Wyoming Property & Casualty Insurance License Exam — All Questions

Commercial General Liability (CGL) coverage most typically protects a business against:

• a.Damage to the business's own building and its contents
• b.Loss of the business's own inventory in a warehouse fire
• c.Third-party injury and property damage from its operations✓
• d.Injuries suffered by its own employees while on the job

Commercial General Liability covers a business's legal liability to third parties for bodily injury and property damage arising from its premises, operations, products, and completed work, plus personal and advertising injury. Damage to the company's own building or inventory is covered by commercial property insurance, and on-the-job injuries to the company's employees are handled by workers compensation, not CGL.

A Businessowners Policy (BOP) is best described as:

• a.A package of property and liability for small businesses✓
• b.A policy that covers only commercial auto exposures
• c.A life insurance product sold to the business owner
• d.A stand-alone workers compensation policy for a firm

A Businessowners Policy is a packaged commercial policy that bundles commercial property and general liability coverage (and often business income) tailored for eligible small and mid-sized businesses. It is convenient and cost-effective but has eligibility restrictions. Workers compensation and commercial auto are generally written separately, not inside a BOP.

Business income (business interruption) coverage is designed to pay for:

• a.The cost of replacing inventory stolen in a theft
• b.Lost net income and continuing expenses while shut✓
• c.Liability claims brought by injured customers on site
• d.The physical repairs to the damaged building itself

Business income coverage replaces the net income the business would have earned and pays continuing normal operating expenses (such as payroll and rent) during the period of restoration after a covered physical loss suspends operations. It addresses the indirect financial consequences of a loss, complementing the direct property coverage that pays to repair or replace the damaged property itself.

An inland marine policy is typically used to cover:

• a.Movable property and property in transit over land✓
• b.An employee's medical and hospital care expenses
• c.Ocean-going cargo on international voyages only
• d.A building's permanent foundation and its footings

Inland marine coverage evolved from ocean marine to insure property that moves over land or is otherwise mobile or in transit, as well as certain fixed property tied to transportation or communication (such as bridges) and hard-to-value items like fine art and contractors' equipment. Ocean marine covers vessels and cargo on the water; buildings and employee health are covered by other lines.

A commercial package policy is built from a common declarations page, common policy conditions, interline endorsements, and:

• a.two or more separate coverage parts✓
• b.exactly one coverage part per policy
• c.a mandatory workers compensation part
• d.a common causes of loss form for all parts

A package binds one common declarations page and one set of common policy conditions to two or more coverage parts, such as commercial property, general liability, crime, inland marine and commercial auto, with interline endorsements applying across them. A policy carrying a single coverage part is a mono-line policy, not a package. Each coverage part brings its own declarations, coverage form and causes of loss selection, so no single causes of loss form governs the whole package, and workers compensation is written separately.

In a commercial package policy, an interline endorsement is one that:

• a.applies to more than one coverage part✓
• b.adds an additional insured to a part
• c.changes just the property coverage part
• d.turns the package into a mono-line policy

Interline endorsements are the endorsements that cut across the package rather than belonging to a single line, so one attachment can amend the property, liability and crime parts at once. A nuclear energy liability exclusion is the classic example. An endorsement that touches only the property part is a coverage-part endorsement, and adding an additional insured amends one part rather than crossing lines.

Under the building and personal property coverage form, which of these is insured as part of the building?

• a.A customer's auto parked in the lot
• b.Permanently installed machinery✓
• c.Money and securities kept in the safe
• d.Stock the insured is holding for sale

Building coverage reaches the described structure, completed additions, permanently installed fixtures, machinery and equipment, and property the insured owns and uses to service the building or its premises. Stock held for sale is business personal property, not building. Money and securities are excluded from the property form and need crime coverage, and a customer's vehicle in the lot is a garagekeepers exposure.

A tenant pays to install new partitions and lighting in the space it leases. Under a commercial property policy that work is insured as:

• a.the tenant's business personal property✓
• b.an extra expense under business income
• c.personal property of others in its care
• d.part of the landlord's building coverage

Improvements and betterments made by a tenant are covered as the tenant's use interest within its business personal property, alongside owned stock, furniture and leased property the tenant is contractually required to insure. They are not personal property of others, because the tenant paid for them and holds the use interest rather than holding someone else's goods. The landlord's building limit covers the structure the landlord owns, not the tenant's fit-out.

A repair shop insures personal property of others. A covered fire destroys a customer's machine that was in the shop for repair. Payment for that machine is made to:

• a.the customer's own insurer first
• b.the mortgagee named on the building
• c.the named insured, acting as bailee
• d.the owner of the property✓

Personal property of others covers goods in the insured's care, custody or control at the described premises, and the loss is adjusted with and paid to the owner of that property rather than to the business holding it. Paying the named insured would treat the customer's machine as the shop's own property. A mortgagee has rights in the building, not in a customer's equipment, and the customer's own insurer is not a payee under this coverage.

