Free CAIB 2 Practice Questions: Commercial General Liability Exclusions

Use this page to isolate Commercial General Liability Exclusions before returning to mixed CAIB 2 practice.

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These are original Finance Prep practice questions aligned to this topic area. They are not official exam questions, copied live-exam content, or exam dumps. Use them for self-assessment, scope review, and deciding what to drill next.

Question 1

Topic: Commercial General Liability Exclusions

A plumbing contractor is sued after an employee backs a company-owned van into a customer’s loading dock while arriving to perform repair work. The contractor asks whether the Commercial General Liability policy should handle the property damage claim. Which CAIB 2 concept most directly redirects the coverage analysis away from the CGL policy?

• A. Professional services exclusion, requiring review of errors and omissions coverage
• B. Automobile exclusion, requiring review of the commercial automobile policy
• C. Pollution exclusion, requiring review of environmental liability coverage
• D. Intentional conduct limitation, requiring review of expected or intended injury wording

Best answer: B

What this tests: Commercial General Liability Exclusions

Explanation: A CGL policy is not intended to replace automobile liability coverage. When the alleged bodily injury or property damage arises from the ownership, use, or operation of an automobile, the broker should recognize the CGL automobile exclusion or limitation and review the commercial automobile policy instead. In this situation, the damage occurred when an employee was operating a company-owned van. The core coverage question is therefore automobile liability, not premises, operations, products, or completed operations liability under the CGL. The broker should avoid promising coverage and should report or direct the claim according to the applicable auto policy and brokerage procedures.

• Professional services applies when the loss arises from specialized advice or services, not vehicle operation.
• Pollution applies when the claim arises from the release or escape of pollutants, which is not suggested here.
• Intentional conduct concerns expected or intended injury, while the facts describe an accidental vehicle impact.

Property damage arising from the ownership, use, or operation of an automobile is commonly redirected from CGL analysis to commercial automobile coverage.

Question 2

Topic: Commercial General Liability Exclusions

A renovation contractor asks why its CGL insurer is questioning a claim. The file shows these facts:

• The CGL has a $2,000,000 occurrence limit and a $2,500 property damage deductible.
• An endorsement states: “This insurance does not apply to bodily injury to an employee of the insured arising out of and in the course of employment.”
• The underwriting notes say the contractor should not perform exterior work above three storeys, but no such wording appears on the policy.
• An employee was injured while doing exterior work and has sued the contractor.

What is the broker’s best conclusion?

• A. Report the claim to the insurer and explain that the employee bodily injury exclusion may remove the loss from CGL coverage, unlike a deductible, limit, or underwriting note.
• B. Advise the client that the $2,000,000 occurrence limit overrides the exclusion because the injury occurred during insured operations.
• C. Advise the client that the claim is covered once the $2,500 deductible is paid because deductibles only affect the amount payable.
• D. Treat the underwriting note as the controlling restriction and advise that coverage depends only on whether the work was above three storeys.

Best answer: A

What this tests: Commercial General Liability Exclusions

Explanation: An exclusion is policy wording that removes certain losses from coverage even if the claim otherwise appears to involve an insured operation. A deductible affects how much the insured must absorb before the insurer pays a covered loss. A limit caps the insurer’s payment for covered claims. An underwriting restriction or note may guide placement, pricing, or future action, but it is not the same as a policy exclusion unless it is actually included in the policy wording or endorsement. Here, the decisive wording is the employee bodily injury exclusion. The broker should not promise denial or payment, but should report the claim and explain the coverage boundary accurately.

• Paying a deductible does not convert an excluded loss into a covered loss.
• A liability limit caps covered damages; it does not override an exclusion.
• An underwriting note is not the same as enforceable policy wording unless reflected in the policy or endorsement.

The policy wording contains an exclusion that can bar coverage for this type of loss, while the deductible, limit, and underwriting note do not create coverage for an excluded claim.

Question 3

Topic: Commercial General Liability Exclusions

A small engineering firm carries a standard commercial general liability policy. It receives a demand from a developer alleging that the firm’s stamped drainage design was negligent, causing the developer to pay for redesign work and delay-related costs. The demand does not involve an owned vehicle, a spill, or a network-security incident. Which coverage discussion should the broker raise first?

