Insurance Policy Interpretation & Coverage Analysis Flashcards

In analyzing a 'business income' (BI) claim, the key factor for determining the length of the indemnity period is:

Answer: The time required to restore operations to the condition that existed prior to the loss

The business income indemnity period runs from the date of the loss until the property is restored to its pre-loss condition with reasonable speed, not necessarily until revenues recover.

Under the 'other insurance' clause, a 'pro rata' provision means that when two policies cover the same loss, each insurer pays:

Answer: Its proportional share based on the ratio of its limit to the total limits of all applicable policies

A pro rata other insurance clause requires each insurer to pay only its proportional share of the loss, calculated by dividing its policy limit by the sum of all applicable limits.

A 'manuscript policy' differs from a standard ISO policy in that a manuscript policy is:

Answer: Custom-drafted to meet the specific needs of a particular insured

A manuscript policy is a custom-written policy tailored to the unique coverage needs of a specific insured, rather than using standardized ISO forms.

Which of the following triggers the 'products-completed operations' hazard under a CGL policy?

Answer: Bodily injury or property damage arising from the insured's completed work or product after it has left the insured's possession

The products-completed operations hazard is triggered when bodily injury or property damage arises from the insured's product or completed work after the insured has relinquished possession or completed the operations.

The 'valuation' clause in a property policy that provides 'agreed value' coverage means that in the event of a total loss:

Answer: The policy pays the agreed amount stated in the policy without applying a coinsurance penalty

An agreed value clause suspends the coinsurance requirement and guarantees that the stated amount in the policy will be paid in the event of a total loss, without any coinsurance penalty.

When interpreting an ambiguous exclusion, the principle of 'contra proferentem' requires the ambiguity to be resolved:

Answer: Against the insurer as the drafter of the policy

Contra proferentem is the rule that ambiguous policy language is construed against the party who drafted it—the insurer—and in favor of the insured.

A 'subrogation waiver' endorsement on a property policy prevents the insurer from:

Answer: Pursuing the negligent third party after paying the insured's claim

A subrogation waiver endorsement contractually releases a specified third party from the insurer's right to pursue recovery after paying the insured's claim.