Bar Exam (Next Generation) Quiz: Insurance Coverage

6 questions · exam conditions

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Insurance CoverageQuestion 1 of 6

Fresh Foods, Inc. has a Business Auto Policy with Highway Mutual. The declarations page shows coverage symbol 1 for 'Owned Autos Only' and symbol 9 for 'Nonowned Autos.' The policy provides:

'Who Is An Insured: 1. You for any covered auto. 2. Anyone else while using with your permission a covered auto you own, hire, or borrow. 3. Anyone liable for the conduct of an insured described above, but only to the extent of that liability. 4. For any covered auto that is a nonowned auto, any employee or partner of yours while using it in your business.'

'Nonowned auto' is defined as 'any auto you do not own, lease, hire, rent, or borrow that is used in your business by you or any employee or partner. It includes an auto owned by an employee while the employee is using it in your business.'

A Fresh Foods delivery driver, using her personally owned sedan to make deliveries for Fresh Foods, struck and injured a pedestrian. Fresh Foods did not own, lease, hire, rent, or borrow the sedan, and the sedan was not listed on the policy. The driver had Fresh Foods' permission and was acting within the scope of her employment.

Under the policy, is the driver an insured for the pedestrian's claim?

No, because the driver is not Fresh Foods, and her own sedan is not an auto Fresh Foods owns, hires, or borrows under provision 2.

Yes, because the sedan is a nonowned auto used in Fresh Foods' business by an employee, and the policy makes such an employee an insured.

No, because an auto owned by the driver cannot be a nonowned auto, even when it is used for the employer's business.

Yes, because the driver had Fresh Foods' permission to use the sedan, making her an insured under provision 2.

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Bar Exam (Next Generation) Quiz

Bar Exam (Next Generation) Quiz: Insurance Coverage

Practice Insurance Coverage in Bar Exam (Next Generation) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Insurance Coverage, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Next Generation).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Fresh Foods, Inc. has a Business Auto Policy with Highway Mutual. The declarations page shows coverage symbol 1 for 'Owned Autos Only' and symbol 9 for 'Nonowned Autos.' The policy provides:

Under the policy, is the driver an insured for the pedestrian's claim?

No, because the driver is not Fresh Foods, and her own sedan is not an auto Fresh Foods owns, hires, or borrows under provision 2.
Yes, because the sedan is a nonowned auto used in Fresh Foods' business by an employee, and the policy makes such an employee an insured. (correct answer)
No, because an auto owned by the driver cannot be a nonowned auto, even when it is used for the employer's business.
Yes, because the driver had Fresh Foods' permission to use the sedan, making her an insured under provision 2.

Explanation: Whenever you see a Business Auto Policy question, first identify the coverage symbols and then match the vehicle to the symbol and the user to the Who Is An Insured clause. Here, the declarations include symbol 9 for Nonowned Autos, and the policy defines a nonowned auto as one the employer does not own, lease, hire, rent, or borrow — including an employee's own auto while used in the employer's business. The driver was making deliveries with permission and within scope, so her sedan is a nonowned auto under symbol 9. Provision 4 then expressly makes any employee an insured while using a nonowned auto in your business. Therefore, she is insured for the pedestrian's claim. The first wrong answer focuses on provision 2 and says she is not insured because Fresh Foods does not own, hire, or borrow the sedan. That ignores provision 4, which is the nonowned-auto grant. The answer claiming an employee-owned auto can never be a nonowned auto contradicts the definition: "nonowned" means not owned by the employer, not owned by no one. The remaining wrong answer reaches "yes" for the wrong reason: permission is enough under provision 2 only for a covered auto that Fresh Foods owns, hires, or borrows — the sedan is none of those, so provision 2 does not apply. Strategy: On insurance questions, distinguish the coverage trigger from the insured trigger. Read definitions carefully; "nonowned" is a term of art meaning not owned by the named insured, not "unowned."

Question 2

Pinnacle Electric, a subcontractor, agreed to add Westgate Properties as an additional insured on Pinnacle's CGL policy. The endorsement states:

'Who Is An Insured is amended to include any person or organization with whom you have agreed to add as an additional insured, but only with respect to liability for bodily injury or property damage caused, in whole or in part, by your acts or omissions or the acts or omissions of those acting on your behalf. However, this insurance does not apply to bodily injury or property damage caused by the sole negligence of the additional insured.'

