Insurance Policies & Coverage Analysis Flashcards
7 cards from real RIMS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance Policies & Coverage Analysis flashcards as text
Under a surety bond, which party is obligated to perform the underlying contractual duty?
Answer: Principal
The principal is the party who must perform the obligation; the surety guarantees performance to the obligee if the principal defaults.
A 'defense within limits' (eroding limits) policy means that:
Answer: Defense costs reduce the policy's aggregate and per-occurrence limits
In a defense-within-limits policy, legal defense expenses count against and erode the available coverage limits, reducing what remains for indemnity.
Which type of endorsement would a risk manager use to extend a commercial property policy to cover newly acquired locations automatically for a specified period?
Answer: Newly acquired or constructed property provision
The newly acquired or constructed property provision automatically provides temporary coverage for new locations up to a stated limit and time period.
A marine open cargo policy is best suited for a company that:
Answer: Requires continuous automatic coverage for all shipments throughout the year
An open cargo policy provides automatic, continuous coverage for all qualifying shipments during the policy period without the need to declare each shipment individually.
The 'absolute pollution exclusion' found in most modern CGL policies excludes coverage for bodily injury or property damage arising from:
Answer: The discharge, dispersal, seepage, or release of pollutants in virtually all circumstances
The absolute pollution exclusion broadly bars coverage for harm resulting from the release of pollutants, with very limited exceptions depending on the policy form.
Under a fiduciary liability policy, coverage is triggered when a plan fiduciary commits a 'breach of fiduciary duty' as defined under:
Answer: The Employee Retirement Income Security Act (ERISA)
ERISA establishes the fiduciary standards for employee benefit plan administrators, and fiduciary liability policies are designed to cover breaches of those ERISA-imposed duties.
When a property insurer pays a loss to its insured and then pursues recovery against the negligent third party who caused the loss, this right is known as:
Answer: Subrogation
Subrogation allows the insurer, after paying the insured's claim, to step into the insured's shoes and seek reimbursement from the responsible third party.