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HW_Prob_3_S08_Key

# HW_Prob_3_S08_Key - Answer Key Department of Policy...

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1 Answer Key Department of Policy Analysis and Management PAM 423: Risk Management and Policy Problem Set 3 Spring 2008 1. A product manufactured by Harrington, Inc. in 2000 injures Greg Niehaus in 2005. Harrington purchased annual liability insurance coverage for all years 2000-2008, with coverage renewing each year on January 1. Niehaus sues Harrington for damages in 2007. A. If Harrington’s insurance is occurrence-based coverage, which year’s policy provides coverage for the lawsuit? The 2005 policy. B. If Harrington’s insurance is claims-made coverage with the retroactive date for each policy set to 2000, which year’s policy provides coverage for the lawsuit? The 2007 policy. C. Assume that Harrington’s insurance coverage has a self insured retention (SIR) of \$100,000 and a primary per occurrence limit of \$400,000. Harrington also has a first excess layer with \$2 million per occurrence limit in excess of \$500,000, and a second excess layer with \$5 million per occurrence limit in excess of \$2,500,000. Illustrate Harrington’s insurance program with a coverage chart.

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2 Either of the following coverage charts is correct: \$7,500,000 \$2,500,000 \$500,000 Excess 2 Excess 1 Primary Excess 2 \$2,500,000 to \$7,500,000 Excess 1 \$500,000 to \$2,500,000 Primary \$100,000 to \$500,000 SIR \$0 to \$100,000
3 D. Harrington’s insurance companies settle the lawsuit with Niehaus for \$3 million. How much, if anything, will each insurer (primary, first excess, second excess) have to pay? How much, if anything, will Harrington have to pay?

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