Liability Coverage on the P&C Exam: 7 Practice Questions That Test the Basics

Liability Coverage on the P&C Exam — 7 Practice Questions That Test the Basics Liability coverage is the backbone of nearly every P&C policy — and the exam tests it from every angle. These 7 practice questions cover the core concepts you need to know cold. Q1: What are the three components of a CGL (Commercial General Liability) Coverage Form? Answer: Coverage A (Bodily Injury and Property Damage), Coverage B (Personal and Advertising Injury), and Coverage C (Medical Payments). The exam frequently asks which coverage applies to a given scenario. Key distinction: Coverage C (MedPay) is first-party and voluntary — it pays regardless of fault to prevent lawsuits, while Coverage A is third-party liability. Q2: What is the difference between "occurrence" and "claims-made" CGL policies? Answer: An occurrence policy covers claims based on when the injury or damage happened — even if the claim is filed years later. A claims-made policy covers claims only if they're reported during the policy period (or an extended reporting period). The exam trap: a claim filed in 2025 for an injury in 2022. Under an occurrence policy, the 2022 policy responds. Under claims-made, the 2025 policy responds (if still in force). Q3: What does "additional insured" mean, and how does it differ from "named insured"? Answer: A named insured is the policyholder — the person or entity whose name is on the policy and who has full coverage rights. An additional insured is a third party added to the policy via endorsement — they get coverage but only for liability arising from the named insured's operations or premises. The exam will give you a contractor/subcontractor scenario and ask who's covered and for what. Q4: How do aggregate limits differ from per-occurrence limits? Answer: The per-occurrence limit is the max the insurer pays for any single occurrence. The aggregate limit is the max the insurer pays for ALL occurrences during the policy period. Once the aggregate is exhausted, no more coverage is available for the rest of the term. The exam trap: assuming per-occurrence resets after each claim. It does — but the aggregate does NOT reset until renewal. Q5: What is "products-completed operations" hazard? Answer: It covers liability arising from the insured's products after they've left the insured's possession, or from completed work. If a contractor finishes a project and the faulty work causes injury months later, that's products-completed operations. The exam tests whether this coverage applies under Coverage A — yes, it does, but only after the product has left the insured's control or the work is complete. Q6: What is the "insured contract" concept in CGL? Answer: An insured contract is a specific type of agreement (like a lease, sidetrack agreement, easement, or hold-harmless agreement) where the insured assumes liability of another party. The CGL extends coverage to liability the insured assumes under these contracts. The exam will test whether a hold-harmless or indemnity agreement qualifies — it usually does if it meets the policy definition. Q7: When does an auto liability policy respond vs. a CGL policy? Answer: Auto liability responds to bodily injury or property damage arising from the use of a covered auto. CGL responds to BI/PD from business operations — EXCEPT it excludes liability from owned/operated autos (that's what auto liability is for). The exam trap: a delivery driver hits someone. That's auto liability, NOT CGL. But if a customer slips in your office, that's CGL. Score yourself: • 7/7 — You're locked in on liability. Keep it sharp. • 5-6 — Strong. Review occurrence vs. claims-made and aggregate limits. • 4 or less — Liability is a weak spot. Spend extra time here — it's heavily tested. Pro tip: The exam almost always includes an occurrence vs. claims-made scenario AND an aggregate limit question. Master both. Need extra help to PASS your Property and Casualty exam? Get our on-demand program here: https://www.pandcpacademy.com/pass-your-exam-now