Free CAIB 2 Practice Questions: Commercial General Liability Policy

Use this page to isolate Commercial General Liability Policy 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 Policy

A broker receives a notice from a commercial client that manufactures and installs custom checkout counters. A grocery store alleges the counters warped after installation, causing several checkout lanes to be closed for a week. The store is demanding the cost to replace the counters and reimbursement for lost sales. No bodily injury has been reported. Before discussing whether the CGL bodily injury and property damage coverage may be engaged, which missing fact is most important for the broker to obtain?

• A. Whether the client wants to keep doing work for the grocery store
• B. Whether the warped counters caused physical damage to other tangible property or loss of use of tangible property
• C. Whether the grocery store has paid the client’s final invoice for the counters
• D. Whether the client provided a written workmanship warranty with the installation contract

Best answer: B

What this tests: Commercial General Liability Policy

Explanation: CGL bodily injury and property damage coverage is not a general guarantee of the insured’s work or product. In this scenario, the key issue is whether the allegation includes property damage as understood under the CGL, such as physical injury to tangible property, or loss of use of tangible property. If the complaint is only that the insured’s counters were defective and the customer lost sales because the counters had to be replaced, coverage may be limited by the insuring agreement and business-risk exclusions. The broker should gather the missing claim facts and avoid promising coverage while the insurer reviews the policy wording and allegations.

• Payment of the final invoice may matter to a contract dispute, but it does not determine whether CGL property damage has been alleged.
• The future business relationship is a client-service concern, not the coverage trigger for bodily injury or property damage.
• A workmanship warranty may affect contractual obligations, but CGL coverage still depends first on the nature of the alleged injury or damage.

CGL property damage analysis turns on physical injury to tangible property or loss of use, not merely poor workmanship or disappointed business expectations.

Question 2

Topic: Commercial General Liability Policy

A brokerage receives a claim notice from a commercial client that installs shelving for retail stores. The client completed and invoiced a shelving installation three weeks ago, and the store accepted the work. Yesterday, a shelf detached from the wall after installation was finished, damaging the store’s merchandise and injuring a customer. Which CGL exposure category is most relevant for the broker to identify when reporting the claim to the insurer?

• A. Premises exposure
• B. Ongoing operations exposure
• C. Products exposure
• D. Completed operations exposure

Best answer: D

What this tests: Commercial General Liability Policy

Explanation: CGL exposure categories help organize how liability may arise. Premises exposure relates to injury or damage arising from the insured’s ownership, occupancy, or use of premises. Operations exposure relates to work being performed while it is in progress. Products exposure relates to goods manufactured, sold, handled, or distributed by the insured. Completed operations exposure applies when injury or property damage arises out of work after that work has been completed or abandoned. Here, the shelving installation was finished, invoiced, and accepted before the shelf detached. The broker should report the facts accurately and identify the completed operations aspect without promising coverage or claim payment.

• Premises exposure is not the best fit because the injury occurred at the customer’s store, not from the insured’s own premises.
• Ongoing operations exposure would fit damage caused while the contractor was still performing the installation.
• Products exposure is less precise because the allegation arises from completed installation work, not merely a defective product sold by the insured.

The alleged damage and injury arose after the contractor’s work was finished and accepted, making completed operations the most relevant CGL exposure category.

Question 3

Topic: Commercial General Liability Policy

A broker is reviewing a CGL declaration for a retail bakery after the landlord asks to be added for liability arising from the leased premises.

Commercial General Liability Declarations
Named Insured: Westgate Bakery Ltd.
Policy period: March 1, 2026 to March 1, 2027
Each occurrence limit: $2,000,000
General aggregate limit: $5,000,000
Products-completed operations aggregate: $2,000,000
Property damage deductible: $1,000 per occurrence
Endorsement schedule: Additional Insured - Managers or Lessors of Premises

Which declaration item is the most relevant clue for responding to the landlord’s request?

• A. The property damage deductible of $1,000 per occurrence
• B. The named insured shown as Westgate Bakery Ltd.
• C. The products-completed operations aggregate of $2,000,000
• D. The endorsement schedule showing Additional Insured - Managers or Lessors of Premises

Best answer: D

What this tests: Commercial General Liability Policy

Explanation: A CGL declaration summarizes key policy facts such as the named insured, policy period, limits, deductibles, aggregates, and scheduled endorsements. For a landlord’s request to be added for liability arising from leased premises, the most relevant declaration clue is the endorsement schedule. An endorsement titled Additional Insured - Managers or Lessors of Premises suggests the policy may include wording intended for landlords or property managers. The broker should still review the actual endorsement wording, lease requirements, and insurer authority before issuing confirmation or a certificate. The declaration is a guide, not a full coverage promise.

