Construction
1. Gencon Contracting is considering a commercial package policy (CPP) to insure its exposures. Their insurer, Cavalier Commercial Insurance, recommends a CPP and outlines the advantages. These advantages include all of the following EXCEPT:
a. Gencon will have the convenience of a single policy.
b. Cavalier will likely save on its expenses and will pass these savings on to Gencon in the form of a package discount.
c. The policy will have fewer gaps in coverage.
d. Cavalier will be able to issue the policy on a single and simple form, which will provide coverage tailored to Gencon’s needs.
2. Assuming that they meet all other eligibility requirements, which of the following contractors would qualify for the ISO BOP?
a. Lift-It Elevator Installation and Repair
b. Atlantis Swimming Pool Company, which designs and builds swimming pools
c. Wendall Builders, a general contractor
d. Picasso Painters, a residential painting company
3. Diggins Excavation, a new business, is setting up an insurance program for its exposures. Diggins is eligible for the ISO businessowners policy (BOP). If Diggins decides to use the ISO BOP for its insurance coverage, the BOP will be written
a. using separate, stand-alone coverage forms.
b. on a separate portfolio of special businessowners policy forms.
c. using manuscript forms.
d. by reinsurers.
4. Peters Plumbing has applied for an ISO BOP. To qualify for this policy, Peters Plumbing must meet all of the following eligibility requirements EXCEPT
a. annual payroll of $500,000 or less.
b. no work at a height greater than three stories.
c. no renting or leasing of equipment to other parties.
d. sales unrelated to installation, service, or repair cannot exceed 25 percent of annual gross sales.
5. When the pollution liability—broadened coverage for covered autos endorsement is attached to a commercial auto policy, the portion of the exclusion that deals with transportation exposures is modified to apply only to
a. contractually assumed liability.
b. certain categories of pollutants.
c. pollutants transported in specific types of autos.
d. losses involving the escape of pollutants required for the operation of the covered auto.
6. Anderson Smith, a general contracting company, owns several autos and plans to buy two more. In designating covered autos under his business auto policy, Smith can use Symbol 2 (Owned Autos Only), for all of the following coverages EXCEPT
a. uninsured motorists/underinsured motorists.
b. physical damage collision.
c. no-fault.
d. liability.
7. Gencon Contracting’s construction foreman is driving an inspector to a work site when he is involved in a minor accident. The foreman’s truck collides with another vehicle, injuring the inspector. In order for medical payments under Gencon’s BAP to apply, what requirement regarding fault must be met?
a. The foreman need not be found at fault for medical payments to apply.
b. The foreman must have been 100 percent at fault in order for medical payments to apply.
c. The other driver must have been 100 percent at fault for medical payments under Gencon’s BAP to apply.
d. Both the foreman and the other driver must be jointly at fault in order for medical payments to apply.
8. When symbol 1 (any auto) is used to designate covered autos for liability coverage, all of the following would also be covered autos EXCEPT
a. a cherry picker (bucket truck) while it is being used to raise or lower workers.
b. a small trailer being pulled by a covered auto.
c. mobile equipment while being carried or towed by a covered auto.
d. a borrowed car used as a substitute for a covered auto that is being repaired.
9. Hanson Builders, owned by Harry Hanson, uses Symbol 8 (Hired Autos Only) to designate coverage for physical damage. For which of the following autos would Hanson have coverage under his business auto policy?
a. Hanson rents a truck from Commercial Truck Leasing.
b. Harry Hanson borrows a car from one of its employees to use in the course of business.
c. Harry Hanson leases an auto for his personal use.
d. Harry Hanson borrows his son’s car while his company truck is in the shop for repairs.
10. Frank, a construction foreman, is an insured under his employer’s business auto policy. Frank is involved in an accident while driving to a construction site. The other driver is at fault in the accident, but the amount of damage exceeds his liability limits under his auto policy. In this situation, Frank will likely have coverage under what section of his employer’s BAP?
a. no-fault
b. medical payments
c. underinsured motorists
d. uninsured motorists
11. Hanson Contracting owns a pick-up insured under a BAP for physical damage and liability coverage. While driving the pickup on a construction site, Hanson’s driver is distracted and collides with a chemical storage tank owned by the property owner. The tank ruptures and two pedestrians walking nearby are injured by the toxic fumes. The chemicals will also have to be cleaned up from the site. What elements of this loss would be covered by Hanson’s BAP?
a. only the damage to the pick-up
b. only the bodily injury suffered by the pedestrians
c. only the damage to the pick-up and the bodily injury suffered by the ten people
d. the damage to the pick-up, the bodily injury suffered by the pedestrians, and the cost of removing the spilled chemicals from the site
12. Gencon Contracting owns and uses a crane in its construction work. Gencon has both CGL and commercial auto policies. For any damage that occurs while the crane is being used on a construction site, Gencon has coverage under
a. only the CGL policy.
b. only the commercial auto policy.
c. both the CGL and commercial auto policies.
d. neither of the policies.
13. Gencon General Contracting owns three small pickup trucks that the construction foremen use to drive from job site to job site. The trucks are insured under a commercial auto policy. What business use classification would be stipulated on Gencon’s commercial auto policy for these three trucks?
a. retail use
b. commercial use
c. service use
d. supervisory use
14. Johnson Contractors owns a fleet of trucks insured with a commercial auto policy. Under the policy, an insured contract would include all of the following EXCEPT
a. a sidetrack agreement with a railroad.
b. a lease of premises that Johnson Contracting uses to store building materials.
c. an obligation, as required by an ordinance, to indemnify Cresent City, a town in which Johnson does business.
d. an elevator maintenance agreement with Frump Towers, a building that Johnson Contractors constructed.
15. Which of the following is NOT an insured under ABC Builders’ contractors professional liability policy?
a. ABC’s stockholders
b. ABC’s employees
c. ABC’s former employees
d. Beta Builders, a subcontractor that ABC routinely uses
16. Gencon Contracting is reviewing its operations to determine whether it has professional liability exposures. All of the following activities present potential professional liability loss exposures EXCEPT:
a. Gencon enters into a design-build contract with Tyson Industries.
b. Gencon provides on-the-job training to its construction workers.
c. Gencon obtains engineering advice from an outside firm in conjunction with excavation activities on a job site.
d. Gencon, acting as a design-builder, hires an architect to provide design services on the project.
17. Which of the following losses is an example of vicarious liability on the part of the contractor?
a. Three of a contractor’s workers are injured when improperly installed scaffolding collapses.
b. A home catches fire after an electrical contractor’s new employee installs faulty wiring.
c. A retaining wall collapses due to negligent engineering techniques performed by an engineering company hired by the contractor.
d. Two cars are damaged when the contractor’s employee drops an HVAC unit from a crane hook during a lift.
18. ABC Builders will complete a design-build project for Hanson Inc. ABC Builders will buy a contractors professional liability policy for the project. In the “covered services” section of the insurance policy’s insuring agreement, the definition of “professional services” should match the definition of “professional services” in
a. the contract with Hanson Inc.
b. the dictionary.
c. the CGL policy.
d. the design blueprint for the project.
19. Which of the following describes a situation to which a contractors professional liability policy’s express warranties or guarantees exclusion would apply?
a. An electrician installs a sound board in a recording studio and the studio is not happy with the quality of the sound.
b. The construction contract stipulates that the contractor’s work will comply with all applicable building codes.
c. A design-build contractor expressly warrants that the building will satisfy the owner’s performance requirements.
d. A commercial plumber installs pipes that come with a ten-year manufacturer’s warranty.
20. A severability of interests provision establishes that
a. except regarding the retroactive date, the policy applies separately to each claim.
b. except regarding policy limits, the policy applies separately to each insured.
c. the policy applies separately to each claimant, even if one claim involves multiple claimants.
d. a claim filed against one insured will also apply to other insureds regardless of their interest or involvement in or liability for the claim.
