverage for these injuries
under the corporation's unendorsed Commercial General Liability Coverage Form?
A) Coverage would be excluded because of the pollution exclusion.
B) There would be coverage because the pollution exclusion has an exception that
applies to bodily injury caused by fumes from heating equipment.
C) Coverage would be excluded because of the impaired property exclusion.
D) There would be coverage because the impaired property exclusion has an exception
that applies to bodily injury caused by fumes from heating equipment. - Answer -B
An employee of a manufacturing plant is injured by a defective blade manufactured by
the employer. Although workers compensation is considered the exclusive remedy for
an employee injured in the course of employment, the injured worker may be able to
sue the employer under the:
A) Occupational disease benefits law.
B) Third-party-over action coverage.
C) Contractual liability coverage.
D) Dual-capacity doctrine. - Answer -D
The insuring agreement in Coverage A of the standard Commercial General Liability
(CGL) Coverage Form includes language that addresses legal expenses for claims
,covered by the policy. Which one of the following statements regarding the insurer's
legal defense obligations is most accurate?
A) An insurer's duty to defend ends when the combined cost of legal expenses and
damages reaches the applicable policy limits.
B) An insurer's obligation to defend ends when the applicable limits of insurance have
been exhausted.
C) Legal expenses paid to outside, independent counsel end when the limits of
insurance are exhausted, but the insurer's obligation to defend using in-house counsel
continues without limit.
D) There is a separate limit established for legal expenses, and once that limit is
reached the insurer's duty to defend ends, even if no damages have yet been awarded.
- Answer -B
Which one of these is an insured contract within the meaning of the definition of
"insured contract" in the CGL coverage form?
A) A warranty contract for product performance
B) An indemnification contract with an architect for injury or damage arising out of his or
her professional services
C) A builders contract covering the building of a single-family residence
D) An indemnity agreement with a municipality covering the use and maintenance of a
sign - Answer -D
A robber comes into a bank and threatens to hurt one of the bank's customers if he
does not give him cash. One of the bank's employees pushes the customer out of the
way and restrains the robber. In doing so, the employee injures the robber. Under the
bank's unendorsed Commercial General Liability policy, the robber's injury is:
A) Covered because the employee was using reasonable force to protect the customer.
B) Not covered because the injury was expected or intended.
C) Not covered because the injury was caused by an employee.
D) Covered because the employee has a duty to prevent illegal activity. - Answer -A
A sporting goods manufacturer recently issued a recall for defective basketballs. The
total cost of the recall exceeded $250,000, prompting the manufacturer to submit a
claim to its insurer for the recall expense. The manufacturer has an unendorsed
Commercial General Liability (CGL) policy. Which one of the following statements best
represents the insurability of this loss exposure on the manufacturer's CGL?
A) There is no coverage due to the exclusion for the Recall of Products, Work, or
Impaired Property.
B) Coverage is available at the discretion of the insurer. The cost of the recall must be
less than the anticipated cost of claims arising from the product defect.
C) The policy will only respond to claims for the recall of Products, Work, or Impaired
Property on an indemnity basis.
, D) The policy provides a $100,000 sub-limit for the recall of Products, Work, or Impaired
Property. - Answer -A
One of the exclusions in Part A of the Commercial General Liability Coverage Form is
for expected or intended injury. However, there is one exception to this exclusion that
applies to bodily injury arising from which one of the following?
A) An action of an employee
B) The use of reasonable force to protect persons or property
C) Self-inflicted injuries by a dissatisfied customer who is mentally ill
D) A person testing a new product as long as the person is not paid to conduct the test -
Answer -B
Which one of the following statements concerning the exclusions commonly found in
Coverage A of the ISO Commercial General Liability (CGL) Coverage Form is most
accurate?
A. The Contractual Liability exclusion for assumed liability only applies to liability
assumed by the named insured, but does not apply to any of the named insured's
employees.
B. The Expected or Intended Injury exclusion only applies if the intended injury occurs
on the premises of the named insured.
C. The Liquor Liability exclusion only applies if the insured is in the business of
manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.
D. Although there is a Pollution Exclusion in the basic CGL policy, the pollution
exclusion only applies to the intentional release of pollutants, so there would be
coverage for an accidental discharge by the insured. - Answer -C
The claims-made version of the Commercial General Liability Coverage Form is used
only in cases in which:
A) The possibility of long-tail claims is a major underwriting concern.
B) The occurrence version is not available due to loss experience.
C) The insured is purchasing for the first time.
D) Claims are expected to be fully developed within two years. - Answer -A
The Grey Corporation was founded three years ago and purchased an occurrence
version of the Commercial General Liability Coverage Form. Each year, the corporation
has changed insurers but has purchased the same type of form without any gaps in
coverage. During year 1, the company completed work that resulted in an injury to a
customer in year 2. However, the customer did not make a claim for damages until year
3. Which of Grey's forms will respond to this loss?
A) The form in force in year 1 when the work was completed
B) The form in force in year 2 when the injury occurred
C) The form in force in year 3 when the claim was made.