• A. Commercial automobile liability coverage
• B. Cyber liability coverage
• C. Pollution liability coverage
• D. Professional liability or errors and omissions coverage

Best answer: D

What this tests: Commercial General Liability Exclusions

Explanation: A CGL policy is not intended to cover every type of business liability. When the allegation is based on specialized skill, advice, design, inspection, or other professional services, the broker should recognize that a professional services exclusion or limitation may point away from the CGL and toward a professional liability or errors and omissions discussion. Here, the key fact is the alleged negligent stamped drainage design. The absence of vehicle use, pollution, and cyber facts helps narrow the coverage fit. The broker should avoid promising coverage and should review the wording, report the matter as required, and discuss whether the client has or needs professional liability coverage.

• Commercial automobile coverage fits liability arising from ownership, use, or operation of an automobile, which is not the source of this demand.
• Pollution liability would be relevant if the loss involved release, escape, or contamination by pollutants, not a design-fee and delay allegation alone.
• Cyber liability would be relevant for data breach, network security, or privacy allegations, none of which are present here.

The allegation arises from negligent professional design services, an exposure commonly addressed outside the CGL by professional liability coverage.

Question 4

Topic: Commercial General Liability Exclusions

A café equipment repair shop carries an unendorsed commercial general liability policy. A customer leaves an espresso machine at the shop for repair. Before any repair work is completed, an employee drops the machine while moving it to a workbench, causing major damage. The customer demands payment for the damaged machine.

Which coverage fit should the broker discuss first?

• A. Treat it as a CGL products-completed operations claim because the shop repairs equipment for customers.
• B. Treat it as a commercial automobile claim because an employee was moving the machine.
• C. Treat it as likely excluded under the CGL care, custody, or control exclusion and review bailees or customers’ property coverage.
• D. Treat it as a CGL premises liability claim because the damage occurred at the insured’s shop.

Best answer: C

What this tests: Commercial General Liability Exclusions

Explanation: A CGL policy is designed mainly for third-party bodily injury and property damage claims, but it contains important exclusions. Damage to personal property in the insured’s care, custody, or control is a common CGL boundary. The customer’s machine was physically left with the repair shop and was being handled by an employee, so the broker should not assume the CGL will respond. The better coverage discussion is whether the client has, or should have had, bailees or customers’ property coverage for property of others in the business’s possession. The broker should explain the coverage issue, check the actual wording and endorsements, and avoid promising claim payment.

• Products-completed operations is not the best fit because the repair work was not completed and the loss is to the customer’s item in the shop’s custody.
• Premises liability focuses on injury or damage arising from the premises, but it does not overcome the care, custody, or control issue.
• Commercial automobile coverage is not triggered merely because an employee moved property inside the shop.

The damaged property was in the insured’s custody, so the CGL may exclude it, while bailees or customers’ property coverage may insure the exposure.

Question 5

Topic: Commercial General Liability Exclusions

A landscaping contractor reports that, while working at a client’s premises, an employee damaged a portable generator sitting beside the work area. The contractor asks whether a CGL property damage exclusion may apply. Before discussing the exclusion boundary, which missing fact is most important to obtain?

• A. Whether the generator was owned, rented, borrowed, or otherwise in the contractor’s care, custody, or control
• B. Whether the contractor’s commercial property policy has a high enough contents limit
• C. Whether the contractor has completed loss-control training for employees
• D. Whether the client requested a certificate of insurance before the work began

Best answer: A

What this tests: Commercial General Liability Exclusions

Explanation: CGL exclusion analysis depends on the precise relationship between the insured, the operation, and the damaged property. For property damage, a broker needs to know whether the damaged item was third-party property, property owned by the insured, or property rented, borrowed, occupied, or in the insured’s care, custody, or control. That fact helps determine whether a common CGL exclusion boundary may be relevant. The broker should gather and document the facts, review the wording, and avoid promising coverage before insurer review.

• A commercial property contents limit is not the first issue because the client is asking about a third-party liability claim under the CGL.
• A certificate request may matter for contract compliance, but it does not determine the property damage exclusion boundary.
• Loss-control training may be useful underwriting information, but it does not identify the relationship between the insured and the damaged property.

The ownership and control status of the damaged property is needed to assess common CGL property damage exclusion boundaries.

Question 6

Topic: Commercial General Liability Exclusions

A commercial client is an electrical contractor insured under a CGL policy. While installing wiring in a customer’s finished restaurant, an employee accidentally drills through a hidden water line. The claim includes damage to the customer’s hardwood floor and dining furniture, plus the cost to open the wall and redo the contractor’s faulty wiring in that work area. The CGL wording excludes damage to “that particular part” of property being worked on and excludes the insured’s own work, but does not exclude resulting damage to other property. What is the best coverage advice?

