Coverage Analysis & Interpretation Flashcards

Which of the following losses would most likely be covered under the 'collapse' additional coverage in a standard homeowners policy?

Answer: A floor caving in due to hidden insect damage

Many homeowners forms extend collapse coverage to include hidden insect or vermin damage as a specified cause, distinguishing it from ordinary settling or deterioration.

The 'separation of insureds' clause in a CGL policy means:

Answer: Each insured is covered separately as if each had its own policy, subject to overall limits

The separation of insureds provision treats each insured independently for coverage purposes, preventing the acts of one insured from automatically barring coverage for another.

A homeowner has a covered water damage loss. The insurer pays the claim and then sues the plumber whose negligence caused the pipe to burst. This is an example of:

Answer: Subrogation

Subrogation is the insurer's right to step into the insured's shoes and recover from a negligent third party after paying the insured's claim.

Under a commercial inland marine policy, which of the following is a key characteristic that distinguishes inland marine property from building coverage?

Answer: Inland marine covers property that is mobile or in transit

Inland marine policies are designed for property that moves — such as equipment in transit, contractors' tools, or goods being shipped — unlike building coverage for fixed locations.

A liability policy has a $1,000,000 per-occurrence limit and a $2,000,000 aggregate limit. After two $900,000 claims are paid in the same policy year, how much aggregate coverage remains?

Answer: $200,000

Two $900,000 payments total $1,800,000 paid against the $2,000,000 aggregate, leaving $200,000 of aggregate coverage remaining for the policy year.

When analyzing a 'pollution exclusion' in a CGL policy, a 'sudden and accidental' exception would most likely allow coverage for:

Answer: An unexpected chemical spill during routine operations that is immediately contained

The sudden and accidental exception to the pollution exclusion can restore coverage when a discharge is abrupt, unintended, and promptly addressed rather than gradual or ongoing.

Which of the following best describes the 'insuring agreement' section of an insurance policy?

Answer: States the insurer's promise to pay covered losses in exchange for premium

The insuring agreement is the core promise of the policy where the insurer agrees to pay for covered losses, subject to the policy's terms, conditions, and exclusions.