Compared with the basic causes of loss form, the broad form adds coverage for:

• a.mechanical breakdown of the boiler
• b.falling objects and weight of snow✓
• c.flood and earth movement at the premises
• d.theft of stock and money from the premises

The broad form keeps every basic peril and adds falling objects, the weight of snow, ice or sleet, and water damage from the accidental discharge of water or steam, plus collapse as an additional coverage. Theft is not part of the broad form; it arrives with the special form's open-perils approach. Flood and earth movement are excluded on all three causes of loss forms, and mechanical breakdown needs equipment breakdown coverage.

When a commercial property policy uses the special causes of loss form, what must the insurer do to deny a claim for direct physical loss?

• a.show the insured failed to prove value
• b.show the peril was not listed in the form
• c.prove the loss was not sudden enough
• d.prove that an exclusion applies✓

The special form is open perils: every risk of direct physical loss is covered unless the policy excludes or limits it, so the burden falls on the insurer to identify the exclusion. Requiring the insured to point at a listed peril describes the basic and broad forms, where only named perils are covered. Suddenness is not the test under a property form, and proof of value goes to the amount of the loss rather than to whether it is covered.

A building with a replacement cost of $600,000 is insured for $360,000 under an 80% coinsurance clause, with a $2,500 deductible. A covered fire causes $90,000 of damage. What does the insurer pay?

• a.$90,000
• b.$65,000✓
• c.$87,500
• d.$67,500

The coinsurance formula divides the amount carried by the amount required and multiplies by the loss. The amount required is 80% of $600,000, or $480,000, and the insured carried $360,000, so $360,000 divided by $480,000 is 0.75. That gives 0.75 times $90,000, or $67,500, and the $2,500 deductible then comes off for a payment of $65,000. The $67,500 answer forgets the deductible and the $90,000 answer ignores the underinsurance penalty.

A commercial property policy carries an agreed value of $750,000, a limit of $750,000 and a $5,000 deductible. A covered loss of $200,000 occurs. What does the insurer pay?

• a.$160,000, the agreed value's share
• b.$200,000, with no deductible applied
• c.$150,000, after a coinsurance penalty
• d.$195,000, the full loss less the deductible✓

The agreed value option suspends the coinsurance condition for the term shown, in exchange for the insured filing a statement of values the insurer accepts. With coinsurance out of the way and the limit at least equal to the agreed value, the covered loss is paid in full up to the limit: $200,000 less the $5,000 deductible is $195,000. The answers that apply a coinsurance penalty misread the endorsement, and the deductible is not waived by agreed value.

Two buildings valued at $500,000 and $700,000 are insured under a single blanket limit of $1,200,000 with a $10,000 deductible. Fire causes a $600,000 loss to the smaller building. What is paid?

• a.$590,000, the blanket limit covers it all✓
• b.$500,000, the specific limit for it
• c.$490,000, capped at that building's value
• d.$600,000, deductibles are waived here

A blanket limit is one limit available to any covered item at any covered location, so the whole $1,200,000 stands behind a loss at either building and the $600,000 loss is paid in full, less the $10,000 deductible, for $590,000. Specific limits work the other way: a $500,000 limit written on that building alone would cap the recovery there and leave $100,000 uninsured. Blanket coverage does not waive the deductible.

Under business income coverage, the period of restoration ends on the earlier of the date operations resume at a new permanent location or the date on which:

• a.the policy period comes to an end
• b.the property should have been rebuilt✓
• c.the coverage limit is exhausted
• d.the property is sold or abandoned

The period of restoration runs from the direct physical loss until the damaged property should be repaired, rebuilt or replaced with reasonable speed and similar quality, or until the business resumes at a new permanent location, whichever comes first. Slow rebuilding by the insured does not extend it. The period is not cut off when the policy term expires, which is why the answer pointing at policy expiry is wrong; exhausting the limit caps the payment rather than defining the period.

A covered fire shuts a bakery for four months. It would have earned $9,000 a month in net income, and it must keep paying $6,000 a month in continuing normal operating expenses. What is its business income loss?

• a.$45,000
• b.$24,000
• c.$60,000✓
• d.$36,000

Business income is the net income the business would have earned plus the normal operating expenses that continue during the suspension, including payroll the insured keeps paying. Each month of the shutdown costs $9,000 plus $6,000, or $15,000, and four months gives four times $15,000, or $60,000. The $36,000 figure counts only lost net income and the $24,000 figure counts only continuing expenses, so both understate the loss.

