ACE Policy Analysis & Evaluation 3 — Questions and Answers
Question 1: Which component of a policy is considered the primary document that outlines the insurer's basic promises and the insured's duties?
- Insuring agreement (Correct answer)
- Declarations page
- Conditions section
- Exclusions section
Correct answer: Insuring agreement
The insuring agreement sets forth what the insurer promises to pay or do and the broad scope of coverage granted.
Question 2: Under ACORD standards, what is the primary purpose of the ACORD 140 form?
- To submit a property section of a commercial insurance application (Correct answer)
- To report a first notice of loss for auto claims
- To document workers' compensation payroll information
- To issue a certificate of insurance for marine coverage
Correct answer: To submit a property section of a commercial insurance application
The ACORD 140 is the Commercial Property Section application form used to collect property coverage information.
Question 3: A claims-made policy is triggered when:
- A claim is first made against the insured during the policy period (Correct answer)
- The wrongful act occurs during the policy period
- The policy is first purchased
- The insurer receives written notice of a suit
Correct answer: A claim is first made against the insured during the policy period
Claims-made policies are triggered by when the claim is first made against the insured, not when the underlying act occurred.
Question 4: What is the primary function of a retroactive date on a claims-made policy?
- It establishes the earliest date that a covered act can have occurred (Correct answer)
- It defines when the policy first renews
- It sets the date the insurer must pay claims by
- It determines the start of the extended reporting period
Correct answer: It establishes the earliest date that a covered act can have occurred
The retroactive date limits claims-made coverage to acts that occurred on or after that date, preventing coverage for pre-existing incidents.
Question 5: An insured requests an Extended Reporting Period (ERP) endorsement. What does this provision primarily allow?
- Reporting claims after policy expiration for acts that occurred before expiration (Correct answer)
- Extending the policy term at the same premium
- Covering acts that occur after policy expiration
- Allowing late premium payments without cancellation
Correct answer: Reporting claims after policy expiration for acts that occurred before expiration
An ERP (or 'tail') allows the insured to report claims after the policy expires as long as the underlying acts occurred before expiration.
Question 6: When analyzing policy limits under a CGL policy, what does 'per occurrence' limit mean?
- The maximum the insurer will pay for all damages arising from a single occurrence (Correct answer)
- The total the insurer will pay for all occurrences during the policy year
- The amount paid per individual claimant
- The limit applicable only to property damage claims
Correct answer: The maximum the insurer will pay for all damages arising from a single occurrence
The per-occurrence limit caps the insurer's total payment for all bodily injury and property damage arising from any one occurrence.
Question 7: Which evaluation factor is MOST critical when reviewing an inland marine floater policy for a contractor's equipment?
- Whether the covered property is scheduled or blanket and the basis of valuation (Correct answer)
- The insured's credit score at policy inception
- Whether the policy includes a liberalization clause
- The number of employees who operate the equipment
Correct answer: Whether the covered property is scheduled or blanket and the basis of valuation
Scheduled vs. blanket coverage and the valuation method (ACV vs. RCV) directly determine how much the insurer pays when equipment is lost or damaged.
ACE Policy Analysis & Evaluation 3
Which component of a policy is considered the primary document that outlines the insurer's basic promises and the insured's duties?