Insurance Policies and Contracts Flashcards

In a 'self-insured retention' (SIR) arrangement, how does the SIR differ from a standard deductible?

Answer: With an SIR, the insured pays and manages claims up to the retention before the insurer's coverage attaches

Under a SIR, the insured is responsible for paying and managing all claims within the retention layer; the insurer's policy only responds once the SIR is exhausted.

The 'care, custody, or control' exclusion in a general liability policy is designed to exclude coverage for property damage to property that:

Answer: The insured is currently in possession of, responsible for, or working on

The care, custody, or control exclusion prevents the general liability policy from acting as a property policy for third-party property the insured is holding or working on.

Which of the following best describes 'concurrent causation' and why it creates coverage disputes?

Answer: Two or more causes combine to produce a loss, where one is covered and another is excluded

Concurrent causation arises when a covered peril and an excluded peril both contribute to a loss, leading to disputes over whether the policy should respond.

A 'reservation of rights' letter from an insurer to an insured signals that:

Answer: The insurer will investigate and possibly defend the claim while preserving its right to later deny coverage

A reservation of rights letter allows the insurer to participate in the defense of a claim without waiving its right to later contest coverage if investigation reveals an exclusion applies.

Under a 'valued' policy law (in states that have enacted it), in the event of a total loss to insured property, the insurer must pay:

Answer: The face amount stated in the policy regardless of the property's actual value at loss

Valued policy laws require insurers to pay the full face value of a policy upon total destruction of the insured property, even if that amount exceeds actual market value.

What is the key underwriting concern with 'vacant' versus 'unoccupied' property in a commercial property policy?

Answer: Vacant property presents greater moral hazard and increased physical risk because it lacks furnishings, regular supervision, and human presence

Vacant property (empty of contents and people) carries more risk than unoccupied property (contents present but temporarily uninhabited) because there is no monitoring, and many policy forms restrict or suspend coverage after a vacancy threshold.

The 'anti-stacking' provision in a liability policy is intended to prevent:

Answer: Claimants from recovering more than one policy limit for a single occurrence by aggregating multiple policy periods

Anti-stacking language limits the total recovery to a single policy limit even if multiple policies were in force over several years during a long-tail loss like environmental contamination.