Chapter 3

Question 1

Lightning strikes an above-ground pool in a neighbor’s backyard, causing the pool’s wall to collapse. The water that filled the pool escapes and flows into the insured’s basement through a backdoor, causing water damage throughout the finished basement. The proximate cause of loss is:

Answer 1

lightning damage

Question 2

What key component of a contract of insurance (the policy) is being assessed when asking, “Is the property the subject matter of the insurance?”

Answer 2

Insurable interest

Question 3

What is an example of a common residential limitation?

Answer 3

Theft of money is limited to $200 in any one occurrence

Question 4

What two types of things can exclusions be used for to limit coverage?

Answer 4

Types of property and types of loss

Question 5

Exclusions are construed:

Answer 5

contra proferentem

Question 6

Liability policies can be written on a(n)

Answer 6

claims-made basis or an occurrence basis

Question 7

Exclusions under a policy:

Answer 7

restrict coverage