CCA Insurance Policies and Coverage 3 — Questions and Answers
Question 1: Under a claims-made liability policy, a 'retroactive date' of January 1, 2020 means:
- Claims must be filed by January 1, 2020
- Occurrences before January 1, 2020 are not covered even if the claim is made during the policy period (Correct answer)
- The policy automatically renews on January 1 each year
- Coverage begins only after a 60-day waiting period from January 1, 2020
Correct answer: Occurrences before January 1, 2020 are not covered even if the claim is made during the policy period
The retroactive date sets the earliest point in time from which occurrences can give rise to covered claims; incidents before that date are excluded regardless of when the claim is made.
Question 2: Which provision in a property insurance policy requires the insured to carry insurance equal to a specified percentage of the property's value or face a penalty at the time of loss?
- Pro rata liability clause
- Coinsurance clause (Correct answer)
- Agreed value clause
- Mortgagee clause
Correct answer: Coinsurance clause
The coinsurance clause (e.g., 80% coinsurance) penalizes insureds who underinsure their property by requiring them to share in the loss proportionally.
Question 3: A homeowner's policy excludes flood damage. The insured suffers a loss from storm surge during a hurricane. The adjuster should:
- Pay the claim under the windstorm peril
- Deny the flood portion and pay only wind damage if separable (Correct answer)
- Pay the entire claim since a hurricane caused it
- Apply the Sue and Labor clause to cover flood losses
Correct answer: Deny the flood portion and pay only wind damage if separable
When a covered peril (wind) and an excluded peril (flood) combine to cause damage, the adjuster must segregate the damages; only wind-caused losses are covered.
Question 4: What does 'additional insured' status on a liability policy typically grant?
- The additional insured receives a separate policy with its own limits
- The additional insured is covered under the named insured's policy for specified liability arising from the named insured's operations (Correct answer)
- The additional insured can collect first-party property benefits
- The additional insured takes over the named insured's premium obligations
Correct answer: The additional insured is covered under the named insured's policy for specified liability arising from the named insured's operations
Additional insured status extends the named insured's liability coverage to a third party (e.g., a property owner) for claims arising out of the named insured's work or operations.
Question 5: An 'umbrella' policy differs from an 'excess' liability policy primarily because an umbrella policy:
- Only applies after the named insured's primary policy is exhausted
- Can drop down to provide primary coverage for claims not covered by underlying policies (Correct answer)
- Has lower limits than the primary policy
- Excludes all products liability claims
Correct answer: Can drop down to provide primary coverage for claims not covered by underlying policies
An umbrella policy can 'drop down' to cover gaps in the underlying policy or claims not covered by the primary policy, while a pure excess policy only sits above the primary limits.
Question 6: Under a Business Owners Policy (BOP), which coverage is typically NOT included in the standard form?
- Commercial property coverage
- General liability coverage
- Business income coverage
- Workers' compensation coverage (Correct answer)
Correct answer: Workers' compensation coverage
A BOP packages property, general liability, and business income coverage for small businesses, but workers' compensation is a separate statutory coverage not included in a BOP.
Question 7: A 'per occurrence' limit in a CGL policy means the insurer will pay no more than that amount for:
- All claims made during the entire policy period
- All bodily injury and property damage arising from one single event or occurrence (Correct answer)
- Each separate claimant who files a lawsuit
- Each policy year regardless of the number of occurrences
Correct answer: All bodily injury and property damage arising from one single event or occurrence
The per occurrence limit caps the insurer's liability for all BI and PD damages resulting from any single occurrence, regardless of how many claimants are involved.
CCA Insurance Policies and Coverage 3
Under a claims-made liability policy, a 'retroactive date' of January 1, 2020 means: