Liability and Casualty Insurance
This domain tests legal liability coverage for bodily injury, property damage, personal and advertising injury, auto liability, professional liability, and workers' compensation. Questions focus on negligence, occurrence versus claims-made triggers, limits, aggregates, defense costs, additional insureds, and umbrella or excess coverage.
Core rules
- Liability insurance responds to the insured's legal obligation to pay damages. Negligence generally requires duty, breach, causation, and damages.
- Commercial general liability is commonly written on an occurrence basis: the occurrence must happen during the policy period, even if the claim is later.
- Claims-made policies require the claim to be made and reported during the policy period, and the wrongful act must be after any retroactive date.
- Limits may apply per occurrence and in the aggregate. Defense costs may be inside or outside the limit, depending on the policy.
- Additional insured endorsements extend coverage to others for specified operations. Certificates of insurance are evidence, not the policy itself.
- Umbrella policies provide excess limits and may drop down for gaps. Workers' compensation is statutory and generally provides exclusive remedy against the employer.
Worked example
A professional liability policy is claims-made with a retroactive date of 1 January 2021. A claim is reported in 2024 for an act in 2020. There is no coverage because the act predates the retroactive date. If the act had occurred in 2022 and the claim were reported during the 2024 policy period, coverage would apply. The reasoning is that both the retroactive date and the reporting requirement must be satisfied.
Traps that cost marks
- Confusing occurrence and claims-made triggers.
- Ignoring the retroactive date.
- Assuming the aggregate limit is available for every claim.
- Treating a certificate as the insurance policy.