17 Free North Carolina P&C Practice Questions: Commercial Casualty Coverages (2026)

Question 1 (Chapter 5)

A marketing agency’s CGL policy includes Coverage B for personal and advertising injury. The agency distributes a flyer that unintentionally contains a false statement about a competitor’s product, resulting in a libel lawsuit. Which element of Coverage B is triggered?

• A) Defamation of a private individual
• B) Invasion of privacy
• C) Wrongful termination of an employee
• D) Libel, a form of written defamation

Question 2 (Chapter 5)

A restaurant’s CGL policy contains a supplementary payments provision that states the insurer will pay defense costs "in addition to the limits of liability." How does this affect the aggregate limit of $1,000,000 for Coverage A?

• A) Defense costs are subtracted from the $1,000,000 aggregate limit.
• B) Defense costs are only paid if the claim is settled, not if it goes to trial.
• C) The provision is void under G.S. 58‑63‑20, so defense costs are not covered.
• D) Defense costs are paid separately and do not reduce the $1,000,000 aggregate limit.

Question 3 (Chapter 5)

A small manufacturing firm located in a county that does not have a workers’ compensation insurance pool seeks coverage. Which mechanism allows the firm to obtain workers’ comp insurance under North Carolina law?

• A) Purchase a surplus lines workers’ comp policy
• B) Apply for a self‑insurance exemption under G.S. 58‑33‑150
• C) Obtain a commercial general liability policy that includes workers’ comp endorsement
• D) Enroll in the State Assigned Risk Plan for workers’ compensation

Question 4 (Chapter 5)

A retailer purchases a Crime coverage policy that uses the "loss sustained" form. Which of the following statements best describes the timing of coverage under this form?

• A) Coverage attaches when the loss is discovered, even if the loss occurred months earlier.
• B) Coverage attaches at the time the insured first learns of the loss, regardless of when the loss occurred.
• C) Coverage attaches only after a police report is filed, irrespective of the loss date.
• D) Coverage attaches when the loss actually occurs, and the insured must report it within the policy’s notice period.

Question 5 (Chapter 5)

A sales representative uses his personal vehicle to deliver product samples to customers during business hours. The company’s Commercial Auto policy includes owned, hired, and non‑owned auto coverage. Which coverage applies to the representative’s personal vehicle?

• A) Owned auto coverage, because the vehicle is used for business purposes.
• B) Hired auto coverage, because the employee is a temporary driver.
• C) Non‑owned auto liability coverage, because the vehicle is not owned by the insured.
• D) Physical damage coverage, because the vehicle is insured against collision.

Question 6 (Chapter 5)

An employee intentionally self‑inflicts a hand injury while on the job. The employer files a workers’ compensation claim for temporary total disability. Which statement is correct regarding coverage?

• A) Workers’ compensation will pay benefits because the injury occurred on the employer’s premises.
• B) Workers’ compensation will pay only the medical expenses, not disability benefits.
• C) Workers’ compensation will deny benefits because intentional injury is excluded under G.S. Chapter 97.
• D) Workers’ compensation will pay a reduced benefit because the injury was self‑inflicted.

Question 7 (Chapter 5)

A business has a $2,000,000 Commercial Umbrella policy that sits on top of a $1,000,000 CGL and a $500,000 Business Auto policy. The business suffers a $300,000 workers’ compensation claim. How much, if any, will the umbrella policy pay?

• A) $300,000, because the umbrella provides excess for any liability.
• B) $250,000, after applying the self‑insured retention.
• C) $50,000, because the umbrella will fill the gap between the claim and the CGL limit.
• D) $0, because workers’ compensation is not an underlying coverage.

Question 8 (Chapter 5)

During a lawsuit alleging false advertising, the insured’s CGL policy includes a supplementary payments provision for defense costs. The insurer attempts to deny defense costs, citing lack of coverage. Under G.S. 58‑63‑15 (Unfair Trade Practices), what is the insurer’s obligation?

• A) The insurer may deny defense costs because the claim is groundless.
• B) The insurer must only pay defense costs if the claim is proven to be covered after trial.
• C) The insurer can deny defense costs if the insured fails to cooperate with the investigation.
• D) The insurer must provide a defense, even if the claim is groundless, because defense costs are a supplementary payment.

Question 9 (Chapter 5)

A subcontractor adds a general contractor as an "additional insured" on its CGL policy by virtue of a contractual clause, but the endorsement was never signed. The general contractor is sued for bodily injury that occurred on the subcontractor’s site. Which statement is most accurate?

• A) The general contractor is not covered because the endorsement was not executed.
• B) The general contractor is automatically covered because the contract requires it.
• C) The general contractor is covered only for damages arising from the subcontractor’s negligence.
• D) The general contractor is covered for any liability arising from the subcontractor’s operations.

