33% Page 1 of 3 Loading... 1. The need for excess or umbrella liability insurance is closely related to three basic issues involved in the use of liability insurance. Those three issues include all of the following, EXCEPT:A. Layering of liability coverages.B. Insurer solvency.C. Effect of aggregate limits.D. Difficulty in determining the maximum possible loss. Loading... 2. Which one of the following statements is correct regarding the need for excess or umbrella liability coverage?A. Higher average deductibles in primary liability insurance policies have created a demand for more excess liability insurance coverage.B. The need for excess or umbrella liability coverage has declined in recent years due to the lower frequency of large verdicts against insureds.C. Insureds often purchase excess or liability insurance coverage because their primary insurers are unwilling to provide adequate limits within the primary insurance layer.D. Excess and umbrella liability coverages provide additional coverages for liability exposures in which it may be difficult to estimate the minimum probable loss. Loading... 3. Because of the difficulty in estimating the maximum possible loss for liability claims, many insureds should consider:A. Purchasing an excess or umbrella liability coverage.B. Increasing their commercial general liability policy deductible.C. Creation of separate business entities for each service offering.D. Implementing a risk management program designed to eliminate hazardous conditions. Loading... 4. Which one of the following statements is correct regarding excess liability insurance and umbrella liability insurance?A. Almost all insurers writing excess and umbrella liability policies use standardized policies.B. From a practical standpoint, the distinction between excess and umbrella liability policies may be unclear.C. Umbrella liability policies rarely provide coverage for defense costs.D. An excess liability policy offers broader protection than that provided by the underlying coverage. Loading... 5. Which one of the following represents a difference between an excess policy and an umbrella liability policy?A. Almost all excess liability insurance policies are written on standardized forms, while almost all umbrella liability policies are manuscript forms.B. An excess policy contains a self-insured retention amount, while an umbrella liability policy excludes this provision.C. An excess policy offers no broader protection than that offered in underlying policies, while an umbrella policy may provide coverage not available in underlying policies.D. An excess policy would typically have a benefit limit far lower than the benefit offered by an umbrella liability policy. Loading... 6. A risk manager for a large manufacturing company has determined that the company needs $50,000,000 of liability insurance coverage. However, no single insurer is willing to write a $50,000,000 policy. The risk manager designed the following insurance plan: ABC Insurance Company – $5,000,000 policy. DEF Insurance Company – $10,000,000 policy. GHI Insurance Company – $15,000,000 policy. JKL Insurance Company – $20,000,000 policy.Which one of the following represents the best description of this type of insurance plan?A. Offset plan.B. Reimbursement plan.C. Indemnification plan.D. Layering plan. Loading... 7. ABC Company incurred a liability loss that is not covered under their primary liability insurance policy. Which one of the following statements is correct regarding coverages under either an excess or umbrella liability policy?A. Both an excess and umbrella liability policy might cover the loss, subject to a self-insured retention.B. Neither the excess nor the umbrella liability policy would cover the loss, because the loss is not covered under the primary policy.C. The umbrella liability policy will not cover the loss, but the excess policy may cover the loss, subject to a self-insured retention.D. The excess policy will not cover the loss, but the umbrella liability policy may cover the loss, subject to a self-insured retention. Loading... 8. Which one of the following types of insurance policies provides coverage that is more broad than commercial excess liability insurance?A. Business automobile policy.B. Umbrella policy.C. Self-contained policy.D. “Following form” policy. Loading... 9. Which one of the following statements is correct regarding a following-form excess liability policy?A. It is essentially just an increase in limits to the underlying policy.B. In most cases, it requires a self-insured retention before coverage applies.C. It usually provides fewer exclusions than the primary policy, leading to coverage that is broader in scope.D. It does not depend on the provisions of the underlying policy for determining the scope of coverage. Loading... 10. Which one of the following statements is correct regarding a self-contained excess liability policy?A. It is typically used in connection with self-insured workers’ compensation plans.B. It is basically nothing more than an increase in limits to the underlying policy.C. It requires a self-insured retention.D. It generally does not depend on the provisions of the underlying policy. Page 2 of 3 Loading... 11. Which one of the following is an excess liability policy that covers a claim in excess of the underlying limits only if the loss is covered by the underlying policy?A. Per diem liability policy.B. Following-form excess policy.C. Self-contained excess policy.D. Umbrella liability policy. Loading... 12. Which one of the following excess liability insurance policies includes the provisions of the underlying policy and then modifies those provisions with additional exclusions or conditions?A. Self-contained excess liability policy.B. Aggregate excess liability policy.C. Combination excess liability policy.D. Specific excess liability policy. Loading... 13. Onyx Company retains general liability claims up to $50,000 per occurrence. They purchased excess liability coverage that, after the retention, provides both specific and aggregate excess coverage as follows: Specific excess limit – $250,000 per occurrence. Aggregate excess limit – $2,500,000.Onyx sustained the following general liability claims during the year: Claim 1 – $25,000 settlement. Claim 2 – $350,000 settlement. Claim 3 – $200,000 settlement.How much of will the excess insurer pay in total?A. $0.B. $400,000.C. $450,000.D. $575,000. Loading... 14. GOW Manufacturing purchased a specific excess liability policy. Limits are as follows: Per occurrence retention – $200,000. Maximum limit – $2,000,000.GOW incurred the following losses during the policy year: January – $300,000. March – $100,000. July – $200,000. September – $1,500,000.Under the specific excess liability policy, how much will the insurer pay for the losses?A. $1,300,000.B. $1,400,000.C. $1,900,000.D. $2,000,000. Loading... 