Advanced General Insurance Principles Flashcards

What is the difference between 'occurrence-based' and 'claims-made' liability policies?

Answer: Occurrence-based covers incidents happening during the policy period regardless of when claimed; claims-made covers claims first made during the policy period

An occurrence-based policy covers losses arising from incidents that happen during the policy period, regardless of when the claim is made. A claims-made policy only covers claims first notified during the policy period, regardless of when the incident occurred.

What is 'contingent liability' in commercial general liability insurance?

Answer: Liability that arises from the actions of independent contractors or subsidiaries rather than the insured directly

Contingent liability arises when the insured is held legally responsible for the acts or omissions of another party (e.g., independent contractors, subsidiaries) over whom they have some degree of control or responsibility.

What does 'retroactive date' mean in a claims-made liability policy?

Answer: The earliest date from which incidents will be covered under the claims-made policy

The retroactive date in a claims-made policy is the earliest date from which an incident must have occurred for the resulting claim to be covered. Claims arising from incidents before this date are excluded.

What is 'extended reporting period' (tail coverage) in a claims-made policy?

Answer: A period after policy expiry during which claims can be reported for incidents that occurred during the policy period

Extended reporting period allows the insured, after policy expiry, to report claims for incidents that occurred during the policy period. This is critical when switching from claims-made to occurrence coverage or when a business closes.

What is 'products completed operations' coverage and when does it apply?

Answer: Coverage for bodily injury or property damage arising from completed products or finished operations away from the insured's premises

Products completed operations coverage applies after a product has been sold and delivered, or an operation has been completed. It covers liability for injury or damage caused by the product or completed work away from the insured's premises.

What is 'professional indemnity' (PI) insurance and what gap does it fill?

Answer: PI covers financial loss caused to clients due to negligent professional advice or services, a gap not covered by standard liability policies

Professional indemnity insurance covers the insured professional's legal liability for financial loss caused to clients due to negligent advice, errors, or omissions in providing professional services — a specific gap that general liability policies typically exclude.