Property & Casualty Insurance Coverage Flashcards

A homeowner suffers a kitchen fire. The policy has a $300,000 Coverage A limit with an 80% coinsurance requirement. The home's replacement cost is $400,000 and the insured carries $280,000 in coverage. What is the coinsurance penalty formula result for a $40,000 loss?

Answer: $35,000

Required insurance = $320,000 (80% × $400,000); penalty ratio = $280,000/$320,000 = 0.875; insurer pays 0.875 × $40,000 = $35,000.

Which section of the commercial package policy (CPP) addresses loss of business income caused by a covered property loss that forces the insured to suspend operations?

Answer: Business income (and extra expense) coverage form

The Business Income (and Extra Expense) form covers lost net income and continuing expenses when a covered property loss causes a business interruption.

Under the PAP, Uninsured Motorist (UM) coverage protects the insured from losses caused by:

Answer: A driver who carries no liability insurance or a hit-and-run driver

UM coverage responds when the at-fault driver has no liability coverage or flees the scene; underinsured motorist (UIM) fills gaps in coverage.

A CGL policy's 'occurrence' trigger means a claim is covered based on:

Answer: When the injury or damage occurs during the policy period

An occurrence-based CGL policy covers bodily injury or property damage that occurs during the policy period, regardless of when the claim is made.

Which of the following best describes the 'other insurance' pro-rata clause in property policies?

Answer: Each insurer pays its proportionate share based on its limit relative to total coverage

Under a pro-rata other insurance clause, each carrier pays its proportionate share based on the ratio of its limit to the combined limits of all policies.

An insured files a claim under their HO policy after a burglar steals jewelry valued at $8,000. The policy has a $200,000 Coverage C limit but a $1,500 sublimit for jewelry. How much will the insurer pay (assuming no deductible)?

Answer: $1,500

Special sublimits for jewelry cap theft coverage at $1,500 under standard HO forms regardless of the broader Coverage C limit.

In workers' compensation, the employer's liability coverage (Part Two) protects the employer against:

Answer: Third-party lawsuits by injured employees that fall outside the workers' comp exclusive remedy

Part Two (employer's liability) covers the employer's legal liability in suits that circumvent the exclusive remedy doctrine, such as dual-capacity or third-party-over actions.