Practice Test General Lines Back of the Book

Practice Test General Lines Back of the Book

by Russell William Rands -
Number of replies: 9

Just seeing if anyone can help me out with the following question from the practice test in the back of the General Lines book, the question reads as follows:

6.) Joe has a PAP with Liability of 25/50/25. He hits a car with four occupants from Minnesota, all of whom are hurt. They all sue. The first sues for $20,000, the second for $35,000, the third for $22,000, and the fourth for $18,000. The car Joe hit has $8,000 in damage. The company spends $20,000 on a law firm for defense. Ignoring any PIP or Med Pay, what is the total cost to the company for Joe's claim?

a.) $50,000

b.) $70,000

c.) $78,000 (correct answer)

d.) $90,000

 

I am not quite understand how the math is computed to give an answer of $78,000. Can somebody please help explain this to me? I've looked back in unit 3 for help on Liability and the section doesn't explain it well enough to me.

 

Help is appreciated!

In reply to Russell William Rands

Re: Practice Test General Lines Back of the Book

by Marianela Aybar -

Hi Russell,

 

The liability will only pay out max $50,000 since that's the max limit. The limit for property damage is $25,000 so the $8,000 damage is added on to that. And the defense is extra so that's the other $20,000.

 

Total would be:

$50,000 + $8,000 + $20,000 = $78,000.

 

Hope this helps.

In reply to Marianela Aybar

Re: Practice Test General Lines Back of the Book

by Russell William Rands -

I understand now that the $50k is maximum limit paid for the claims. The clearer explanation then is, $8,000 in PD is paid plus the additional defense expense of $20,000. 

 

50K+8K+20K = $78k. 

 

It did help me understand it better. 

 

Thank you,

 

In reply to Russell William Rands

Re: Practice Test General Lines Back of the Book

by Doris Etienne -

Maximum per occurrence is $50k  plus $20k  legal plus $8k damages $78k

In reply to Russell William Rands

Re: Practice Test General Lines Back of the Book

by Jan Bradburn- -

Russell, 

Joe has $25,000 liability coverage per person and up to $50,000 liability coverage total for bodily injury for one occurrence.  He also has $25,000 for property damage. The $50,000 is easily maxed-out for bodily injury.  There also coverage available for the $8000 in property damage, so the policy will pay $58,000 in a loss claim.  

Cost to defend are paid in additional to the policy limit as long as the policy limit has not been exhausted.  This policy has a $75,000 policy limit.  Since the limit has not been exhausted, the $20,000 cost to defend is also payable for a total of $78,000. 

Jan

In reply to Jan Bradburn-

Re: Practice Test General Lines Back of the Book - question #6

by Patricia Vargas -

Jan I just sent you that same question by email.

In reference to your response to previous person that asked the same thing.

 

Your response states that the policy has a limit of a total of $75,000.

where do you get that from?

I understand the part of $50,000 being the limit for all persons injured in one accident, and the limit of $25,000 for property damage (out of which only $8,000 get used on this claim)

I need to understand the max limit of $75000- where is that ?

 

 

In reply to Patricia Vargas

Re: Practice Test General Lines Back of the Book - question #6

by Rachel Elwood -

I think she is referring to the max limit between persons injured and property damage. Meaning 50k total for person injured, and 25k total for property damage, a total of 75k can be used(if needed, in this case he didn't use all of the property damage).

The 25/50/25 has nothing to do with defense costs, which they will pay.

Therefore the total is 78k because...

50k for med expenses (which is the cap on his policy even though 95k was being sued for)

8k for damage to his auto (25k is his cap but he didn't need it)

20k for the defense fees (which has nothing to do with 25/50/25)

Total: 78k

In reply to Rachel Elwood

Re: Practice Test General Lines Back of the Book - question #6

by Jan Bradburn- -

Rachel, 

Good response!  Thanks for helping Patricia with this question.

Jan

In reply to Patricia Vargas

Re: Practice Test General Lines Back of the Book - question #6

by Jan Bradburn- -

Hi Patricia, 

Rachel provided a good response.  Please let me know if you understand or if I can provide more information.

Jan