• A. Deny any CGL involvement because all damage arose from the contractor’s operations at the job site.
• B. Advise that the CGL should pay the full claim because the damage was accidental and happened during the policy period.
• C. Report the claim and explain that resulting damage to the customer’s floor and furniture may be covered, but the contractor’s own faulty work is likely excluded.
• D. Treat the entire loss as a professional services complaint because the contractor made an installation error.

Best answer: C

What this tests: Commercial General Liability Exclusions

Explanation: CGL exclusion analysis often separates resulting third-party property damage from the insured’s cost to correct its own work. Here, the accidental drilling caused water damage to property owned by the customer, including the floor and furniture. That type of resulting property damage may fall within the CGL insuring agreement, subject to the full wording and investigation. However, the policy excerpt points to exclusions for the particular part being worked on and for the insured’s own work. Those exclusions are aimed at preventing the CGL from becoming a warranty or quality-control policy for the contractor’s workmanship. The broker should avoid promising payment, report the claim promptly, and explain the likely boundary based on the wording.

• Treating all job-site damage as excluded ignores the distinction between faulty work and resulting damage to other property.
• Treating the full claim as payable ignores the CGL exclusions for the insured’s own work and the particular part being worked on.
• Calling the installation error a professional services complaint misclassifies a trade operations property damage claim.

The CGL may respond to third-party property damage caused by the occurrence while excluding the insured’s own work or the particular part being worked on.

Question 7

Topic: Commercial General Liability Exclusions

A commercial client operates a small custom millwork shop. A contractor has demanded reimbursement because cabinets were delivered late and several units did not match the approved drawings. The contractor’s letter claims extra labour costs, delay penalties, and the cost to replace the cabinets. No bodily injury or damage to other property is alleged. The client says, “We have CGL, so this should cover any lawsuit connected to our business.” Which broker explanation is most appropriate?

• A. CGL is unnecessary for this type of client because product quality disputes are always handled under commercial property insurance.
• B. CGL will respond if the contractor sues, because defence coverage applies to any legal action against the business.
• C. CGL should cover the entire demand because the dispute arose from the client’s business operations and involves a third party.
• D. CGL is designed for covered third-party liability claims such as bodily injury or property damage, and it is not a catch-all for contract penalties, defective product costs, or pure business disputes.

Best answer: D

What this tests: Commercial General Liability Exclusions

Explanation: A CGL policy is not a general warranty, performance bond, accounts receivable protection, or business dispute policy. It is primarily intended to respond to covered third-party claims involving bodily injury, property damage, personal injury, or advertising injury, subject to the insuring agreement, definitions, exclusions, and endorsements. In this scenario, the demand is based on late delivery, nonconforming cabinets, replacement of the client’s own product, and related economic loss. Those facts raise common CGL boundary issues such as contractual liability, own product, own work, and impaired property concepts. A careful broker should explain the coverage fit, recommend prompt claim reporting if a claim may exist, and avoid guaranteeing either coverage or denial.

• A dispute being connected to business operations does not make every demand a CGL claim.
• Defence coverage is not unlimited; it depends on the pleadings and whether the claim potentially falls within covered liability.
• Commercial property insurance covers first-party property exposures, not routine contractual performance or product quality disputes with customers.

The facts point to a contractual and defective-work dispute without bodily injury or damage to other property, so the broker should explain the CGL coverage boundary without promising a claim outcome.

Question 8

Topic: Commercial General Liability Exclusions

A broker is reviewing a CGL claim notice for a mechanical contractor. The notice says: “After the contractor completed installation of a new pump at a customer’s plant, the pump failed and there is a demand for $18,000 in property damage.” The file does not identify what property was damaged.

Which missing fact is most important for deciding whether the demand involves the insured’s own work, the insured’s own product, or third-party property?

• A. Whether the damaged property was the pump, the installation work, or other property belonging to the customer
• B. Whether the customer has fully paid the contractor’s invoice for the pump installation
• C. Whether the contractor has had similar claims with the same insurer in prior policy periods
• D. Whether the customer requested a certificate of insurance before work began

Best answer: A

What this tests: Commercial General Liability Exclusions

Explanation: CGL analysis often turns on what property was actually damaged and its relationship to the insured’s operations. Damage to the insured’s own product, such as a supplied pump, may raise an own product issue. Damage to the insured’s performed work, such as the installation itself, may raise an own work issue. Damage to separate property belonging to the customer, such as surrounding machinery, flooring, or other plant equipment, is a different third-party property damage issue. Without identifying the damaged property, a broker cannot properly discuss the likely coverage boundary or frame the claim information for the insurer. The broker should gather the missing facts and avoid promising a coverage outcome.