21. Which of the following losses is excluded by the pollution liability exclusion of a commercial general liability policy?
a. A contractor stores several drums of chemical solvents on a work site. One of the drums leaks and damages water pipes on an adjacent property.
b. Fuel leaks from the gas tank of a grader when its gas tank is accidentally punctured.
c. Fumes escape from a hostile fire unrelated to remedial operations.
d. Tar that was used on a completed roof is accidentally ignited, releasing fumes in the neighborhood where the work was done. Several residents are injured.
22. A contractor asks its CGL insurer to include a hostile fire exception in the total pollution exclusion endorsement. This endorsement will retain coverage for losses that meet certain requirements. These requirements include all of the following EXCEPT:
a. The loss arises from smoke, fumes, or vapors caused by a hostile fire.
b. The site from which the hostile fire emanates is not, and has never been, used to treat or store waste.
c. The contractor’s operations are not remedial in nature.
d. The source of the fire is flammable materials from a job site that stored nuclear waste.
23. Two key issues in determining coverage under a contractors pollution liability policy are whether the policy will respond to a gradual release of pollutants and
a. whether the pollutant is life threatening.
b. whether the person responsible for the loss was properly trained.
c. whether the substance released was a covered pollutant.
d. whether the contractor is qualified to clean up the pollutants.
24. A contractor working in remediation and restoration is reviewing its pollution liability insurance policy. Under the terms of the policy, an important element of whether a pollution loss will be covered is
a. how long the contractor has been in the remediation and restoration field.
b. how many subcontractors the contractor employs.
c. what kind of equipment the contractor uses.
d. what types of substances are considered pollutants.
25. Diggins Excavation is performing some remediation work when a tank ruptures, spilling a hazardous substance. Diggins tenders the claim to its contractors pollution liability insurer. Under that policy, all of the following are claim expenses EXCEPT
a. court costs related to the claim.
b. expenses related to investigation of the events leading to the ruptured tank.
c. clean-up costs.
d. attorneys’ fees for the legal proceedings related to the claim.
26. A contractor is removing several underground natural gas storage tanks when one of the tanks ruptures. The gas leak results in the evacuation and closure of a nearby neighborhood that lasts ten days. What kind of coverage will normally be available for claims made by these residents under the contractor’s pollution liability policy?
a. The policy will cover extra expenses incurred by the residents arising out of the loss of use of their homes only if they can demonstrate damage to their homes.
b. The policy will not cover any extra expenses incurred by the residents arising out of their loss of use of their homes.
c. The policy will cover extra expenses incurred by the residents arising out of the loss of use of their homes.
d. The policy will not cover extra expenses incurred by the residents until a one week waiting period has passed.
27. Justin Contracting frequently hires temporary workers from an employee leasing agency. If the agency does not provide EPLI coverage for its employees, what should Justin Contracting do?
a. Ignore the fact that the leased employees are not covered by the agency. It should not cause a problem.
b. Endorse its EPLI policy so that the policy covers temporary workers.
c. Have its CGL policy endorsed to provide EPL coverage for these employees.
d. Stop hiring temporary employees.
28. EPLI policies for contractors are usually part of a package policy that covers other types of executive risk such as
a. directors and officers liability and fiduciary liability.
b. directors and officers liability and pollution liability.
c. fiduciary liability and workers' compensation.
d. fiduciary liability and commercial general liability.
29. When asked to explain how defense costs are paid in the EPLI policy and how they are paid in the CGL policy, Gencon’s risk manager responds that:
a. In the EPLI policy, the costs are paid in addition to the policy limits; in the CGL policy they are paid within the policy limits, and therefore reduce the limits.
b. Both the EPLI and CGL policies contain a separate limit for defense costs.
c. In the EPLI policy, defense costs reduce the policy limits, whereas in the CGL the defense costs are paid in addition to the policy limits.
d. The EPLI policy does not cover defense costs at all; the CGL policy provides coverage for defense costs in addition to the policy limits.
