18 Free Texas Commercial Liability & CGL Practice Questions (2026)
How to Use This Commercial Liability Set
Types of Casualty Policies is the largest block on the Texas Property & Casualty exam at 23 of the 130 scored questions. Auto and workers' compensation take a share of it; commercial liability takes the rest, and it is the part that personal-lines candidates find least intuitive.
The reason is that the questions stop asking who was careless. They describe a business, a loss and a lawsuit, and ask which instrument responds — the CGL, an umbrella, a professional liability policy, a surety bond, or nothing at all. Several of them sound plausible in every scenario, which is exactly the point.
These 18 questions come from LanePrep's Texas P&C quiz bank: the CGL's coverage parts and what triggers them, where the CGL stops and another policy has to start, and the specialist forms the exam expects you to name on sight.
Decide what kind of loss it is first. Bodily injury, property damage, personal and advertising injury, and pure economic loss go to different places. Naming the loss narrows six candidate policies to two.
Practice Questions 1-6: CGL Coverage Parts, Triggers and Limits
The CGL has three coverage parts and two possible triggers, and the exam tests both. Occurrence and claims-made forms respond to the same facts differently, and the per-occurrence and aggregate limits interact in a way that produces a specific number.
Question 1 (Chapter 4)
A customer slips on a wet floor inside a retail store and suffers a broken hip. The store has a Commercial General Liability (CGL) policy. Under which CGL coverage part would this claim be handled?
- A) Coverage A — Bodily Injury and Property Damage Liability
- B) Coverage B — Personal and Advertising Injury Liability
- C) Coverage C — Medical Payments
- D) Both A and C may apply
Show answer & explanation
Answer: D
Coverage A applies because the store may be liable for the customer's bodily injury due to negligence. Coverage C (Medical Payments) may also apply, as it pays regardless of fault for medical expenses of persons injured on the premises. Medical Payments is designed to settle small claims quickly and help maintain goodwill.
Question 2 (Chapter 4)
A manufacturer sells a product that causes injury to a consumer two years after the product was sold. The manufacturer has a CGL policy. Under which CGL coverage category does this claim fall?
- A) Premises and operations liability
- B) Products and completed operations liability
- C) Personal and advertising injury liability
- D) Contractual liability
Show answer & explanation
Answer: B
Products and completed operations liability under Coverage A of the CGL covers bodily injury or property damage arising from the insured's products or completed work, when the injury occurs away from the insured's premises and after the product has left the insured's control. Premises and operations liability, by contrast, covers injuries that occur on the insured's premises or during ongoing operations.
Question 3 (Chapter 4)
A business competitor publishes false statements about a company's products in an advertisement. The targeted company has a CGL policy. Under which coverage would a claim for damages be filed?
- A) Coverage A — Bodily Injury and Property Damage Liability
- B) Coverage B — Personal and Advertising Injury Liability
- C) Coverage C — Medical Payments
- D) This type of claim is excluded from the CGL policy
Show answer & explanation
Answer: B
Coverage B of the CGL policy covers personal and advertising injury, which includes offenses such as libel, slander, disparagement of a person's or organization's goods, products, or services, copyright infringement in advertisements, and invasion of privacy. False statements about a company's products in advertising constitute disparagement, which falls squarely under Coverage B.
Question 4 (Chapter 4)
A CGL policy is written on an occurrence basis with a policy period of January 1 to December 31, 2025. A customer is injured on the premises on November 15, 2025, but does not file a lawsuit until March 2026. Is the claim covered?
- A) No, because the lawsuit was filed after the policy expired
- B) Yes, because the occurrence (injury) took place during the policy period
- C) Only if the insured purchased an Extended Reporting Period endorsement
- D) No, because the insured failed to report the incident during the policy period
Show answer & explanation
Answer: B
An occurrence-based CGL policy covers claims arising from occurrences (accidents) that take place during the policy period, regardless of when the claim is filed. This is a key distinction from claims-made policies, which require both the occurrence and the claim to fall within the policy period (or reporting period).
Question 5 (Chapter 4)
A CGL policy written on a claims-made basis has a policy period of January 1 to December 31, 2025. A bodily injury occurs on June 15, 2025, and a claim is filed on November 1, 2025. A separate bodily injury occurs on October 1, 2025, but the claim is not filed until February 15, 2026. Which claims are covered?
