Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

When would a Commercial General Liability Policy not respond to a claim for damages?

1. When an injury occurs due to negligence

2. When a goodwill gesture payment is made for an injury

3. When an accident occurs in a public place

4. When the claimant is a well-known individual

The correct answer is: When a goodwill gesture payment is made for an injury

A Commercial General Liability (CGL) Policy is designed to cover claims arising from bodily injury, property damage, and certain personal and advertising injuries that occur in the course of business operations. However, the policy typically does not respond to claims that arise from goodwill gestures made by a business. When a goodwill gesture payment is made for an injury, it is generally not considered as compensatory damages for which the insurer is liable. Goodwill payments are often made voluntarily by businesses to maintain customer relations or to address complaints without admitting wrongdoing. As such, these payments do not fall under the provisions of the CGL policy that cover damages that need to be compensated due to legal liability incurred by the insured. In contrast, the other scenarios provided involve situations that would typically fall under the coverage of a CGL policy as they relate to incidents where an injury or loss has occurred due to a business-related operation. This is why option B stands out as the circumstance under which a CGL policy would not respond to a claim for damages.