The state supreme court in Mount Airy v. Premier Indemnity, interpreting identical language, held: 'The words caused, in whole or in part, by require only that the named insured's conduct be a proximate cause of the injury. Coverage is barred only when the additional insured's liability rests entirely on its own conduct and the named insured played no causal role. In determining the duty to defend, the insurer must consider facts actually known to it that could bring the claim within coverage, even if those facts are not alleged in the complaint.'

A visitor to Westgate's building tripped over an unmarked cable that Pinnacle had left across a hallway and sued Westgate, alleging only that Westgate negligently failed to inspect the premises and warn of the danger. Westgate tendered the suit to Pinnacle's insurer. Before suit was filed, Pinnacle's insurer had received an accident report stating that Pinnacle's cable was the cause of the fall.

Does Pinnacle's insurer have a duty to defend Westgate?

No, because the complaint alleges only Westgate's own negligence and does not mention Pinnacle's conduct.
Yes, because the insurer knew facts showing Pinnacle's cable was a proximate cause of the fall and Westgate was not the sole cause. (correct answer)
No, because Westgate's negligent failure to inspect was an independent cause of the fall, and any independent negligence bars coverage under the sole-negligence clause.
Yes, because the endorsement provides coverage for any liability arising out of Pinnacle's work on the project, without regard to causation.

Explanation: Whenever you see a duty-to-defend question, remember the claim is not judged only by the complaint. The insurer must consider facts actually known to it that could bring the claim within coverage. Here, the insurer knew from the accident report that Pinnacle's cable caused the fall. Under Mount Airy, "caused, in whole or in part, by" requires only that Pinnacle's conduct be a proximate cause. Because the known facts show Pinnacle played a causal role, Westgate was not the sole cause, so the sole-negligence exclusion does not apply. Therefore, the insurer must defend Westgate. The choice saying "no, because the complaint alleges only Westgate's own negligence" is wrong: it ignores the insurer's independent knowledge, which triggers the duty to defend even if unpled. The choice claiming "Westgate's negligent failure to inspect was an independent cause" misunderstands the sole-negligence clause: coverage is barred only if the additional insured's liability rests entirely on its own conduct, and here Pinnacle's cable was also a cause. The choice saying coverage applies "to any liability arising out of Pinnacle's work, without regard to causation" is too broad; the endorsement expressly requires causation and excludes sole negligence of the additional insured. On the exam, when an additional insured endorsement is involved, ask: What facts did the insurer know, and did the named insured contribute to the injury? If yes, the duty to defend is triggered regardless of how the plaintiff framed the complaint.

Question 3

GreenScape, Inc. is the named insured under a commercial general liability policy. The policy provides:

'Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.'

The policy excludes 'bodily injury or property damage expected or intended from the standpoint of the insured.' The state supreme court in Bergeron v. Mount Beacon Insurance Co., interpreting identical language, held that 'an injury is expected if the insured knew, before the injury occurred, that the injury or damage was practically certain to result from its conduct; a mere foreseeable risk of harm is not enough.'

A GreenScape foreman sprayed herbicide along a customer's fence line. The foreman checked the weather, saw the wind was blowing directly toward the neighbor's prize shrubs, and knew the herbicide would drift onto the shrubs and kill them if he sprayed in those conditions. He sprayed anyway because the crew was behind schedule. He did not want the shrubs to die and hoped the wind would calm, but it did not, and the shrubs died.

Under the policy and Bergeron, is the shrubs' death property damage 'expected or intended' so that coverage is excluded?

No, because the foreman did not desire or intend to kill the shrubs and hoped the wind would calm down.
No, because the death of the shrubs was not certain to occur; the foreman only knew of a foreseeable risk.
Yes, because the foreman intentionally applied herbicide, and an intentional act that causes damage is always expected.
Yes, because the foreman knew the shrubs' death was practically certain when he chose to spray. (correct answer)