• The named insured identifies who is insured as the primary business, but it does not by itself satisfy a landlord’s additional insured request.
• The products-completed operations aggregate relates to products and completed work exposures, not the landlord’s premises liability request.
• The property damage deductible may affect claim payment handling, but it does not identify whether the landlord can be added.

That endorsement clue directly relates to a landlord or lessor being added for liability connected with the leased premises.

Question 4

Topic: Commercial General Liability Policy

A commercial broker is reviewing a new lease for a printing shop client. The lease requires the tenant to add the landlord as an additional insured on the tenant’s CGL for liability arising out of the tenant’s occupancy. It also requires the tenant to indemnify the landlord for all claims connected with the premises, including the landlord’s own negligence. The current CGL declarations do not show any additional insured endorsement, and the landlord asks for a certificate today stating the landlord is fully covered for all lease obligations. What is the broker’s best action?

• A. Submit the lease requirement to the insurer, request the appropriate additional insured endorsement, issue only an accurate certificate after authority is confirmed, and suggest legal advice on the indemnity clause.
• B. Issue the certificate immediately because the lease requirement automatically extends the tenant’s CGL to the landlord.
• C. Decline the request because landlords cannot be added as additional insureds under a tenant’s CGL policy.
• D. Tell the client the CGL will cover every liability assumed under the lease, including the landlord’s own negligence.

Best answer: A

What this tests: Commercial General Liability Policy

Explanation: Contractual risk transfer can create two separate issues: the contract obligation and the insurance coverage available to support it. A CGL policy does not automatically change because a lease requires additional insured status. The broker should review the request, provide the insurer with the relevant wording, and obtain authority or an endorsement before issuing a certificate that names the landlord. The certificate must accurately reflect the policy; it should not promise coverage broader than the policy provides. The indemnity clause is also a legal obligation that may be broader than the insurance, especially where it refers to the landlord’s own negligence. The broker can explain the insurance limitation but should not give legal advice on whether the client should accept that clause.

• A certificate alone does not amend the CGL policy or create additional insured coverage.
• Assuming all contractual indemnity obligations are insured overlooks CGL limits, exclusions, and wording restrictions.
• Refusing all landlord requests is too broad; landlord additional insured endorsements are common when approved by the insurer.

This addresses the insurance request within the broker’s authority while recognizing that the lease’s indemnity wording may create obligations broader than CGL coverage.

Question 5

Topic: Commercial General Liability Policy

A small contractor sends a construction contract requiring the project owner to be named as an additional insured. The client asks the broker to issue the certificate today and to confirm that any lawsuit involving the project will be fully covered. Which explanation best connects the risk transfer request to the CGL policy without promising a legal or claim outcome?

• A. The project owner is automatically covered under the contractor’s CGL policy whenever a written contract requires additional insured status.
• B. The contract transfers the project owner’s risk to the contractor’s insurer, so the certificate can confirm full coverage for any lawsuit on the project.
• C. The broker should advise whether the indemnity clause is legally enforceable before deciding whether to issue the certificate.
• D. The certificate can show existing coverage, but the additional insured request must be checked against the CGL wording and any required endorsement before confirming what coverage may apply.

Best answer: D

What this tests: Commercial General Liability Policy

Explanation: Risk transfer requests often involve contracts, certificates, and additional insured endorsements, but the broker should connect the request back to the actual CGL policy wording. A certificate generally evidences coverage; it does not create or broaden coverage. Additional insured status usually depends on the policy wording, endorsement wording, insurer authority, and the facts of a claim. The broker can explain the process, identify what must be reviewed, request insurer approval when needed, and document the client’s instructions. The broker should not promise that a lawsuit will be covered or give a legal opinion about the contract.

• Saying the contract transfers all risk to the insurer overstates what a CGL policy and certificate can do.
• Treating additional insured status as automatic ignores endorsement wording and insurer requirements.
• Advising on the legal enforceability of an indemnity clause crosses into legal advice rather than broker coverage guidance.

It links the contract request to the actual CGL policy and endorsement while avoiding a promise of coverage or legal result.

Question 6

Topic: Commercial General Liability Policy

A contractor asks why its landlord and several project owners require proof of commercial general liability insurance. The contractor does not own the project sites, but its employees work at customer premises. Recent concerns include a visitor tripping over the contractor’s extension cord, accidental damage to a customer’s wall during work, and a demand letter alleging that the contractor’s promotional material harmed another business’s reputation.