Business income coverage is written on an actual loss sustained basis. That means the insurer pays:

• a.the income actually lost, up to the limit✓
• b.a set share of last year's revenue
• c.the cost to replace the building
• d.a fixed daily amount named in the declarations

Actual loss sustained means the insured is paid what the suspension genuinely cost in lost net income and continuing expenses during the period of restoration, proved from its own books, subject to the limit of insurance. There is no per-day sum agreed in advance, which is what separates this from a valued or stated-amount approach. Rebuilding the structure is paid by the direct property coverage, not by business income.

After a covered fire, a print shop rents temporary space for $12,000 a month for three months and rents replacement presses for $9,000 so it can keep filling orders. What is its extra expense claim?

• a.$9,000
• b.$36,000
• c.$21,000
• d.$45,000✓

Extra expense pays the necessary costs the insured would not have incurred had there been no loss, spent to avoid or cut short the suspension of operations. Both items qualify: three months at $12,000 is $36,000, plus $9,000 for the rented presses, for a total of $45,000. The $36,000 answer leaves out the equipment rental. Extra expense sits alongside business income, which pays lost net income and continuing expenses rather than these added costs.

An insured elects to exclude ordinary payroll from its business income coverage. During a shutdown the policy will then not pay:

• a.any payroll during the shutdown
• b.wages of staff who can be laid off✓
• c.the salaries of its officers
• d.rent and utilities it still owes

Ordinary payroll is the payroll of employees other than officers, executives, department managers and employees under contract. Excluding it, or limiting it to a set number of days, cuts the premium on the reasoning that rank-and-file staff would be released after a shutdown while key people are retained. So officer and executive pay stays covered, and continuing expenses such as rent and utilities are still paid, which is why the answers stripping out all payroll or removing rent are wrong.

An insured on a reporting form last reported $200,000 of stock when the true value on that date was $250,000. A covered loss of $50,000 follows. What does the full reporting condition allow?

• a.$50,000
• b.$45,000
• c.$40,000✓
• d.$30,000

A reporting form charges premium on the values the insured reports at set intervals, which suits a business whose inventory swings through the year. The full reporting condition pays only the proportion the last reported value bears to the actual value on that date: $200,000 divided by $250,000 is 80%, and 80% of $50,000 is $40,000. Paying the whole $50,000 would reward the under-report, and the penalty is proportional rather than a flat cut.

A retailer's business personal property limit is $300,000, raised to $700,000 for September through December by a peak season endorsement. A covered fire on November 10 destroys $560,000 of stock. The deductible is $5,000. How much is paid?

• a.$300,000
• b.$555,000✓
• c.$295,000
• d.$560,000

A peak season endorsement lifts the limit for the stated months, when inventory is at its highest, so the November loss is measured against $700,000 rather than the off-season $300,000: $560,000 less the $5,000 deductible is $555,000. The answers built on $300,000 apply the base limit to a loss that fell inside the endorsed period, and the full $560,000 ignores the deductible.

For the vacancy condition in a commercial property policy, a building owned by the insured counts as vacant when:

• a.nobody has slept there for some months
• b.it holds too little property to operate✓
• c.it is being renovated by a contractor
• d.the owner has shut off all the utilities

Vacancy turns on the contents: the building is vacant when it does not hold enough business personal property to carry on customary operations. That is why the answer about nobody sleeping there is wrong, since it describes unoccupancy, which is a different idea. A building under construction or renovation is not treated as vacant, and utility service is not the test. Once the stated vacancy period has run, the insurer will not pay for vandalism, theft, water damage, glass breakage or sprinkler leakage, and other covered losses are settled at a reduced amount.

Why is equipment breakdown coverage bought separately from the commercial property policy?

• a.Boilers are excluded as property
• b.Property forms exclude mechanical breakdown✓
• c.Fire following a boiler burst is excluded
• d.Breakdown is an inland marine peril

Commercial property forms exclude loss caused by mechanical breakdown and by artificially generated electrical current, so a boiler, chiller, transformer or motor that wrecks itself is not a property claim. Equipment breakdown coverage fills that gap and pays for the damaged equipment, resulting damage to other property, and the business income loss that follows. A boiler is still covered property for perils such as fire, and an ensuing fire after an explosion is covered, so those answers are wrong.

A builders risk policy on a commercial building under construction is normally written for a limit equal to:

• a.the land and the building together
• b.the completed value of the building✓
• c.the contractor's fee for the job
• d.the value in place when work starts

Builders risk is written on a completed value basis: the limit is set at what the finished structure will be worth, and the exposure builds up as materials, labour and equipment go into the job. Insuring only the value in place on day one would leave the project badly underinsured within weeks. Land is not insurable property, and the contractor's fee measures profit rather than the property at risk. Coverage ends when the building is accepted, occupied or put to its intended use.

