Exercise
Individual 1 has an automobile insurance policy with the ABC Insurance Company featuring 200,000 of third-party liability coverage (bodily injury/property damage) and a 1,000 deductible for collision coverage. Individual 1 is at fault for an accident that injures Individual 2 who is insured by XYZ Insurance Company. Individual 1 is sued by Individual 2 for these injuries. The court orders Individual 1 to pay 175,000 to Individual 2. Other expenses incurred are:
- Legal fees to ABC on behalf of Individual 1: 45,000
- Collision costs to repair Individual 1’s car: 20,000
Calculate the total amount ABC pays for this occurrence.
- 175,000
- 195,000
- 200,000
- 219,000
- 239,000
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.
Key: E
The payment is 175,000 + 45,000 + (20,000 – 1,000) = 239,000. Note that the legal fees do not count against the liability limit.
Copyright 2023. The Society of Actuaries, Schaumburg, Illinois. Reproduced with permission.