Which coverage concept best fits the purpose of the required insurance?

• A. CGL coverage for third-party bodily injury, property damage, personal injury, advertising injury, and related defence exposures
• B. Commercial property coverage for damage to the contractor’s own tools, equipment, stock, and tenant improvements
• C. Commercial automobile coverage for liability arising from owned, leased, hired, or non-owned vehicles
• D. Business income coverage for the contractor’s lost revenue after insured damage to its own premises

Best answer: A

What this tests: Commercial General Liability Policy

Explanation: Commercial general liability insurance is intended to protect a business against common third-party liability exposures. It is not first-party property insurance for the insured’s own assets. In this situation, the key facts are allegations by others: a visitor’s bodily injury, damage to a customer’s property, and reputational harm from promotional material. These are the types of third-party bodily injury, property damage, personal injury, advertising injury, and defence-related exposures that fall within the basic purpose of a CGL policy, subject to the actual wording, definitions, exclusions, and conditions.

• Damage to the contractor’s own tools or stock is a commercial property issue, not the main purpose of CGL.
• Vehicle-related liability is normally addressed through commercial automobile insurance, not the CGL insuring agreement.
• Lost revenue after damage to the insured’s own premises points to business income coverage, not third-party liability coverage.

CGL insurance is designed to address legal liability exposures to third parties, including defence, for the types of allegations described.

Question 7

Topic: Commercial General Liability Policy

A commercial client tells the broker, “We bought CGL, so the insurer should handle any loss involving an unhappy customer.” The client describes two recent situations: a customer alleges she slipped on a wet floor in the client’s store and fractured her wrist, and another customer demands compensation because a special order was delivered late and caused lost sales.

Which coverage concept best fits the broker’s explanation?

• A. CGL is intended to pay any complaint once a customer threatens to sue, regardless of the policy wording or alleged damage.
• B. CGL is intended for covered legal liability to third parties, such as an alleged bodily injury claim, not every business loss or customer service dispute.
• C. CGL is intended to cover only damage to the insured’s own property at the business premises.
• D. CGL is intended to reimburse the insured for all customer refunds, replacement costs, and lost profits arising from business operations.

Best answer: B

What this tests: Commercial General Liability Policy

Explanation: A Commercial General Liability policy is not a general business-loss policy. Its core purpose is to respond when the insured faces covered legal liability to a third party, commonly for bodily injury or property damage, subject to the insuring agreement, definitions, exclusions, limits, and conditions. A customer alleging injury from a slip and fall at the insured’s premises is the type of third-party liability allegation that may trigger CGL coverage and defence obligations. By contrast, a late delivery, refund demand, lost sale, poor service complaint, or ordinary contract dispute does not automatically become a covered CGL claim. The broker should explain the coverage boundary without promising claim payment and should report potentially covered allegations according to policy and brokerage procedures.

• Treating CGL as reimbursement for refunds and lost profits confuses liability insurance with business performance or contract risk.
• Treating CGL as first-party property insurance is incorrect because CGL primarily addresses third-party liability, not the insured’s own property loss.
• A lawsuit threat alone does not create coverage; the allegation still must fit the policy wording and avoid applicable exclusions.

The slip-and-fall allegation fits the CGL liability trigger, while the late-order complaint may be a contractual or business loss rather than covered legal liability.

Question 8

Topic: Commercial General Liability Policy

A broker is explaining a CGL claim to a renovation contractor. The contractor’s current policy shows:

• Limit: $1,000,000 each occurrence and $2,000,000 products-completed operations aggregate.
• Prior completed-operations settlements this policy year have used $1,900,000 of the aggregate.
• A new completed-operations property damage claim seeks $300,000, and the policy states defence costs and supplementary payments are in addition to the limits.
• The deductible is $5,000 per property damage claim. A renewal quote would replace the deductible with a $25,000 self-insured retention that applies before the insurer has any duty to pay damages or defence costs.

What is the best advice to give the client?

• A. The $300,000 claim can be fully paid because defence costs and supplementary payments are in addition to limits and therefore restore the aggregate after each claim.
• B. Only $100,000 of the products-completed operations aggregate remains for covered damages on the current claim; defence and supplementary payments do not reduce that remaining aggregate, and the renewal self-insured retention would require the client to fund the stated layer before the insurer responds.
• C. The renewal self-insured retention would operate the same as the current deductible because the insurer would still defend and pay the claim from the first dollar, then bill the client later.
• D. The $1,000,000 each occurrence limit is available for the new claim because each occurrence limit overrides any aggregate used by prior claims in the same policy year.