A grading contractor's excavator burns at a job site many miles from the contractor's own yard. Which coverage responds?

• a.The commercial auto physical damage part
• b.The building and personal property form
• c.An inland marine contractors equipment floater✓
• d.The ocean marine hull coverage

A contractors equipment floater is inland marine coverage bought precisely because the property moves: it follows mobile equipment to job sites, in transit and in storage. The building and personal property form confines coverage to the described premises and the area immediately around them, so an excavator miles away falls outside it. An excavator is mobile equipment rather than a covered auto, and ocean marine hull coverage insures vessels.

A dry cleaner wants coverage for customers' garments held at its shop. The form designed for that exposure is:

• a.a fine arts floater
• b.a garagekeepers coverage form
• c.the stock item of its property form
• d.a bailee customers form✓

A bailee customers form is the inland marine answer for a business holding other people's goods for cleaning, repair or processing, and it responds for the customers' property whether or not the bailee is legally liable for the damage. The stock item on a property form covers goods the insured owns for sale, not customers' clothing. A fine arts floater insures works of art, and garagekeepers is the parallel coverage for customers' vehicles.

Which of these is one of the four coverages traditionally written in ocean marine insurance?

• a.Protection and indemnity✓
• b.Business income and extra expense
• c.Garagekeepers legal liability
• d.Contractors equipment

Ocean marine is written in four traditional parts: hull on the vessel itself, cargo on the goods being carried, freight on the shipping revenue at risk, and protection and indemnity for the vessel owner's liability to crew, passengers and other property. Contractors equipment is an inland marine floater and garagekeepers covers customers' autos at a service business, so neither belongs to ocean marine. Business income is a commercial property coverage.

A bookkeeper embezzles $86,000 over two years, and the acts are treated as one occurrence. The crime coverage carries a $50,000 employee theft limit per occurrence and a $1,000 deductible. What is paid?

• a.$85,000
• b.$86,000
• c.$50,000
• d.$49,000✓

Employee theft coverage treats a series of dishonest acts by one employee as a single occurrence, so the whole scheme is measured against one $50,000 limit rather than one limit per year. The loss runs past the limit, so the insurer pays the limit less the deductible: $50,000 minus $1,000 is $49,000. The $85,000 answer ignores the limit altogether, and the $50,000 answer forgets that the deductible still comes off.

In a surety bond, which party guarantees that the obligation will be carried out?

• a.the principal, which owes the underlying duty
• b.the surety, which backs the principal✓
• c.the insurer of the obligee
• d.the obligee, which demands the bond be filed

Suretyship is a three-party guarantee. The principal owes the duty and must perform, the obligee is the party protected and the one who required the bond, and the surety guarantees the principal's performance and may seek reimbursement from the principal after paying a claim. That right of reimbursement is what separates a surety bond from insurance. A fidelity bond is a different animal: it protects an employer against loss from its own employees' dishonesty and works as insurance rather than as a guarantee of somebody else's promise.

A crop-dusting operator needs cover for damage to the aircraft itself and for injury to people on the ground. This is written under:

• a.an inland marine equipment floater form
• b.the commercial general liability part
• c.a farmowners policy, as farm equipment
• d.an aviation hull and liability form✓

Aviation is a specialty line of its own, written as hull coverage on the aircraft plus aviation liability for injury and damage the flying causes. Standard property, liability and farm forms exclude aircraft, so the farmowners answer fails even though the flying serves farming. A farmowners policy packages the farm dwelling, barns and other farm structures, livestock and machinery, and farm liability. Inland marine floaters follow mobile equipment on the ground, not aircraft.

Which risk is generally outside the eligible classes for a businessowners policy?

• a.An office within size limits
• b.A small apartment building of six units
• c.A plant manufacturing steel parts✓
• d.A retail store within size limits

A businessowners policy is aimed at small and mid-sized apartment buildings, offices, retail stores and similar service risks that fall inside the eligibility rules on size and receipts, and it packages property, business income and general liability in one prepackaged form at a lower cost than buying each separately. Manufacturing operations sit outside those classes and are written on a commercial package policy instead, which also lets the manufacturer add crime, inland marine and equipment breakdown parts.

A repair garage buys garagekeepers coverage. What does that coverage insure?

• a.injuries to the garage's employees
• b.the garage's own service trucks
• c.customers' autos left in its care✓
• d.the building the garage works in

Garagekeepers responds for damage to customers' vehicles left with the business for service, repair, storage or parking, making it the auto version of bailee coverage. The garage's own vehicles are insured as owned autos under its garage or commercial auto coverage. Injuries to its own workers belong to workers compensation, and the structure itself needs commercial property coverage.