30. Under most contractors CGL policies, coverage for employment-related practices is
a. provided subject to a sublimit.
b. excluded by endorsement.
c. added by endorsement.
d. covered under supplementary payments.
31. Gencon Contracting has an EPLI policy with a “catchall provision” in it. This means that the policy will cover claims alleging discrimination on the basis of race, color, religion, creed, age, sex, national origin, disability, appearance, pregnancy, sexual orientation or preference, o
a. claims made by any other protected classes of people.
b. any combination of these types of acts.
c. any other claims made against the policy regardless of the category of discrimination.
d. claims made by Gencon’s own employees.
32. Underwood Corporation is run by a board of directors. Fred Wilson, one of the board members, is CEO of a subcontracting firm that has submitted a bid in conjunction with one of Underwood’s projects. The chairman of Underwood’s board tells Wilson the amounts of the other two competing bids. This is an example of what type of claim?
a. breach of the duty of loyalty
b. breach of the duty of care
c. violation of federal securities law
d. shareholder derivative claim
33. Which of the following is a common D&O loss exposure for a privately held company?
a. An outside director of a privately held company becomes a personal adviser to the company’s team of senior managers.
b. A stockholder approves improper dividend payments.
c. The dominant shareholders operate with full regard to the rights and interests of minority shareholders and other company constituents.
d. The directors serve on the board in a full-time capacity with higher than average compensation.
34. Wilson Contracting Corporation is involved in a major land dispute with Seaver and Associates, which involves negligent actions on the part of some of Wilson’s directors. This dispute leads to an expensive court battle which Wilson loses, resulting in a severely compromised financial position for Wilson. The stockholders then sue the directors, alleging financial wrongdoings. The court rules in favor of the stockholders. Which of the following losses would the contractor’s D&O policy cover?
a. money damages awarded to the stockholders
b. injunctive relief
c. sanctions
d. taxes
35. An employee files a suit against the president and human resources manager of Trade Builders, alleging that he was purposefully and deceptively not paid for overtime hours worked during a two-month period. Under the D&O policy, the president and human resources manager will have coverage against the allegation until
a. the settlement is reached and the monetary damages established.
b. the policy limits are paid out.
c. it is determined that the president and the human resources manager did, in fact, dishonestly fail to pay the employee the overtime wages due to him.
d. the claim goes to court.
36. Contractors’ directors and officers are subject to potential personal liability arising out of
a. their personal conduct.
b. their managerial decisions.
c. liability for the actions of independent contractors.
d. the actions of their employees.
37. A fiduciary liability policy issued to Reynolds Construction International would cover all of the following EXCEPT
a. Reynolds Construction International’s assets.
b. the assets of one of Reynolds’ subcontractors.
c. the assets of any plans that Reynolds has scheduled in the policy.
d. the personal assets of any additional persons named on Reynolds’ policy.
38. Under ERISA, Gencon Contracting's fiduciary responsibilities include all of the following EXCEPT managing and administering Gencon’s employee benefit plans to provide maximum benefits to Gencon employees
a. who participate in the plan.
b. maintaining reasonable expenses for administering the plan.
c. managing any welfare benefit plan or employee pension plan.
d. managing workers' compensation and unemployment benefits.
39. Which of the following policies issued to Wendell Steel Fabrication would nearly always use an occurrence coverage trigger?
a. contractors professional liability policy
b. builders risk insurance policy
c. fiduciary liability policy
d. commercial general liability policy
40. It is to the insured’s advantage for a retroactive date
a. to be the same as the policy effective date.
b. to be as far in the past as possible.
c. to be determined by expected claims.
d. to be as far in the future as possible.
