TRIP Insurance Principles and Coverages 2 — Questions and Answers
Question 1: Under the principle of indemnity, what is the maximum amount an insured can recover after a covered loss?
- The policy limit regardless of actual loss
- The actual cash value of the loss, not to exceed the policy limit (Correct answer)
- The replacement cost of the property without depreciation
- Twice the loss amount if the insurer acted in bad faith
Correct answer: The actual cash value of the loss, not to exceed the policy limit
Indemnity limits recovery to the actual financial loss suffered, capped at the policy limit, preventing profit from insurance.
Question 2: A trucking company insures a fleet under a commercial auto policy with a $1M per-occurrence limit. Three vehicles are damaged in the same accident. What is the maximum the insurer pays?
- $3M because three vehicles were damaged
- $1M total for all vehicles in the single occurrence (Correct answer)
- $1M per vehicle for a total of $3M
- The per-vehicle ACV regardless of the per-occurrence limit
Correct answer: $1M total for all vehicles in the single occurrence
A per-occurrence limit caps total insurer payment for all damages arising from one event, regardless of how many vehicles are involved.
Question 3: Which coverage under a commercial auto policy pays for damage to the insured's own vehicle caused by collision with another object?
- Comprehensive coverage
- Collision coverage (Correct answer)
- Uninsured motorist property damage
- Medical payments coverage
Correct answer: Collision coverage
Collision coverage pays for physical damage to the insured vehicle resulting from impact with another vehicle or object.
Question 4: What does 'other than collision' (comprehensive) coverage protect against on a commercial auto policy?
- Only theft and vandalism
- Losses caused by collision with animals or stationary objects
- Physical damage from perils such as fire, theft, hail, flood, and vandalism (Correct answer)
- Liability arising from non-collision incidents
Correct answer: Physical damage from perils such as fire, theft, hail, flood, and vandalism
Comprehensive (other than collision) covers a broad range of physical damage perils that are not collision-related, including fire, theft, weather, and animal strikes.
Question 5: A motor carrier's cargo policy excludes losses caused by the shipper's improper packaging. This is an example of which type of policy provision?
- Condition
- Exclusion (Correct answer)
- Declaration
- Endorsement
Correct answer: Exclusion
Exclusions are policy provisions that eliminate coverage for specified causes of loss, such as shipper negligence in packaging.
Question 6: Which principle requires that an insured must have a financial stake in the insured property at the time of loss?
- Subrogation
- Contribution
- Insurable interest (Correct answer)
- Proximate cause
Correct answer: Insurable interest
Insurable interest requires the insured to suffer a direct financial loss if the property is damaged, which must exist at the time of loss for property insurance.
Question 7: A transportation insurer pays a cargo claim and then sues the at-fault third-party carrier to recover the amount paid. What doctrine allows this?
- Contribution
- Indemnity
- Subrogation (Correct answer)
- Waiver
Correct answer: Subrogation
Subrogation allows the insurer, after paying a claim, to step into the insured's shoes and pursue recovery from the responsible third party.
TRIP Insurance Principles and Coverages 2
Under the principle of indemnity, what is the maximum amount an insured can recover after a covered loss?