- A) Both claims are covered because both injuries occurred during the policy period
- B) Only the first claim is covered because, under a claims-made policy, both the occurrence and the claim must fall within the policy period
- C) Neither claim is covered
- D) Only the second claim is covered because it involves a more recent injury
Show answer & explanation
Answer: B
Under a claims-made CGL policy, coverage requires that both the occurrence take place after the retroactive date and the claim be made during the policy period. The first claim meets both criteria (injury June 15, claim November 1 — both in 2025). The second claim fails because, although the injury occurred during the policy period, the claim was filed in February 2026 — after the policy expired. An Extended Reporting Period would have been needed.
Question 6 (Chapter 4)
A CGL policy has a $1,000,000 per-occurrence limit and a $2,000,000 general aggregate limit. During the policy period, three separate covered claims occur: $800,000, $900,000, and $700,000. How much does the insurer pay in total?
- A) $2,400,000, the sum of all three claims
- B) $2,000,000, limited by the general aggregate, with each individual claim capped at $1,000,000 per occurrence
- C) $1,000,000, the per-occurrence limit
- D) $3,000,000, three times the per-occurrence limit
Show answer & explanation
Answer: B
The general aggregate limit is the maximum the insurer will pay for all covered claims during the policy period (excluding products-completed operations, which has its own aggregate). Each individual claim is first subject to the $1,000,000 per-occurrence limit. Claim 1: $800,000 (within per-occurrence limit). Claim 2: $900,000 (within per-occurrence limit). Running total: $1,700,000. Claim 3: only $300,000 is available ($2,000,000 aggregate - $1,700,000 already paid), even though the claim is $700,000.
Practice Questions 7-12: Where the CGL Stops, and Umbrella Coverage
Where the CGL stops. Product recall costs, professional negligence and an additional insured's position are all standard exam ground, and umbrella coverage only makes sense once you know what it sits above — including the difference between an umbrella and a plain excess policy, which is not the same thing.
Question 7 (Chapter 4)
A toy manufacturer discovers a defect in one of its products and voluntarily recalls 50,000 units. The recall costs $2 million. The manufacturer files a claim under its CGL policy. Is the recall cost covered?
- A) Yes, product recall costs are covered under the CGL's products-completed operations coverage
- B) No, the CGL policy contains a product recall exclusion — the cost of recalling, repairing, replacing, or withdrawing a defective product is excluded
- C) Yes, but only if someone was actually injured by the defective product
- D) Yes, recall costs are covered under Coverage C — Medical Payments
Show answer & explanation
Answer: B
The CGL policy specifically excludes product recall costs (also known as 'sistership' liability). The cost of withdrawing, inspecting, repairing, replacing, or disposing of the insured's defective product is the insured's business expense, not an insurable third-party liability. However, if a defective product causes bodily injury or property damage to a third party, those claims are covered under products-completed operations. Separate product recall insurance is available.
Question 8 (Chapter 4)
An architect's negligent building design causes a structural collapse that injures several people. The building owner's CGL policy is in force. Does the CGL cover the architect's professional negligence?
- A) Yes, the CGL covers all types of negligence
- B) No, the CGL contains a professional services exclusion — claims arising from the rendering or failure to render professional services are excluded
- C) Yes, but only if the architect is an additional insured on the building owner's policy
- D) No, because the architect is not an employee of the building owner
Show answer & explanation
Answer: B
The CGL policy excludes claims arising from professional services — errors, omissions, or negligent acts in the performance of professional duties. This is why professionals such as architects, engineers, doctors, lawyers, and accountants need separate Professional Liability (E&O) insurance. The CGL covers general commercial liability exposures (premises, operations, products) but not professional malpractice.
Question 9 (Chapter 4)
A general contractor requires a subcontractor to name the general contractor as an additional insured on the subcontractor's CGL policy. What does the additional insured endorsement provide to the general contractor?
- A) It makes the general contractor the named insured on the subcontractor's policy
- B) It extends the subcontractor's CGL coverage to the general contractor for liability arising out of the subcontractor's work, providing the general contractor with direct coverage under the subcontractor's policy
- C) It replaces the general contractor's own CGL policy
- D) It provides physical damage coverage for the general contractor's equipment
Show answer & explanation
Answer: B
An additional insured endorsement adds a party (such as a general contractor, landlord, or project owner) to the CGL policy of another party. The additional insured receives direct coverage under the policy for liability arising from the named insured's operations. This is not the same as being the named insured — the additional insured's coverage is typically limited to liability arising from the named insured's work. It does not replace the additional insured's own coverage.