Question 10 (Chapter 5)

An employee suffers a back injury at work that prevents him from performing his previous job but allows him to work part‑time in a lighter‑duty position. Under North Carolina workers’ compensation definitions, this injury is classified as:

• A) Temporary total disability
• B) Permanent partial disability
• C) Temporary partial disability
• D) Permanent total disability

Question 11 (Chapter 5)

A construction firm has a $2,000,000 Commercial Umbrella policy with a $100,000 self‑insured retention (SIR). The firm's underlying coverages, a $500,000 CGL policy and a $250,000 Business Auto liability policy, both exhaust their limits responding to a third‑party lawsuit. The loss remaining above those exhausted underlying limits is $1,200,000. How much will the Umbrella policy pay?

• A) $1,200,000
• B) $1,000,000
• C) $1,100,000
• D) $900,000

Question 12 (Chapter 5)

A North Carolina employer has an experience modification factor of 1.2, a manual rate of $15 per $100 of payroll, and an actual payroll for the policy period of $800,000. Under North Carolina's workers' compensation rating rules, what is the employer's premium for the policy period?

• A) $144,000, calculated as ($800,000 ÷ 100 × $15) × 1.2.
• B) $120,000, calculated by ignoring the experience modification factor.
• C) $9,600, calculated as $15 × 1.2 without applying it to the payroll.
• D) $150,000, calculated as $15,000 × 10.

Question 13 (Chapter 5)

A North Carolina employer fails to post the required Notice of Workers' Compensation Coverage in a conspicuous place at the workplace. Under North Carolina law, which of the following is accurate regarding the employer's exposure for this violation?

• A) The Industrial Commission may impose a penalty on the employer for the violation.
• B) No penalty can ever be imposed, because posting the notice is only a recommended best practice.
• C) The only possible consequence is suspension of benefits for affected employees.
• D) The violation automatically voids the employer's workers' compensation coverage entirely.

Question 14 (Chapter 5)

A North Carolina Commercial Crime policy uses a loss sustained form. An employee embezzles $100,000 over 12 months but is terminated before discovery. The theft is discovered 6 months after termination, and the policy was in effect for the entire 18-month period. Under North Carolina’s crime coverage terms, which statement is correct?

• A) The claim is covered because the theft occurred during the policy period, and the loss was sustained within the coverage’s discovery window.
• B) The claim is excluded because the theft was discovered after the employee’s termination, violating the policy’s discovery condition.
• C) The claim is covered only if the employee’s termination was unrelated to the theft.
• D) The claim is excluded because the policy only covers theft discovered within 6 months of the policy’s end date.

Question 15 (Chapter 5)

A North Carolina‑based landscaping company purchases a Commercial General Liability (CGL) policy with a $1,000,000 aggregate limit and a $750,000 per‑occurrence limit for Coverage A. During a routine job, an employee accidentally damages a neighbor's irrigation system (property damage) and injures a pedestrian (bodily injury) in the same incident. The total claim is $750,000. Two weeks later, a separate incident occurs where a customer slips on a wet walkway, resulting in a $300,000 medical claim. Under North Carolina's CGL policy terms, how much will the insurer pay in total for these claims?

• A) $1,000,000 (the aggregate limit is exhausted by the first claim alone)
• B) $1,250,000 (both claims are paid in full, with the aggregate limit treated as applying separately to each occurrence)
• C) $750,000 (only the first claim is covered because the second exceeds the per‑occurrence limit)
• D) $1,000,000 (the first claim is paid in full, and the second is capped at the $250,000 remaining under the aggregate limit)

Question 16 (Chapter 5)

A North Carolina surety bond is issued for a public works project where the obligor (owner) requires a performance bond from the principal (contractor). The bond amount is $500,000. If the contractor fails to complete the project and the owner suffers a $400,000 loss, which party is secondarily liable for paying the obligee (owner) under the bond terms?

• A) The principal (contractor) is secondarily liable after the surety pays.
• B) The obligee (owner) is secondarily liable if the surety refuses to pay.
• C) The surety is secondarily liable only if the principal is insolvent.
• D) No party is secondarily liable; the surety pays the full amount.

Question 17 (Chapter 5)

A North Carolina workers' compensation claim is filed for an employee who suffers a temporary total disability (TTD) after a workplace injury and remains completely unable to work. Which statement about her TTD benefits is accurate?

• A) TTD benefits are not paid in North Carolina; only medical expenses are covered.
• B) TTD benefits are calculated as a percentage of her average weekly wage, subject to the statutory maximum, while she remains unable to work.
• C) TTD benefits equal her full average weekly wage with no statutory maximum.
• D) TTD benefits are a fixed dollar amount set annually, regardless of the employee's wage.