Insurance Principles and Coverages Flashcards

Which coverage in a commercial auto policy pays medical expenses for the insured's driver and passengers regardless of fault?

Answer: Medical payments (MedPay) coverage

Medical payments coverage pays reasonable medical expenses for occupants of the insured vehicle without requiring proof of fault.

A cargo insurer applies an 'average' clause requiring the insured to co-insure property to at least 80% of its value. The insured only insures to 60%. If a $100,000 loss occurs on $500,000 of cargo, how is the claim affected?

Answer: The insurer pays only a proportionate share because the insured is a co-insurer for the underinsured portion

Under an average (coinsurance) clause, underinsuring triggers a proportional reduction in claim payment, making the insured bear a share of each loss.

What is the primary purpose of uninsured/underinsured motorist (UM/UIM) coverage on a commercial auto policy?

Answer: To protect the insured and occupants when injured by a motorist who has no or insufficient liability insurance

UM/UIM coverage compensates the insured's injured occupants for bodily injury damages they cannot fully collect from an at-fault driver who lacks adequate liability coverage.

A transportation company wants to protect against the cost of environmental cleanup resulting from a fuel spill from one of its tankers. Which specialty coverage would most directly address this exposure?

Answer: Pollution liability / environmental impairment liability policy

A pollution liability (environmental impairment liability) policy is designed to cover cleanup costs and third-party claims arising from pollution incidents such as fuel spills.

Under the principle of contribution, when two policies both cover the same loss, how is the claim typically settled?

Answer: Each insurer pays a proportionate share of the loss based on its policy limit relative to the total coverage

Contribution requires insurers covering the same loss to share payment proportionally based on their respective policy limits, preventing the insured from collecting more than the actual loss.

A motor carrier's liability policy contains a 'pollution exclusion.' A fuel spill from a ruptured tank during an accident injures a bystander. Which statement best describes how the exclusion is likely interpreted by courts?

Answer: Courts may find coverage if the spill resulted suddenly and accidentally from a vehicle accident, as some courts narrow absolute pollution exclusions in auto contexts

Some courts distinguish sudden, accidental vehicle-related spills from traditional industrial pollution and find that absolute pollution exclusions may not bar auto liability coverage in those circumstances.

Which insurance policy condition requires the insured to submit a sworn statement detailing the extent of a loss within a specified time after a loss occurs?

Answer: Proof of loss condition

The proof of loss condition requires the insured to provide a formal, sworn written statement of the loss within a defined period, giving the insurer information needed to evaluate and settle the claim.