CMFAS CGI Commercial Liability Insurance question: run-off cover and extended reporting periods exist for claims-made liability policies

CMFAS CGICommercial Liability Insurance

Why do run-off cover and extended reporting periods exist for claims-made liability policies?

A To cover later claims after a business stops trading or switches insurer
B To raise the aggregate limit when claims erode it during the current policy year
C To convert the expired policy retrospectively to an occurrence basis for old acts
D To waive the insured's duty to notify claims promptly during the policy period

Show the answer and explanation

Answer: A. To cover later claims after a business stops trading or switches insurer

Because a claims-made policy responds only while live, run-off cover and extended reporting periods exist to protect a business after it stops trading or switches insurer, guarding against a coverage gap.

Common mistake

Misreading run-off as increasing limits rather than preserving cover for past acts after the policy ends.

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CMFAS CGI Commercial Liability Insurance question: run-off cover and extended reporting periods exist for claims-made liability policies

Answer: A. To cover later claims after a business stops trading or switches insurer

Common mistake

Related CMFAS CGI questions

CMFAS CGI Commercial Liability Insurance question: run-off cover and extended reporting periods exist for claims-made liability policies

Answer: A. To cover later claims after a business stops trading or switches insurer

Common mistake

Related CMFAS CGI questions