AIC Insurance Policies & Coverage Analysis 2

Question 1

A building valued at $400,000 is insured for $240,000 under a commercial property policy with an 80% coinsurance clause and a $1,000 deductible. What does the insurer pay on a $40,000 loss?

Accepted Answer

$29,000

Answer

Required insurance is $320,000, so $240,000/$320,000 × $40,000 = $30,000, minus the $1,000 deductible = $29,000.

Question 2

Policy A ($100,000 limit) and Policy B ($300,000 limit) both cover the same property with pro rata other-insurance clauses. How much does Policy A pay on an $80,000 loss?

Accepted Answer

$20,000

Answer

Policy A carries 1/4 of the total $400,000 coverage, so it pays 1/4 of $80,000, or $20,000.

Question 3

Two liability policies use contribution by equal shares: Policy A has a $50,000 limit and Policy B a $150,000 limit. How is a $120,000 loss split?

Accepted Answer

A $50,000; B $70,000

Answer

Each pays equally until A's $50,000 limit runs out, then B pays the remaining $20,000, for $70,000 total.

Question 4

Under an open perils (special form) policy, who generally has the burden of proving that an exclusion applies?

Accepted Answer

The insurer

Answer

Under open perils coverage, any direct physical loss is covered unless excluded, so the insurer must prove an exclusion applies.

Question 5

A policy exclusion says it applies to a loss 'regardless of any other cause or event contributing concurrently or in any sequence to the loss.' What is this wording designed to do?

Accepted Answer

Override the concurrent causation doctrine

Answer

Anti-concurrent causation language excludes the loss whenever an excluded peril contributes, even if a covered peril was also involved.

AIC - Associate in Claims Practice Test

AIC - Associate in Claims Practice Test

AIC Insurance Policies & Coverage Analysis 2