Question 10 (Chapter 4)
A business has a $1 million CGL policy and a $5 million commercial umbrella policy with a $10,000 self-insured retention (SIR). A lawsuit results in a $3.5 million judgment against the business. How do the policies respond?
- A) The CGL pays $1 million and the umbrella pays $2.5 million
- B) The umbrella pays the full $3.5 million because it has the higher limit
- C) The CGL pays $1 million, the insured pays the $10,000 SIR, and the umbrella pays $2.5 million
- D) The CGL pays $1 million and the umbrella pays $2.49 million after the SIR
Show answer & explanation
Answer: A
An umbrella policy sits above the underlying insurance (the CGL). When the underlying CGL policy is exhausted, the umbrella pays the excess. The CGL pays its $1 million limit first, then the umbrella pays the remaining $2.5 million. The self-insured retention (SIR) applies only to claims that are covered by the umbrella but NOT covered by the underlying policy. Since this claim is covered by the CGL, no SIR applies.
Question 11 (Chapter 4)
What is the key difference between an umbrella liability policy and an excess liability policy?
- A) An umbrella policy provides higher limits, while an excess policy provides lower limits
- B) An umbrella policy may provide broader coverage than the underlying policies and can drop down for claims not covered by underlying insurance, while an excess policy strictly follows the terms of the underlying policy
- C) An excess policy covers personal liability, while an umbrella covers only commercial liability
- D) There is no meaningful difference; the terms are interchangeable
Show answer & explanation
Answer: B
The key distinction is breadth of coverage. An umbrella policy can provide coverage broader than the underlying policies — it may cover claims that the underlying policy does not (subject to a self-insured retention). It 'drops down' to provide coverage where gaps exist. An excess liability policy strictly follows the terms, conditions, and exclusions of the underlying policy, providing only additional limits — not broader coverage.
Question 12 (Chapter 4)
A business owner has a Personal Umbrella Policy (PUP) with a $1 million limit. She also has a Commercial Umbrella Policy (CUP) with a $2 million limit for her business. What is the key difference between a personal and commercial umbrella?
- A) They provide identical coverage; the only difference is the name
- B) A personal umbrella sits over personal lines policies (auto, homeowners) and covers personal liability exposures; a commercial umbrella sits over commercial lines policies (CGL, commercial auto, employers liability) and covers business liability exposures
- C) Personal umbrellas have lower limits than commercial umbrellas by law
- D) Commercial umbrellas cover only property damage; personal umbrellas cover only bodily injury
Show answer & explanation
Answer: B
A personal umbrella policy provides excess liability coverage over underlying personal lines policies (PAP, homeowners, watercraft). A commercial umbrella provides excess liability over underlying commercial policies (CGL, commercial auto, employers liability). Each covers the type of exposures associated with its underlying policies. The personal umbrella may also provide broader coverage (drop-down coverage) for claims not covered by underlying policies, subject to a self-insured retention.
Practice Questions 13-18: Professional Lines, Surety and Commercial Auto
The specialist forms. Errors and omissions, employment practices, directors and officers, surety, garage and commercial auto each exist because a standard CGL would not respond. The exam usually gives you a profession and a loss and expects the policy name back.
Question 13 (Chapter 4)
A financial advisor gives negligent investment advice that causes a client to lose $500,000. Which type of insurance policy would cover the financial advisor's liability?
- A) Commercial General Liability (CGL) policy
- B) Professional Liability / Errors and Omissions (E&O) policy
- C) Directors and Officers (D&O) liability policy
- D) Employment Practices Liability Insurance (EPLI)
Show answer & explanation
Answer: B
Professional Liability, also known as Errors and Omissions (E&O) insurance, covers claims arising from negligent professional services, errors, or omissions. A CGL policy typically excludes professional services. E&O is essential for professionals such as financial advisors, attorneys, accountants, real estate agents, and insurance agents whose clients could suffer financial harm from professional mistakes.
Question 14 (Chapter 4)
An employee files a lawsuit against their employer alleging wrongful termination based on age discrimination. Which type of insurance policy would cover the employer's defense costs and potential damages?
- A) Workers' Compensation insurance
- B) Commercial General Liability (CGL) policy
- C) Employment Practices Liability Insurance (EPLI)
- D) Commercial Umbrella policy
Show answer & explanation
Answer: C
Employment Practices Liability Insurance (EPLI) covers employers against claims by employees alleging wrongful employment practices including wrongful termination, discrimination (age, sex, race, disability), sexual harassment, and retaliation. These employment-related claims are specifically excluded under CGL policies. Workers' Compensation covers workplace injuries, not employment practice disputes.
