CU Insurance Policies and Contracts 2 — Questions and Answers
Question 1: Which contract law doctrine prevents an insurer from denying coverage based on a policy provision it previously waived through its own conduct?
- Subrogation
- Estoppel (Correct answer)
- Indemnity
- Adhesion
Correct answer: Estoppel
Estoppel prevents an insurer from asserting a right or defense that it has previously abandoned through words or conduct that the insured reasonably relied upon.
Question 2: Under a claims-made liability policy, the 'retroactive date' determines:
- When the policy expires
- The earliest date an occurrence can trigger coverage (Correct answer)
- The date the insured first reported a claim
- The policy renewal anniversary
Correct answer: The earliest date an occurrence can trigger coverage
The retroactive date is the earliest point from which an occurrence or wrongful act can originate and still be covered under a claims-made policy.
Question 3: An 'occurrence' trigger in a liability policy means coverage applies when:
- The claim is first reported during the policy period
- The injury or damage happens during the policy period (Correct answer)
- The lawsuit is filed during the policy period
- The policy premium is paid
Correct answer: The injury or damage happens during the policy period
An occurrence-based policy covers bodily injury or property damage that takes place during the policy period, regardless of when the claim is made.
Question 4: Which clause in a property insurance policy requires the insured to maintain coverage equal to a specified percentage of the property's value to receive full loss reimbursement?
- Subrogation clause
- Coinsurance clause (Correct answer)
- Pro rata clause
- Salvage clause
Correct answer: Coinsurance clause
The coinsurance clause penalizes an insured who underinsures property by requiring them to share in any loss proportionally.
Question 5: What is the primary purpose of a 'separation of insureds' clause in a commercial general liability policy?
- To limit coverage to a single named insured
- To allow each insured to be treated separately for coverage purposes (Correct answer)
- To exclude coverage for employee lawsuits
- To define the policy territory
Correct answer: To allow each insured to be treated separately for coverage purposes
A separation of insureds clause means the policy applies separately to each insured, so one insured's wrongdoing does not automatically exclude coverage for another insured.
Question 6: A 'blanket' property insurance policy differs from a 'scheduled' policy in that it:
- Covers only one location under a single limit
- Covers multiple locations or items under a single combined limit (Correct answer)
- Lists each item and its individual coverage amount
- Applies only to inland marine risks
Correct answer: Covers multiple locations or items under a single combined limit
A blanket policy provides a single limit of insurance that applies across multiple locations or classes of property, offering more flexible coverage.
Question 7: Which of the following best describes the 'liberalization clause' found in many insurance policies?
- It allows the insurer to cancel coverage with less notice
- It automatically extends broadened coverage to existing policies if the insurer files a broader form (Correct answer)
- It increases premiums to reflect improved coverage
- It waives the deductible for catastrophic losses
Correct answer: It automatically extends broadened coverage to existing policies if the insurer files a broader form
A liberalization clause provides that if the insurer broadens coverage in a newer policy form without additional premium, existing policyholders automatically receive the same improvement.
CU Insurance Policies and Contracts 2
Which contract law doctrine prevents an insurer from denying coverage based on a policy provision it previously waived through its own conduct?