Casualty Insurance Basics and Policies — Property & Casualty Insurance License practice questions

PAP Part A liability coverage generally does NOT cover damage to:

1. Property owned by or in the care, custody, or control of the insured
2. Third-party bodily injury the insured causes in a covered auto accident
3. A rented residence that the insured does not own but is temporarily using
4. Third-party property caused by the insured while operating a borrowed auto

Answer: A — Property owned by or in the care, custody, or control of the insured

A) Correct — care, custody, or control exclusion under Part A. B) Direction reversal — that is exactly what Part A covers. C) Direction reversal — rented-residence damage is often covered by sub-limit. D) Direction reversal — permissive-use liability is covered by Part A.

Inland marine coverage for a contractor's mobile equipment is generally NOT provided by:

1. A contractor's equipment floater written on an inland marine coverage form
2. The BAP physical damage coverage on licensed commercial autos in the fleet
3. The commercial property BPP form for equipment away from scheduled premises
4. An installation floater during construction while the equipment is in transit

Answer: C — The commercial property BPP form for equipment away from scheduled premises

A) Direction reversal — the floater is designed for this exposure. B) Half-right — BAP covers licensed autos, not all mobile equipment. C) Correct — commercial property is location-based; does not follow equipment. D) Direction reversal — installation floaters follow the project site.

Personal Injury Protection (PIP) under a PAP typically covers:

1. Third-party bodily injury caused by the insured's negligent operation
2. Property damage the insured causes to another driver's vehicle in a wreck
3. Physical damage to the insured's covered auto from a covered peril
4. Medical expenses and lost wages of insured and passengers, no-fault basis

Answer: D — Medical expenses and lost wages of insured and passengers, no-fault basis

A) Look-alike — that is Part A liability coverage. B) Look-alike — that is Part A property damage liability. C) Look-alike — that is Part D physical damage coverage. D) Correct — PIP is a no-fault first-party medical/wage-loss coverage.

The insured contract provision in a CGL policy typically:

1. Excludes all contractual liability the insured assumes under any contract at all
2. Requires the insurer to approve every insured contract before it is signed
3. Applies only to written employment contracts between the insured and its employees
4. Covers liability assumed under specified categories such as leases and indemnities

Answer: D — Covers liability assumed under specified categories such as leases and indemnities

A) Direction reversal — the provision adds back categories to the exclusion. B) True-but-irrelevant — no prior-approval requirement applies to insured contracts. C) Off-by-one — employment contracts are outside this defined scope. D) Correct — enumerated insured-contract categories are covered.

Business Auto Coverage Form (BAP) numeric symbols (1-9) are used to indicate:

1. The age or model year of each vehicle covered under the policy
2. Which categories of autos are covered for which coverages on the policy
3. The driver's license class required to operate each vehicle in the fleet
4. The garaging address ZIP code used to rate each vehicle in the fleet

Answer: B — Which categories of autos are covered for which coverages on the policy

A) True-but-irrelevant — age is a rating factor, not a coverage symbol. B) Correct — symbols map coverage to auto categories (any, owned, hired, etc.). C) True-but-irrelevant — driver licensing is not what symbols track. D) True-but-irrelevant — territory is a rating factor, not a symbol.

Employers Liability (Part Two) coverage typically responds to:

1. Replacement of the underlying workers' compensation Part One benefit payments
2. Only intentional-tort claims by employees against their employer for injury
3. Employment-related suits not covered by WC such as third-party-over actions
4. Commuting injuries occurring while employees travel to and from work location

Answer: C — Employment-related suits not covered by WC such as third-party-over actions

A) Direction reversal — Part One is WC benefits; Part Two supplements it. B) Off-by-one — intentional acts are usually excluded from Part Two. C) Correct — Part Two fills gaps for non-WC employment torts. D) Off-by-one — commuting injuries are usually outside WC and Part Two.

Aggregate limits in a CGL are best described as:

1. The maximum the insurer will pay for any single covered occurrence loss event
2. The maximum applicable only to Coverage C medical payments during the term
3. The maximum the insurer will pay per claimant across the entire policy period
4. The maximum the insurer will pay for all covered losses during the policy term

Answer: D — The maximum the insurer will pay for all covered losses during the policy term

A) Look-alike — that is the per-occurrence limit, not aggregate. B) Off-by-one — aggregates apply to Coverages A and B broadly, not just C. C) Off-by-one — CGL limits are per occurrence and aggregate, not per claimant. D) Correct — general aggregate applies across the policy period.

After a covered PAP loss, the insured's Part E duties typically include:

1. Waiting until the insurer arrives at the scene before reporting to police
2. Repairing the vehicle first at the insured's cost, then submitting all receipts
3. Notifying the insurer promptly, cooperating, and reporting theft to police
4. Signing a full release of liability before any claim payment is issued to insured

Answer: C — Notifying the insurer promptly, cooperating, and reporting theft to police

A) Direction reversal — prompt police notice is required in theft. B) Direction reversal — repairs generally follow claim adjustment, not precede it. C) Correct — notice, cooperation, and police notice (in theft) are duties. D) True-but-irrelevant — releases follow settlement, not precede it.

A worker injured while acting outside the scope of employment is typically:

1. Fully covered by workers' compensation regardless of the scope of activity at time
2. Covered only by the CGL policy issued to the employer as a general liability matter
3. Covered only by employers liability Part Two, not by Part One WC benefits
4. Not covered by WC because the injury did not arise out of and in the course of employment

Answer: D — Not covered by WC because the injury did not arise out of and in the course of employment

A) Direction reversal — WC requires the AOE/COE employment nexus. B) Direction reversal — CGL excludes employee bodily injury from coverage. C) Off-by-one — Part Two also requires an employment-related context. D) Correct — statutory coverage trigger requires the employment nexus.

PAP Part B (Medical Payments) coverage typically applies to:

1. Only the named insured while driving the covered auto with permission
2. Only medical bills after Part A liability limits have first been exhausted
3. Only pedestrians injured by the covered auto on public roads and streets
4. The insured and passengers of the covered auto, regardless of fault of driver

Answer: D — The insured and passengers of the covered auto, regardless of fault of driver

A) Off-by-one — Part B extends beyond just the named insured driver. B) Look-alike — Part B is primary, not excess to Part A liability. C) Direction reversal — pedestrians are covered under different provisions. D) Correct — Part B is a no-fault first-party medical coverage.

PAP Part A (Liability) coverage?

Bodily injury and property damage you cause to others. Split limits (e.g., 100/300/100) or single combined limit.

WC statutory benefits?

Medical (unlimited by statute), temporary total disability (TTD wage replacement), permanent partial (PPD), permanent total (PTD), vocational rehab, and death benefits with burial allowance and dependent benefits.

PAP rental car coverage?

Liability follows the driver under Part A; physical damage on a rented private passenger auto typically extends under Part D on an excess basis (subject to exclusions and loss-of-use limits).

Commercial General Liability (CGL)?

Pays for bodily injury, property damage, personal & advertising injury caused by the insured's operations, products, or premises. Coverage A (BI/PD), Coverage B (Personal & Advertising Injury), Coverage C (Medical Payments). Per-occurrence and aggregate limits.