Question 15 (Chapter 4)
A board member of a publicly traded corporation makes a decision that leads to significant shareholder losses. Shareholders file a lawsuit alleging breach of fiduciary duty. Which type of insurance would cover the board member?
- A) Commercial General Liability (CGL) policy
- B) Professional Liability / Errors and Omissions (E&O) policy
- C) Directors and Officers (D&O) Liability Insurance
- D) Employment Practices Liability Insurance (EPLI)
Show answer & explanation
Answer: C
Directors and Officers (D&O) Liability Insurance protects the personal assets of corporate directors and officers when they are sued for alleged wrongful acts in their capacity as company leaders. This includes claims of breach of fiduciary duty, mismanagement, and failure to comply with regulations. D&O is distinct from E&O, which covers professional service errors, and from EPLI, which covers employment practice claims.
Question 16 (Chapter 4)
A contractor is required by the project owner to obtain a surety bond guaranteeing completion of a construction project. How does a surety bond differ from an insurance policy?
- A) A surety bond involves three parties (principal, obligee, surety) and the surety expects no losses, while insurance involves two parties and the insurer expects to pay some claims
- B) A surety bond is cheaper than insurance and provides the same coverage
- C) A surety bond covers only property damage, while insurance covers liability
- D) There is no difference; surety bonds are a form of insurance
Show answer & explanation
Answer: A
A surety bond involves three parties: the principal (contractor who must perform), the obligee (project owner who is protected), and the surety (company guaranteeing performance). Unlike insurance, the surety expects zero losses — if the surety pays the obligee, it has the right to recover from the principal. Insurance involves two parties (insurer and insured), and the insurer expects to pay claims from the pool of premiums collected.
Question 17 (Chapter 4)
An auto body shop has a Garage Liability policy. A customer drops off their car for repairs. While the car is in the shop's care, a fire destroys the vehicle. Which coverage under the garage policy would apply to the customer's damaged vehicle?
- A) Garage Liability coverage
- B) Garagekeepers coverage
- C) The customer's own auto policy, not the shop's policy
- D) The shop's Commercial Property policy
Show answer & explanation
Answer: B
Garagekeepers coverage is a specific part of the Garage policy that covers physical damage to customers' vehicles while in the care, custody, or control of the garage operation. Standard Garage Liability coverage excludes damage to property in the insured's care, custody, or control. Garagekeepers coverage fills this gap and is essential for auto repair shops, dealerships, and parking facilities.
Question 18 (Chapter 4)
A sales representative uses her personal vehicle for business travel. Her employer does not own the vehicle but wants liability protection if she causes an accident during a business trip. Which type of commercial auto coverage addresses this exposure?
- A) Owned auto coverage (symbol 2)
- B) Hired auto coverage (symbol 8)
- C) Non-owned auto coverage (symbol 9)
- D) Garagekeepers coverage
Show answer & explanation
Answer: C
Non-owned auto coverage (symbol 9) protects the employer against liability arising from the use of vehicles owned by employees or other individuals when used for business purposes. The employer does not own or hire the vehicle — the employee does. This is essential for businesses whose employees use personal cars for business errands, sales calls, or other work-related travel.
The Commercial Liability Mistakes That Cost Marks
Sending professional negligence to the CGL. A CGL excludes professional services. An architect's bad design, a financial adviser's bad advice and a doctor's bad judgment all need their own policy, however physical the resulting injury is.
Treating a surety bond as insurance. A bond is a three-party guarantee and the principal repays the surety. Insurance is two parties and the insurer does not come after its own insured. Every surety question turns on that distinction.
Confusing occurrence with claims-made. An occurrence policy responds to when the injury happened; a claims-made policy responds to when the claim was reported. Same facts, opposite answers, and the exam gives you dates precisely so you have to choose.
Forgetting the aggregate. Three claims under the per-occurrence limit can still exhaust the general aggregate, and the arithmetic question is asked in exactly that shape.
The other two blocks of chapter 4 have their own sets: 16 auto questions and 14 workers' compensation questions, where Texas differs from every other state. All nine chapters are audio lessons too — chapter 1 is free, no signup.
Question counts and content weighting come from the Pearson VUE Texas examination content outline. Read September 2026.
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