Best answer: B

What this tests: Commercial General Liability Policy

Explanation: CGL limits must be read together. An each occurrence limit caps any one occurrence, but an aggregate can further restrict how much remains for a category of claims during the policy period. Here, only $100,000 remains in the products-completed operations aggregate, so covered damages for the new completed-operations claim are limited by that remaining amount, apart from the deductible and any uninsured excess. The stated wording keeps defence costs and supplementary payments outside the limits, so those costs do not erode the remaining aggregate. A deductible and a self-insured retention are not the same. A deductible commonly leaves the insurer handling the covered claim subject to reimbursement by the insured, while the quoted retention expressly requires the insured to absorb damages and defence costs before the insurer has any duty to respond.

• Relying only on the each occurrence limit ignores the nearly exhausted products-completed operations aggregate.
• Treating defence and supplementary payments as restoring limits misunderstands their role; they may be outside limits, but they do not replenish an aggregate.
• Treating the self-insured retention as identical to a deductible misses the stated wording that the insurer has no duty to pay damages or defence until the retention is satisfied.

The remaining aggregate limits damages payable under the current policy, while defence/supplementary payments are outside the limits and the quoted SIR changes when the insurer must respond.

Question 9

Topic: Commercial General Liability Policy

A commercial client calls after an incident at its warehouse. A delivery driver tripped over an unsecured extension cord in the client’s loading area and fractured a wrist. The driver’s lawyer alleges negligence and demands compensation. The client’s CGL policy was in force on the incident date. What is the best advice for the broker to give?

• A. Report the matter to the CGL insurer as a potential claim because it alleges legal liability for bodily injury, while avoiding any promise that the insurer will pay.
• B. Advise the client that the CGL policy cannot apply because there was no damage to the driver’s vehicle or cargo.
• C. Advise the client that the CGL policy automatically pays because the injury happened on the insured premises.
• D. Wait to notify the insurer until a court decides that the client is legally liable.

Best answer: A

What this tests: Commercial General Liability Policy

Explanation: Basic CGL analysis starts with two linked questions: is the insured alleged to be legally liable, and is the claim for a covered type of damage such as bodily injury or property damage? Here, the demand alleges negligence and the injured person suffered a fractured wrist, which is bodily injury. That makes it a potential CGL claim. The broker should promptly report it to the insurer and avoid promising that the claim will be paid, since the insurer must review the insuring agreement, definitions, exclusions, conditions, and evidence of liability.

• An injury on the premises does not create automatic payment; liability and policy terms still matter.
• Lack of vehicle or cargo damage does not defeat the claim because bodily injury is a covered damage category.
• Waiting for a court judgment can prejudice claim handling; CGL claims should be reported when a claim or potential claim arises.

The facts involve an alleged negligent act and bodily injury, so the broker should submit it for insurer review without confirming coverage or liability.

Question 10

Topic: Commercial General Liability Policy

A plumbing contractor receives a demand letter after a completed installation allegedly caused water damage to a customer’s building. The client says, “Our certificate shows a $2,000,000 CGL limit, so the insurer will pay legal fees on top of that, right?” The broker has not yet reviewed the current CGL wording or endorsements.

Which detail should the broker verify before responding to the client’s concern?

• A. Whether the certificate holder is shown as an additional insured for all operations
• B. Whether defence costs and supplementary payments are payable in addition to the applicable limit or reduce that limit
• C. Whether the products-completed operations aggregate is higher than the each occurrence limit
• D. Whether the contractor’s commercial property policy includes water damage coverage

Best answer: B

What this tests: Commercial General Liability Policy

Explanation: A broker should not assure a client that legal defence costs are outside the CGL limit without checking the actual policy wording, endorsements, and insurer claims position. CGL policies commonly address defence and supplementary payments separately from indemnity limits, but the wording and any endorsements control. The broker should verify how defence expenses apply to the relevant limit before explaining the potential impact on the available insurance. The broker should also avoid promising coverage or claim payment and should report the demand promptly according to the policy conditions and brokerage procedures.

• Commercial property water damage coverage addresses first-party loss to the insured’s own property, not a third-party liability demand.
• Additional insured status may matter for another party’s protection, but it does not answer whether the contractor’s defence costs erode the limit.
• The products-completed operations aggregate may be relevant to available limits, but the client’s specific question is about defence costs and supplementary payments.

The client’s concern turns on how the CGL treats defence and supplementary payments in relation to the applicable limit.

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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 Exclusions
• CAIB 2: Commercial Automobile Insurance

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