15. Which one of the following statements is correct regarding an umbrella liability policy?A. It eliminates the need for the insured to carry any primary policies.B. It only covers claims that are not covered by the insured’s primary policies.C. It may contain exclusions more restrictive than those contained in the primary policies.D. It rarely contains aggregate limits since underlying policies already contain these limits. Loading... 16. If an umbrella liability policy provides coverage for a loss, even when the loss is not covered by underlying insurance, this coverage is known as:A. Drop-down coverage.B. Layered coverage.C. Self-insured coverage.D. Triggered coverage. Loading... 17. With respect to an umbrella liability policy, an amount that is deducted from claims that are not covered at all by any primary policy is referred to as a:A. Drop-down deductible.B. Conditional exclusion.C. Sublimit.D. Self-insured retention. Loading... 18. Which one of the following statements is correct regarding umbrella liability policies?A. They are limited to a single insuring agreement.B. They may contain exclusions that do not exist in the underlying policy.C. They typically require the insured to establish identical limits for the various primary insurance coverages.D. They are typically written with a claims-made coverage trigger. Loading... 19. Which one of the following statements is correct regarding the self-insured retention (SIR) in an umbrella policy?A. The SIR only applies when an underlying insurance also covers a portion of the loss.B. The SIR applies to all umbrella coverage payments.C. The SIR cannot exceed $1,000.D. The SIR is similar to a deductible. Loading... 20. Wanda causes an accident while driving her business automobile. The driver of the other car is awarded $900,000 for his injuries. Wanda has a Business Auto Liability policy with a bodily injury liability limit of $250,000 per person and an umbrella liability policy with a $2,000,000 limit and a $2,000 self-insured retention (SIR). It is later discovered that the amount due from Wanda’s Business Auto Liability insurer is uncollectible. What amount will the umbrella insurer pay for this accident?A. $250,000.B. $650,000.C. $895,000.D. $900,000. Page 3 of 3 Loading... 21. Gina’s Manufacturing Company has a commercial general liability (CGL) policy with a limit of $1,000,000. The company also has a $1,000,000 umbrella policy. The umbrella policy is subject to a $25,000 self-insured retention (SIR). Gina’s Manufacturing Company recently posted several ads online, which included disparaging remarks about their competitors. Gina’s Manufacturing was sued by one of their competitors and lost a judgment for $500,000. Their CGL policy does not cover advertising injury. How much will Gina’s Manufacturing be entitled to recover from the insurers?A. $0.B. $225,000.C. $475,000.D. $500,000. Loading... 22. An insured has a commercial general liability (CGL) policy with a $2,000,000 per occurrence limit and a $4,000,000 general aggregate limit. The insured also has an umbrella policy with a $2,000,000 limit and a $25,000 self-insured retention. At the time of a loss, the CGL was canceled due to non-payment of premiums. If the insured incurred a $2,200,000 loss, and this loss would have been covered by the CGL had the premiums been paid, how much will the umbrella policy pay toward the loss?A. $0.B. $175,000.C. $200,000.D. $2,175,000. Loading... 23. A distribution company has a commercial general liability (CGL) policy with liability limits of: $1,000,000 per occurrence. $2,000,000 general aggregate. $2,000,000 products and completed operations aggregate.The insured also has a drop-down coverage umbrella policy with a $2,000,000 limit and a $25,000 self-insured retention. The following bodily injury claims were filed against the company: Claim 1 – $900,000 settlement. Claim 2 – $500,000 settlement. Claim 3 – $1,000,000 settlement.The CGL provided coverage for all three claims. How much did the umbrella insurer contribute to the Claim 3?A. $0.B. $375,000.C. $400,000.D. $1,000,000. Loading... 24. Which one of the following statements is correct regarding the structuring of a liability insurance program?A. Insureds wanting higher limits of liability above the working layers usually achieve this through one or more layers of excess liability coverage.B. If a following-form excess policy is purchased, risk managers should assume the coverage of this policy is as broad as the underlying policies.C. When an insurance program has several liability policies layered on top of one another, the primary and first umbrella layers are referred to as buffer layers.D. An organization maximizes its risk management value by combining an excess policy with an umbrella liability policy. Loading... 25. A level of excess insurance coverage that exists between a primary layer and an umbrella policy is referred to as a:A. Buffer layer.B. Default layer.C. Base layer.D. Safety net layer. Loading... 26. Which one of the following represents a problem that can occur when layering policies?A. It is virtually impossible to find an insurer willing to write multiple layers of coverage.B. Premium discounts are not available for layered policies.C. If a primary policy lapses due to non-payment of premiums, excess layers will no longer provide coverage for losses.D. The aggregate limits may vary with the umbrella and excess layers. Loading... 27. A large corporation purchased umbrella liability insurance with the following limits: $1,000,000 per occurrence. $2,000,000 aggregate limit.The company is required to retain $100,000 per occurrence. During the year, the company had the following losses that were covered under the umbrella policy: Loss 1 – $80,000 Loss 2 – $1,700,000 Loss 3 – $800,000How much of the losses will be covered by the umbrella policy?A. $1,700,000.B. $2,000,000.C. $2,480,000.D. $2,500,000. Loading... 28. ABC Company purchased a commercial general liability policy with the following limits: $1,000,000 per occurrence limit. $2,000,000 general aggregate limit.The company also carries an umbrella liability policy with the following limits: $2,000,000 per occurrence limit. $2,000,000 general aggregate limit. $25,000 self-insured retention.A covered claim arises, resulting in a judgment of $2,400,000 against the company. How much of the judgment is paid by the umbrella liability policy?A. $1,375,000.B. $1,400,000.C. $2,375,000.D. $2,400,000. Loading...
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