TRIP Insurance Principles and Coverages 3 — Questions and Answers
Question 1: Under a Motor Truck Cargo policy, which valuation basis compensates the insured for the invoice value of goods plus freight charges?
- Actual cash value
- Replacement cost value
- Agreed value
- Shipper's invoice value plus freight (Correct answer)
Correct answer: Shipper's invoice value plus freight
Many cargo policies value goods at the shipper's invoice price plus freight charges, ensuring the shipper recovers the full cost of goods in transit.
Question 2: What is the purpose of a 'waiver of subrogation' endorsement on a commercial auto policy?
- It waives the insured's duty to report claims promptly
- It prevents the insurer from seeking recovery from a specified third party after paying a claim (Correct answer)
- It waives the deductible in the event of a total loss
- It eliminates the insurer's right to inspect the insured vehicles
Correct answer: It prevents the insurer from seeking recovery from a specified third party after paying a claim
A waiver of subrogation endorsement contractually prohibits the insurer from pursuing recovery against a named third party, often required by contract between business partners.
Question 3: Which condition in a commercial insurance policy requires the insured to take reasonable steps to protect property from further damage after a loss?
- Notice of loss condition
- Duties after loss — protect property (Correct answer)
- Proof of loss condition
- Cooperation clause
Correct answer: Duties after loss — protect property
The duties-after-loss condition obligates the insured to mitigate additional damage following a covered loss, such as covering a damaged roof to prevent water intrusion.
Question 4: A trucker's policy has a $500 deductible for physical damage. The insured suffers $3,200 in collision damage. How much does the insurer pay?
- $3,200
- $2,700 (Correct answer)
- $500
- $3,700
Correct answer: $2,700
The insurer pays the loss amount minus the deductible: $3,200 − $500 = $2,700.
Question 5: Which type of transportation policy covers goods owned by the insured while they are being shipped by common carriers, railroads, or airlines?
- Motor Truck Cargo — owner's form
- Inland marine — shipper's interest policy (Correct answer)
- Commercial general liability policy
- Ocean marine hull policy
Correct answer: Inland marine — shipper's interest policy
A shipper's interest (inland marine) policy covers the cargo owner's goods while in the custody of various carriers during domestic transit.
Question 6: What term describes the immediate cause that directly produces a loss without which the loss would not have occurred?
- Concurrent cause
- Remote cause
- Proximate cause (Correct answer)
- Superseding cause
Correct answer: Proximate cause
Proximate cause is the dominant, direct cause of a loss, which insurers use to determine whether coverage applies under the policy.
Question 7: A commercial auto policy's 'other insurance' clause says coverage is excess over any other valid insurance. What does this mean for a covered loss?
- The policy pays first up to its limit before other policies
- The policy only pays after all other applicable insurance has been exhausted (Correct answer)
- The policy pays a pro-rata share with other insurers
- The policy voids if other insurance exists
Correct answer: The policy only pays after all other applicable insurance has been exhausted
An excess 'other insurance' clause makes the policy secondary, paying only the remaining loss after primary policies have paid their limits.
TRIP Insurance Principles and Coverages 3
Under a Motor Truck Cargo policy, which valuation basis compensates the insured for the invoice value of goods plus freight charges?