AU 62 Chapter 8 Test Questions with All Correct Answers
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Course
AU 62
Institution
AU 62
AU 62 Chapter 8 Test Questions with All Correct Answers
What is the term for the amount deducted from a claim when the claim is payable under the umbrella and is not covered at all by any primary policy? - Answer Self-insured retention
Key Underwriting Considerations relevant to evaluating su...
AU 62 Chapter 8 Test Questions with
All Correct Answers
What is the term for the amount deducted from a claim when the claim is payable under
the umbrella and is not covered at all by any primary policy? - Answer ✔ Self-insured
retention
Key Underwriting Considerations relevant to evaluating submissions for commercial
umbrella and excess liability insurance: - Answer ✔ - Eligibility
- Underlying insurance, limits, and endorsements
- Loss analysis/ prior losses
- Capacity and use of facultative reinsurance
Why it's important for an underwriter to assess teh financial condition of an insurer that
is providing underlying coverage for an umbrella or excess liability policy issued by a
different insurer. - Answer ✔ The financial condition of the underlying insurer, if different
from the umbrella or excess liability insurer, is important for an underwriter to consider
because the umbrella or excess insurer must assume defense of a claim if the
underlying insurer cannot.
Why is it important for the umbrella or excess liability underwriter to consider any
endorsements that may apply to underlying policies? - Answer ✔ Endorsements
attached to the underlying coverage can severely impair the scope of underlying
insurance by eliminating basic elements of a comprehensive program. The underwriter
should determine whether the underlying policies have been amended by endorsement
to restrict coverage that is normally provided. If so, the insurer might choose to duplicate
these restrictions on the umbrella or excess liability policy.
Self-contained excess liability policies - Answer ✔ can create coverage gaps between
excess and underlying layers.
One form of excess liability insurance incorporates provisions of the underlying policy
and then modifies the provisions with additional conditions or exclusions. This type of
coverage is called - Answer ✔ A combination excess liability policy.
An insured has an excess liability policy that covers a claim for damage, because the
loss was covered by the underlying insurance. Which one of the following types of
excess policy does the insured have? - Answer ✔ The insured has following-form
excess liability policy.
, Which one of the following statements about the self-contained form of an excess
liability insurance policy is the most accurate? - Answer ✔ Typically, a self-contained
excess liability insurance policy does not depend on the provisions of the underlying
policy for determining the scope of its coverage.
Which one of the following best describes the differences between a following-form
excess liability policy and a self-contained excess liability policy? - Answer ✔ A self-
contained excess liability policy is subject only to its own provisions.
Self-contained excess liability policies can create coverage gaps between excess and
underlying layers.
JKL Company retains general liability claims up to $100,000 per occurrence. The
company purchased excess liability insurance that provides both specific and aggregate
excess coverage on an annual basis. After the $100,000 retention, the specific excess
limit is $500,000 per occurrence. The aggregate excess limit is $5 million. During the
year this excess arrangement was in place, JKL sustained three general liability claims.
These three occurrences resulted in settlements of $700,000, $50,000, and $400,000.
How much of these three settlements will JKL's excess insurer pay in total? - Answer ✔
$500,000 + 0 + $300,000 = $800,000; JKL's excess insurer will pay $800,000.
One of the three basic forms of excess liability insurance policies is designed so that it
incorporates the provisions of the underlying policy and then modifies those provisions
with additional conditions or exclusions in the excess liability policy. That type of excess
liability policy form is known as - Answer ✔ as combination excess liability policy.
An excess liability insurance policy that covers a claim in excess of the underlying limits
only if the loss is covered by the underlying policy is called - Answer ✔ A following-form
excess policy.
Which one of the following types of excess liability policies would be least likely to
create gaps between the excess and the underlying insurance layers? - Answer ✔ A
pure following-form excess liability policy simply extends the limits of the underlying
coverage.
Umbrella liability policy - Answer ✔ A liability policy that provides excess coverage
above underlying policies and may also provide coverage not available in the underlying
policies, subject to a self-insured retention. Provides additional limits BUT also provides
coverage not available in the underlying coverages, subject to the insured's assumption
of the self-insured retention or retained limit. Most umbrella policies provide defense
coverage.
An umbrella usually provides excess coverage over several primary policies (i.e.
commercial general liability, auto liability, and employers' liability)
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