Question 1

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, not necessarily injuries suffered by the insured or defense costs.

Question 2

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 the work has been completed.

Question 3

Keith hosts a New Year's 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

Whether Keith is liable for Margaret's injuries is a complex legal question that depends on many factors, including the specific laws of the state where the accident occurred, the facts and circumstances of the case, and the parties' actions and behaviors leading up to the accident. Therefore, it is impossible to give a definitive answer without more information. None of the choices presented are accurate or complete answers to the question.

Question 4

All of the following have contributed to the increasing costs corporate liability risks, except:

Accepted Answer

Higher tax rates actually have no direct impact on corporate liability risks. The other three options (passage of acts protecting the environment, more litigious consumers, decreased use of contributory negligence) have all contributed to increasing costs of corporate liability risks.

Question 5

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

Accepted Answer

The manifestation theory holds that the injury occurs when the disease is first diagnosed or manifests itself clinically. This theory is important in determining when the statute of limitations for initiating a lawsuit begins.

Question 6

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

Accepted Answer

Under a claims-made policy, coverage is triggered when a claim is first reported during the policy period, provided the incident occurred after the policy's retroactive date.

Question 7

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

Accepted Answer

The given options describe criticisms of the current tort system except option A which suggests that fraud is reduced by using the tort system.

Question 8

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

Accepted Answer

Improper pricing of a product does not directly lead to injury or harm to the consumer, so it would not be a basis for a successful products liability suit. The other options involve an injury caused by a defect in the design, manufacturing, or warnings/instructions of a product.

Question 9

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

Accepted Answer

This statement is false as all companies, regardless of size, can potentially face liability for environmental damage.

Question 10

Vicarious liability will be covered under a:

Accepted Answer

Vicarious liability arises when one party is held responsible for the actions of another. This can be a common occurrence in the professional world, where an employer can be held liable for the actions of their employees. Therefore, a professional liability policy would be the most relevant type of insurance to cover vicarious liability claims.

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, as claims can arise years after the product was manufactured and sold. A claims-made contract is better suited for such risks as it covers the insured for claims made within the policy period, regardless of when the event creating the claim occurred.

Question 12

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

Accepted Answer

Professional liability insurance is a type of insurance that protects professionals from claims of negligence or failure to perform their professional duties. A professional football player would not typically need this type of insurance as they are not providing a professional service and are not at risk of being accused of professional negligence. The other occupations listed involve providing a professional service or advice, so they would generally need professional liability insurance.

Question 13

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 for exposure to harmful substances like asbestos or environmental pollution.

Question 14

The ADA holds a business responsible for providing:

Accepted Answer

The ADA (Americans with Disabilities Act) requires businesses to provide opportunities for disabled workers. This includes ensuring that individuals with disabilities have equal opportunities for employment, promotions, and other job-related benefits. The act also requires employers to make reasonable accommodations to enable disabled individuals to perform their job duties. The ADA does not require businesses to provide guaranteed jobs or retirement benefits for disabled workers, nor does it provide opportunities for drunk workers.

Question 15

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

Accepted Answer

The involvement of attorneys, while it may increase compensation for the injured, also increases legal costs and delays in compensation. Therefore, it is not a direct defense of the tort liability system.

Question 16

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.

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 driver's automobile liability insurance will compensate the injured party. Therefore, Indhar will be compensated by Monica's automobile liability insurance because she was at fault for the accident.

Question 18

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, each person collects from their own auto insurance policy regardless of who is at fault in the accident. Therefore, Indhar and Monica will each collect from their own automobile liability policies.

Question 19

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. This is because the system requires victims to prove fault, which can lead to lengthy and costly legal battles. No-fault legislation aims to streamline the process and ensure that victims receive compensation more quickly and efficiently. The other options presented are not arguments for no-fault automobile legislation.

Question 20

Businesses typically insure their primary liability exposures using:

Accepted Answer

The commercial general liability policy provides coverage for a variety of liability exposures, including bodily injury, property damage, and personal/advertising injury. This is the most commonly used insurance policy for primary liability coverage.

Answer: B 
 The business owners liability package policy can also provide primary liability coverage, but it is typically designed for smaller businesses with fewer liability exposures. It may not offer as much coverage or customization options as the commercial general liability policy.

Answer: C 
 Hold-harmless agreements are legal contracts between parties stating that one party will not hold the other liable for certain damages or losses. While they can be useful in limiting liability, they do not provide insurance coverage and should not be relied on as the sole method of liability protection.

Answer: D 
 The comprehensive business policy is not a specific insurance policy and does not provide primary liability coverage. It refers to a combination of insurance policies that a business may choose to purchase in order to protect against a variety of risks.

Quiz 23: Commercial Liability Insurance