Professional Liability and Insurance Concepts Quiz

What is the current government share of losses under TRIA?

• 100%

• 50%

• 80%

• 20%

Answer explanation

Under the Terrorism Risk Insurance Act (TRIA), the government currently covers 80% of losses incurred from acts of terrorism, making 80% the correct answer.

What is the Terrorism Risk Insurance Act (TRIA) designed to do?

• Mandate terrorism coverage for personal lines

• Provide life insurance coverage for victims of terrorism

• Exclude terrorism from all insurance policies

• Ensure availability of terrorism insurance by sharing large terrorism losses with insurers

Answer explanation

The Terrorism Risk Insurance Act (TRIA) is designed to ensure the availability of terrorism insurance by sharing large losses from terrorist attacks between the government and insurers, making coverage more accessible.

What is the purpose of an injunction bond?

• To provide insurance for property damage

• To cover errors in financial statements

• To ensure appearance in court

• To cover damages if wrongfully enjoining someone

Answer explanation

An injunction bond serves to cover damages if a court wrongfully enjoins someone. This protects the enjoined party from financial loss due to an improper injunction.

What is the purpose of a cost bond?

• To provide insurance for property damage

• To ensure appearance in court

• To ensure payment of court costs

• To cover errors in financial statements

Answer explanation

A cost bond is specifically designed to ensure payment of court costs, making it essential for parties involved in litigation to cover any expenses that may arise during the legal process.

What does EPL insurance cover?

• Medical malpractice

• Errors in financial statements

• Property damage

• Employment-related wrongful acts

Answer explanation

EPL insurance specifically covers employment-related wrongful acts, such as discrimination or wrongful termination, making it the correct choice. The other options pertain to different types of insurance.

What is a key feature of most professional liability policies?

• They are written on a claims-made basis

• They cover all types of liability

• They are only available to medical professionals

• They include property damage coverage

Answer explanation

A key feature of most professional liability policies is that they are written on a claims-made basis, meaning coverage is provided for claims made during the policy period, rather than for incidents that occurred during that time.

What is the purpose of a release of attachment bond?

• To regain attached property, guaranteeing it will be available or judgment satisfied

• To ensure appearance in court

• To provide insurance for property damage

• To cover errors in financial statements

Answer explanation

The purpose of a release of attachment bond is to regain attached property, ensuring it will be available or that the judgment will be satisfied. This guarantees that the property is protected during legal proceedings.

Why is Employment Practices Liability Insurance (EPL) necessary?

• Because CGL and Workers’ Comp exclude employment-related claims

• Because it includes coverage for natural disasters

• Because it covers all types of workplace injuries

• Because it is required by law for all businesses

Answer explanation

Employment Practices Liability Insurance (EPL) is necessary because General Liability (CGL) and Workers’ Compensation policies typically exclude coverage for employment-related claims, leaving businesses vulnerable.

What is the purpose of a 'hammer clause' in professional liability policies?

• To provide additional coverage for property damage

• To allow the insurer to settle claims without the insured's consent

• To exclude certain types of claims

• To ensure the insured pays a higher premium

Answer explanation

The purpose of a 'hammer clause' is to allow the insurer to settle claims without the insured's consent, which can expedite the claims process and limit the insurer's liability.

What is a performance bond?

• A guarantee that a contractor will complete the work as per contract terms

• A guarantee that a contractor will enter a contract if their bid is accepted

• A guarantee that a contractor will pay subcontractors and suppliers

• A guarantee of workmanship for a period after completion

Answer explanation

A performance bond ensures that a contractor will complete the work according to the contract terms, providing financial security to the project owner in case of default.