Explanation: Whenever you see an "expected or intended" exclusion, the key is the insured's knowledge before the harm, not the insured's wishes afterward. Here, Bergeron defines "expected" as knowing the injury or damage was practically certain to result. The foreman checked the weather, knew the wind would carry herbicide to the neighbor's shrubs, and knew it would kill them if he sprayed. That satisfies the practical-certainty standard, so the shrubs' death is excluded, regardless of his hope that the wind would calm. The correct choice is the one stating that the foreman knew the death was practically certain when he chose to spray. The choice saying "No, because the foreman did not desire or intend to kill the shrubs" misses the distinction: "expected" and "intended" are separate, and Bergeron focuses on knowledge of practical certainty, not desire. Similarly, the choice saying "No, because death was not certain; he only knew a foreseeable risk" misreads the standard—practical certainty is stronger than mere foreseeability, and the foreman's own knowledge met that bar. Finally, the choice saying "Yes, because an intentional act that causes damage is always expected" overstates the rule: intentional application of herbicide is not automatically excluded; the consequences must be expected or intended from the insured's standpoint. On exam day, when you see an expected/intended exclusion, ask: Did the insured know the harm was practically certain, not merely possible? Hope or motive is irrelevant.

Question 4

Peak Builders, a roofing contractor, is the named insured under a commercial general liability policy. The policy provides:

Exclusion: 'Property damage to your work arising out of it or any part of it and included in the products-completed operations hazard is not covered.'

Exception: 'This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.'

'Your work' is defined as 'work or operations performed by you or on your behalf.' The products-completed operations hazard includes property damage occurring after work is completed and arising out of that work.

Peak Builders hired Alpine Roofing as a subcontractor to install a new roof on a condominium building. Eight months after Alpine completed the roof, its faulty installation leaked during a rainstorm, damaging the roof decking (part of the roofing work) and the interior ceilings. The condominium owner sued Peak, and Peak tendered the claim to its CGL insurer.

Which of the following best describes the insurer's coverage obligation for the roof-decking and interior-ceiling damage?

Both the roof decking and interior ceiling damage are covered; the subcontractor exception applies to the decking because Alpine performed it, and the ceilings are not Peak's work. (correct answer)
The interior ceiling damage is covered, but the roof decking damage is not, because the subcontractor exception does not restore coverage for damage to the work itself.
Neither the roof decking nor the interior ceiling damage is covered, because both are property damage to 'your work' included in the products-completed operations hazard.
The roof decking damage is covered, but the interior ceiling damage is not, because the completed-operations hazard covers only damage to the insured's work product.

Explanation: Whenever you see a completed-operations coverage question, think about whose work was damaged and whether a subcontractor did it. The key here is the subcontractor exception to the "your work" exclusion. The roof decking is part of the roofing work and therefore falls within "your work" included in the products-completed operations hazard. Normally, the exclusion would bar coverage for it. But because Alpine Roofing, a subcontractor, performed the work on Peak's behalf, the exception applies: the exclusion does not apply if the damaged work was performed by a subcontractor. So the decking is covered. The interior ceilings are not Peak's work at all—they are other property damaged by the completed roofing work—so the "your work" exclusion never applies to them, and they are covered as well. The wrong answer claiming interior ceilings are covered but roof decking is not misreads the exception: it does restore coverage for damage to the subcontractor's work itself, not just other property. The answer saying neither is covered ignores the subcontractor exception and wrongly treats the ceilings as Peak's work. And the answer saying decking is covered but ceilings are not gets the rule backwards—completed-operations coverage protects against damage to third-party property, not just damage to the insured's work product. Study tip: always separate the insured's defective work from damage to other property, and remember the subcontractor exception can pull defective subcontractor work back into coverage.

Question 5

Fitness Forge, Inc. is the named insured under a Commercial General Liability policy issued by SureGuard Insurance. The policy provides in part:

'We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies. We have the right and duty to defend the insured against any suit seeking those damages. However, we will have no duty to defend the insured against any suit seeking damages for bodily injury or property damage to which this insurance does not apply.'

The policy defines 'suit' as 'a civil proceeding in which damages because of bodily injury, property damage, or personal and advertising injury are alleged. Suit does not include an arbitration proceeding or other alternative dispute resolution proceeding.'

A former client filed a complaint against Fitness Forge in state court, alleging that Fitness Forge's negligent training of its personal trainers caused the client's shoulder injury. The prayer for relief requests only an order requiring Fitness Forge to retrain its staff and adopt new safety protocols, and costs of suit. A separate arbitration demand was served on Fitness Forge by another client asserting a claim for bodily injury arising from a different alleged negligent incident.

Does SureGuard have a duty to defend Fitness Forge in either the state-court action or the arbitration?