41. Rolf’s Roofing installs a roof on a shopping center in 2003. In late December 2004, the roof collapses, injuring nearly 20 shoppers. Rolf’s Roofing buys a replacement CGL policy effective January 1, 2005. On January 20, 2005, the shoppers file a claim against Rolf’s Roofing. The CGL policy issued in 2005 has a “known loss” provision. In order for coverage to be available for this loss,
a. Rolf must have the shopping center listed as an insured project on the policy.
b. Rolf must not have been aware of the roof collapse prior to the inception of the policy.
c. the previous policy and the current policy must both have been issued by the same insurer.
d. Rolf must have already been aware of the loss that occurred in December 2004.
42. Danson Builders, a custom home builder, is notified that several homes it built on a steep incline are experiencing abnormal shifting. Danson subsequently discovers a significant error in the specifications its engineer developed for stabilizing these homes. What provision in Danson’s professional liability policy allows Danson to lock in coverage for potential future claims arising out of this error?
a. retroactive date provision
b. extended reporting period
c. completed work provision
d. notice of circumstance provision
43. Connie Contractor is sued for damages arising out of her providing of professional services. Connie’s professional liability policy, which has a claims made coverage trigger, will respond to this claim
a. if the claim is filed during the policy period.
b. if the event occurred before the policy’s retroactive date.
c. if the claim was filed before the policy’s retroactive date.
d. if the event occurred during the policy’s extended reporting period.
44. Loss control can be improved under a CIP for a variety of reasons. Those reasons include all of the following EXCEPT:
a. A consistent level of loss control effort can be enforced.
b. Injured employees are less likely to file third-party-over actions under a CIP.
c. A CIP can be a means of enforcing compliance with safety laws.
d. A CIP allows closer scrutiny of loss details and case management which can improve chances of avoiding litigation.
45. Grand World Development Corporation will build a new convention center, including a large resort, for the city of Pleasantville. Grand World decides to use a traditional approach for insuring this project, and specifies minimum insurance requirements in the construction contract. Grand World will buy the builders risk insurance and each other party will buy its own coverages for other risks. Under this type of insurance arrangement,
a. the probability of litigation between insurers is reduced.
b. each contractor must enroll in the program and submit monthly loss reports.
c. each contractor will have the same coverage terms, provisions, deductibles and limits.
d. the total cost of insurance for the project will likely be higher than under a controlled insurance program.
46. King Builders gets a CIP for a $200 million construction program involving work in 12 states. Construction is expected to last two years. Which of the following suggests that the construction program is NOT well suited to a CIP
a. The construction operations are very spread out.
b. The project is not large enough for a CIP.
c. The project is too large for a CIP.
d. The project time frame is too long for a CIP.
47. A contractor is participating in the construction of a $500 million hotel/casino resort in Las Vegas. The project is insured under a CIP. Which of the following required coverages is NOT included in the CIP?
a. builders risk
b. commercial general liability
c. automobile liability
d. workers' compensation
48. Gencon Contracting is the general contractor on a large construction project that will involve numerous subcontractors. The subcontractors are concerned about payment for materials and labor they furnish to Gencon. The construction project is a private project. If Gencon arranges for a payment bond for this project, the ultimate purpose of that bond is
a. to ensure that subcontractors and suppliers are reputable.
b. to ensure that Gencon promptly receives all supplies and labor from its subcontractors.
c. to ensure that the project will be completed free of liens.
d. to ensure that Gencon is paid promptly by the project owner.
49. Gencon Contracting provides a bond for a construction project which promises that Gencon will perform the work in accordance with the construction contract and the related documents, but if Gencon defaults, the bond may require the surety to step in and complete the work. This is an example of a _____ bond.
a. performance
b. bid
c. completed operations
d. payment
50. What does the Miller Act require?
a. payment bonds equal to the full contract price on all federal projects exceeding $1 million that involve the construction, alteration, or repair of public buildings
b. payment bonds equal to the full contract price on all construction projects exceeding $1 million that involve the construction, alteration, or repair of public buildings
c. payment bonds equal to the half of the contract price on all federal projects exceeding $1 million that involve the construction, alteration, or repair of public buildings
d. payment bonds equal to the full contract price on all federal projects exceeding $100,000 that involve the construction, alteration, or repair of public buildings
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