Question 1

Plumbers who serve as subcontractors are often held liable for:

Accepted Answer

Subcontracted plumbers can be held liable for completed operations liability, which covers damages or injuries that occur after they have finished their work.

Question 2

Under a claims-made liability insurance policy,the insurer will pay if the injury sustained by the claimant:

Accepted Answer

D

Question 3

Vicarious liability is also called:

Accepted Answer

Vicarious liability is a type of indirect liability, which means that one party (the employer or principal) becomes liable for the actions of another party (the employee or agent) who caused harm or damage to another person.

Question 4

Which of the following is false concerning Environmental Impairment Liability (EIL)coverage?

Accepted Answer

This statement is false because small firms can still face liability for environmental impacts and may benefit from EIL coverage. The other statements are true. EIL coverage can be expensive and complex to underwrite, the details of the insurance contract can be negotiated, and federal laws impose legal responsibility on polluters for environmental damages.

Question 5

Dram Shop Acts hold a business responsible for providing:

Accepted Answer

Dram Shop Acts hold a business (such as a bar or restaurant) responsible for providing alcohol to a visibly intoxicated person or a minor who later causes harm to themselves or others.

Question 6

Proponents of no-fault automobile legislation argue that the tort-liability insurance system:

Accepted Answer

Proponents of no-fault automobile legislation argue that the tort-liability insurance system is not efficient in returning dollars to automobile accident victims, as cases can often drag on for years and the compensation may not fully cover the victim's losses. No-fault insurance aims to provide a more streamlined and efficient system for compensating accident victims. Option A is incorrect - the tort system typically pays more for larger claims and less for smaller ones. Option B is also incorrect - there is no evidence that the tort system leads to increased costs for motorists. Option C is a common argument against no-fault insurance, but it is not the view of proponents of the system.

Question 7

Which of these is not a criticism of the current tort system?

Accepted Answer

Fraud reduction is not a criticism of the current tort system, but rather a potential benefit of it.

Question 8

Keith hosts a New Years Eve party,and Margaret attends the party. She drinks several beers at the party,and Keith provided the beers. She leaves the party in her car,has an accident and is injured. Which of the following is true?

Accepted Answer

Just because Keith provided the beers does not automatically make him liable for Margaret's injuries. Liability for drunk driving accidents usually falls on the person who was driving under the influence, not the person who provided the alcohol. Margaret's voluntary consumption of alcohol may also limit her ability to sue Keith. However, every case is different, and judges use a variety of factors to determine liability in these types of cases.

Question 9

Indhar suffers minor injuries when Monica negligently crashes her car into his. Monica is also slightly injured in the accident. Both of them have automobile liability policies in force. Under the no-fault liability system:

Accepted Answer

Under the no-fault liability system, both Indhar and Monica will collect from their own auto insurance policies regardless of who was at fault for the accident. Each insurance company will cover its own policyholder's medical expenses and lost wages. This system is designed to reduce litigation and ensure that victims receive prompt and adequate compensation, regardless of fault.

Question 10

Long-tail claims are those filed:

Accepted Answer

Long-tail claims are those that are filed several years after the actual injury takes place, such as claims related to asbestos exposure or environmental pollution. These claims may take years to manifest symptoms or damage, making it difficult to pinpoint the exact cause and timeframe of the injury.

Question 11

Which of the following types of legal liability coverage is most likely to have a "long tail" problem,and thus be insured under a claims-made contract?

Accepted Answer

Products liability is most likely to have a "long tail" problem, meaning that claims can arise long after the product was manufactured or sold. Therefore, it is typically insured under a claims-made contract, which only covers claims made during the policy period, regardless of when the event occurred.

Question 12

Which of the following is not a defense of the tort liability-system?

Accepted Answer

The involvement of attorneys in a tort liability system may increase the cost of legal proceedings and, as a result, reduce the amount of compensation going to the injured party. Thus, maximizing the dollars going to the injured is not a defense of the tort liability system.

Question 13

Businesses typically insure their primary liability exposures using:

Accepted Answer

The commercial general liability policy is the most common type of liability insurance purchased by businesses to protect against claims from third parties for bodily injury, property damage, and personal and advertising injury. It provides coverage for a wide range of liability exposures and can be tailored to meet the specific needs of the business. The other options listed may provide some level of liability protection, but they are not as comprehensive or widely used as the commercial general liability policy.

Question 14

Which of the following theories provides that the "injury" occurs when the disease is first diagnosed?

Accepted Answer

The manifestation theory posits that the "injury" occurs when the disease is first diagnosed, as this is when the symptoms become evident and the disease is recognized as a problem.

Question 15

All of the following acts have been passed to promote a cleaner environment except:

Accepted Answer

There is no such act as the "Clean Environmental Universal Act". The other choices have all been passed to promote a cleaner environment.

Question 16

From the plaintiff's standpoint,a successful products liability suit can arise from all of the following except:

Accepted Answer

The improper pricing of a product does not directly cause injury to a consumer and therefore cannot be a basis for a successful products liability suit from the plaintiff's standpoint.

Question 17

Indhar is seriously injured by Monica's negligence when she crashes her car into his. Both have automobile liability policies in force. Under the tort liability system:

Accepted Answer

Under the tort liability system, the at-fault party's automobile liability insurance will be responsible for compensating the injured party. Therefore, Indhar will be compensated by Monica's automobile liability insurer. It is not relevant whether Indhar also has his own liability insurance policy in force. The option C regarding collecting from the Federal Emergency Management Agency is not applicable in this scenario as it only applies to disaster relief programs.

Question 18

Which of the following occupations would generally not need professional liability insurance for damage done at work?

Accepted Answer

Professional liability insurance, also known as errors and omissions insurance, is designed to protect professionals who provide advice or services to clients from financial loss due to alleged mistakes or negligence. Professional football players generally do not provide advice or services to clients in a professional context and thus would not need this type of insurance. Insurance agents, accountants, and barbers/hairdressers may all provide professional advice or services and therefore may need professional liability insurance to protect themselves from potential lawsuits or claims.

Question 19

A claims-made liability insurance contract pays for:

Accepted Answer

A claims-made liability insurance contract pays for claims filed against the insured during the policy period. It does not cover injuries suffered by the insured, defense costs if the insured is sued, or claims only when an insured is sued, but does not pay for defense costs.

Question 20

Libel committed by a business can result in a lawsuit that asks the business to pay:

Accepted Answer

Libel refers to false and harmful statements made in written form. Since libel can harm a person's reputation, a lawsuit can ask for personal injury damages, which compensate for the harm to the person's reputation and emotional distress caused by the false accusations. Bodily injury damages (B) would be more appropriate in cases where a person has suffered physical harm, while loss of consortium damages (C) compensate for the loss of companionship and intimacy between spouses. Dram shop benefits (D) generally pertain to cases where a business has served alcohol to a visibly intoxicated person who goes on to cause harm to others, and are not relevant in cases of libel.

Quiz 19: Commercial Liability Insurance