It must defend both, because each proceeding alleges bodily injury and the duty to defend is broader than the duty to indemnify.
It must defend the state-court action but not the arbitration, because the policy's definition of 'suit' excludes arbitration proceedings.
It need not defend either until the claimants obtain a judgment awarding damages; the duty to defend arises only if and when damages are actually awarded.
It need not defend either, because the state-court complaint seeks only injunctive relief and costs rather than damages, and the arbitration is not a 'suit.' (correct answer)

Explanation: Whenever you see a duty-to-defend question, remember that the duty is triggered by the allegations in the underlying pleading, but only if those allegations fall within both the coverage grant and the policy's defined terms. Here, two gates block coverage: the claim must seek "damages" and the proceeding must qualify as a "suit." The correct answer is the one stating that SureGuard need not defend either proceeding. The state-court complaint seeks only injunctive relief—retraining staff and adopting safety protocols—plus costs. It does not seek "damages," so the suit does not trigger the duty to defend. The arbitration demand, while it asserts bodily injury, fails the second gate: the policy expressly defines "suit" as a civil proceeding and excludes arbitration proceedings. Therefore, neither proceeding triggers the duty. The choice saying SureGuard must defend both because each alleges bodily injury and the duty is broader than indemnity is a trap. The duty to defend is indeed broader than indemnity, but it is not unlimited—it still requires a claim for damages and a covered "suit." The choice that would defend the state-court action but not the arbitration misses that the state-court complaint seeks no damages, only equitable relief. The choice saying the duty arises only after a judgment awarding damages misstates the rule: the duty to defend is measured at the outset of the litigation, not after judgment. Your study tip: always read the prayer for relief and the policy's definitions carefully—"damages" and "suit" are gatekeeping terms on the bar exam.

Question 6

State statute: 'An insurer may not disclaim liability or deny coverage on the ground of the insured's failure to give notice of an occurrence or claim as soon as practicable unless the insurer proves that the failure prejudiced the insurer. This section does not apply to claims-made policies, for which the insured must make a claim during the policy period or any extended reporting period regardless of prejudice.'

Diversified Manufacturing had an occurrence-based commercial general liability policy with Northgate Insurance. The policy required Diversified to give Northgate notice of an occurrence as soon as practicable and stated that notice was a condition precedent to coverage. A forklift accident injured an employee in January. Diversified did not notify Northgate until September, after the employee sued. Northgate denied coverage solely because notice was late. Diversified concedes the notice was late, but no evidence shows the delay hindered Northgate's investigation, defense, or settlement.

May Northgate properly deny coverage for the employee's claim?

Yes, because the policy expressly made timely notice a condition precedent to coverage.
Yes, because the employee's claim was not made during the policy period and the claims-made rule applies.
No, unless Northgate can prove prejudice, because the policy is an occurrence policy and the statute applies. (correct answer)
No, because the statute eliminates the notice requirement entirely for occurrence policies, so any delay is irrelevant.

Explanation: Whenever you see an insurance coverage question involving late notice, your first move is to classify the policy as either occurrence-based or claims-made. That distinction drives everything: for occurrence policies, statutes often impose a "notice-prejudice" rule, meaning an insurer can only deny coverage if the delay actually harmed it. Here, the policy is occurrence-based, and the statute squarely applies—it prevents denial unless the insurer proves prejudice. Northgate denied solely on lateness, and Diversified's delay didn't hinder investigation, defense, or settlement. Since Northgate offered no evidence of prejudice, it cannot deny coverage. Now consider the traps. The choice saying yes, because the policy expressly made timely notice a condition precedent to coverage misunderstands the hierarchy of law: a state statute overrides conflicting policy language, so the condition precedent cannot save Northgate. The choice saying yes, because the employee's claim was not made during the policy period and the claims-made rule applies is factually wrong—this is an occurrence policy, and the claims-made rule only applies to claims-made policies, which this is not. Finally, the choice saying no, because the statute eliminates the notice requirement entirely overstates the statute's effect. The statute does not wipe out the notice duty; it merely conditions a denial on a showing of prejudice, so a delay alone isn't fatal, but the duty still exists. Your study tip: memorize the two buckets—occurrence policies require prejudice for late notice, while claims-made policies demand strict compliance regardless of prejudice. If a fact pattern mentions "occurrence-based," immediately look for whether the insurer proved actual harm.