FOI - Chapter 9

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Questions and Answers

What is defined as an occurrence in liability policies?

An event that is anticipated and scheduled.

An event that happens suddenly and unexpectedly. (correct)

An event that can only be classified as an accident.

An event that is only defined by its duration over time.

What does an aggregate limit in a policy indicate?

The total limit for all claims across all occurrences. (correct)

The combined limit that includes future claims.

The maximum payout per occurrence only.

The limit for each individual claim made under the policy.

How do split limits function in liability policies?

They provide a single limit for all types of claims.

They only apply to bodily injury claims regardless of circumstances.

They specify different limits for various categories of claims. (correct)

They combine both bodily injury and property damage limits into one.

If a liability policy has a limit of $1,000 per occurrence and an aggregate limit of $10,000, what does this imply?

After reaching the aggregate limit, no further claims can be made. Signup and view all the answers

What does an inclusive limit denote in a liability policy?

A single total limit that does not separate different types of damages. Signup and view all the answers

What is the main purpose of liability policies according to the insuring agreement?

To pay sums the insured is legally obligated to pay to third parties as compensatory damages Signup and view all the answers

Which of the following statements about bodily injury is true?

Bodily injury encompasses both sickness and death resulting from the injury Signup and view all the answers

What type of coverage does property damage liability typically provide?

It covers physical injury to tangible property and loss of use Signup and view all the answers

Who qualifies as a third party under the liability insurance policies?

Any entity not specifically named in the policy Signup and view all the answers

What conditions must be met for a liability policy to respond to a claim?

The insured must be legally liable for the injury or damage Signup and view all the answers

What is included in the definition of bodily injury?

Valid claims of sickness, disease, and related death Signup and view all the answers

What does the term 'property damage' encompass in liability policies?

Unintentional damage to others’ property along with loss of use Signup and view all the answers

Which statement about the coverage territory for liability policies is true?

Coverage applies only if the occurrence happens within a specified area during the policy period Signup and view all the answers

What is the primary purpose of compensatory damages in liability policies?

To compensate the plaintiff for their injury or damage Signup and view all the answers

Which obligation is NOT required of the insured when there is a claim or action?

Pay out-of-pocket expenses without insurer consent Signup and view all the answers

What role does the insurer have in the investigation of a claim?

They may request cooperation from the insured Signup and view all the answers

What happens if the insured refuses to provide testimony during a legal action?

The refusal may weaken the insurer’s case Signup and view all the answers

Which of the following is included under supplementary payments in a liability policy?

Legal costs to conduct a defense Signup and view all the answers

What financial obligation can the insured incur without prior consent from the insurer?

Payment of first aid at the time of the accident Signup and view all the answers

What is the insurer's responsibility regarding punitive damages?

They only cover compensatory damages Signup and view all the answers

What must the insured do promptly after an occurrence that may lead to a claim?

Notify the insurer with details about the event Signup and view all the answers

Which statement about liability policies is true?

They are designed for specific activities. Signup and view all the answers

What type of expenses are typically covered under supplementary payments?

Legal costs for the insured’s defense Signup and view all the answers

Study Notes

Introduction to Liability Insurance

Liability insurance policies ensure compensation for legal obligations to pay third parties due to covered occurrences during the policy period within a defined coverage territory.

Insuring Agreement Overview

Insurers cover bodily injury and property damage claims.
Bodily injury involves physical harm from external causes, encompassing sickness, disease, and related death.
Property damage refers to unintentional physical injury to tangible property and includes loss of use even if property is not physically harmed.

Coverage Specifics

Only third-party coverage is provided, excluding named individuals in the policy.
Claims are paid only when the insured is legally liable, necessitating proof of negligence.

Occurrence Basis of Coverage

Liability policies cover incidents on an occurrence basis, meaning they respond to sudden events or long-term issues.
Coverage limits apply per occurrence, allowing for the same limit to be used for multiple claims.

Aggregate and Split Limits

An aggregate limit caps total payouts during the policy term; for example, a 1,000peroccurrencelimitwitha1,000 per occurrence limit with a 1,000peroccurrencelimitwitha10,000 aggregate limit.
Split limits define distinct coverage amounts for different claim types, common in auto insurance, e.g., $100,000 for bodily injury per person.

Compensatory Damages

Liability insurance pays only compensatory damages aimed at reimbursing injured parties, not punitive or exemplary damages, which are the insured’s responsibility.

Insured Duties Upon Occurrence or Claim

Insureds must promptly notify insurers of any occurrence with potential claims, providing details like time, place, and witnesses.
Immediate sharing of legal documents is required to aid insurer’s defense actions.
Insureds must assist with investigations and defenses, but cannot incur expenses without insurer consent, aside from first aid.

Supplementary Payments

Supplementary payments cover additional costs like legal defense expenses, reasonable costs incurred by the insured upon insurer request, and court costs.
Interest on judgment amounts within policy limits is the insurer’s responsibility and is not capped under supplementary payments, which are additional to standard coverage limits.

Limitations of Liability Policies

Liability policies address specific activities rather than all potential risks faced by the insured, ensuring targeted coverage.

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Description

This quiz focuses on Chapter 9 of the Liability Insurance course, which covers key concepts such as the insuring agreement and what liability policies insure. Students will have three minutes to recall and write about their understanding from the last class, emphasizing the Forgetting Curve. Examples are encouraged to deepen comprehension.