• Payment status may affect a commercial dispute, but it does not classify the damaged property for CGL exclusion analysis.
• Prior claims history may interest an underwriter, but it does not decide whether this loss concerns own work, own product, or third-party property.
• A certificate request may show contractual insurance expectations, but it does not identify what property was damaged.

The CGL boundary depends on identifying whether the claimed damage is to the insured’s product or work, or to separate third-party property.

Question 9

Topic: Commercial General Liability Exclusions

A restaurant tenant asks whether its CGL policy will cover a fire loss at its leased unit. The lease makes the tenant responsible for damage to the premises and to landlord-owned kitchen equipment. The CGL excludes property damage to property the insured owns, rents, occupies, or has in its care, custody, or control, but has an exception for “property damage to premises rented to you caused by fire.” What is the best response?

• A. Confirm that the exception restores CGL coverage for all property at the leased location if the loss is caused by fire.
• B. Explain that the exception is narrow and may address legal liability for fire damage to the rented premises, but it should not be treated as full coverage for contents, equipment, or all lease obligations.
• C. Issue a certificate stating that the landlord’s building, equipment, and the tenant’s stock are fully covered under the CGL.
• D. Advise that no CGL coverage can ever apply to any property damage involving rented premises.

Best answer: B

What this tests: Commercial General Liability Exclusions

Explanation: CGL exclusions often contain exceptions, but an exception does not automatically create the broad coverage a client wants. Here, the exclusion removes coverage for property the insured owns, rents, occupies, or controls. The fire exception is narrower: it may preserve coverage for the insured’s legal liability for fire damage to the rented premises, subject to the actual wording, limits, and conditions. It does not turn the CGL into a commercial property policy for the tenant’s stock, improvements, or equipment, and it does not guarantee coverage for every obligation in the lease. A broker should explain the boundary, avoid promising claim payment, review the property and tenants legal liability needs, and seek insurer confirmation where needed.

• Treating the fire exception as full location coverage ignores the continuing limits of the exclusion and the difference between liability coverage and property insurance.
• Saying CGL can never respond to rented premises damage overlooks the specific exception in the wording.
• Issuing a certificate for coverage that has not been confirmed would overstate the policy and create broker E&O exposure.

The fire exception is limited to the rented premises and does not restore broad CGL coverage for property in the tenant’s care or contractual responsibilities beyond the wording.

Question 10

Topic: Commercial General Liability Exclusions

A cabinetry contractor asks whether its CGL policy will respond to a demand from a restaurant owner. The owner’s email says only: “Your installed bar cabinetry failed and caused damage during opening weekend.” The contractor wants the broker to explain whether the CGL exclusions for the insured’s own work or product will apply.

Which missing fact should the broker obtain first before discussing that exclusion boundary?

• A. Whether the contractor wants to increase its CGL limit at renewal
• B. Whether the restaurant owner has already started a lawsuit against the contractor
• C. What property is alleged to be damaged, and whether it is the contractor’s own work/product or other property
• D. Whether the restaurant owner requires a new certificate of insurance

Best answer: C

What this tests: Commercial General Liability Exclusions

Explanation: Before explaining a CGL exclusion boundary, the broker needs the facts that make the boundary meaningful. For own work and own product issues, the key distinction is usually between the cost to repair or replace the insured’s defective work or product and resulting damage to other property. A vague allegation that cabinetry “failed and caused damage” is not enough. The broker should ask what was damaged, who owned it, and whether the claimed loss is for the cabinetry itself, other restaurant property, or both. The broker should avoid promising coverage and should document the facts and refer the claim to the insurer for a coverage position.

• A lawsuit may affect defence handling, but it does not identify the exclusion boundary.
• Renewal limit discussions do not answer whether the current allegation falls within or outside an exclusion.
• A certificate request is a servicing issue, not the missing damage fact needed to analyze the CGL exclusion boundary.

The own work and own product exclusion boundary depends on identifying the damaged property and separating the insured’s work from damage to other property.

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Related focused pages

• Free CAIB 2 Full-Length Practice Exam
• CAIB 2: Introduction to Commercial Property Insurance
• CAIB 2: Commercial Property Insurance Forms
• CAIB 2: Commercial Property Exclusions and Additional Coverages
• CAIB 2: Roles Involved with Commercial Property Insurance
• CAIB 2: Law in Canada for Commercial Insurance
• CAIB 2: Commercial General Liability Policy
• CAIB 2: Commercial Automobile Insurance

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