Question 10

The earned premium will be determined by audit at the end of the policy period.

In commercial general liability insurance, the earned premium is typically calculated based on an audit conducted at the conclusion of the policy period. This process ensures that the premium reflects the actual exposure and risk during that time.

A) The earned premium will be determined by audit at the end of the policy period

This statement is correct as it accurately describes a standard practice in commercial general liability insurance where the insurer performs an audit to determine the earned premium, ensuring it corresponds to the risk taken on during the policy period.

B) The insured has no right to sue the insurer during the policy term

This statement is incorrect. Generally, the insured retains the right to pursue legal action against the insurer for disputes or claims regarding coverage or handling of the policy during the policy term.

C) Coverage may be written only on a primary basis

This statement is also incorrect. Commercial general liability coverage can be structured in various ways, including primary, excess, or umbrella forms, allowing for flexibility in how protection is provided.

D) Bankruptcy of the insured relieves the insurer from its obligations

This statement is incorrect. While bankruptcy may complicate claims and the relationship between the insured and insurer, it does not automatically relieve the insurer from its obligations under the policy, as coverage is based on the terms of the contract.

Conclusion

The statement regarding the earned premium being determined by audit is accurate and reflects common practices in commercial general liability policies. In contrast, the other options either misrepresent legal rights concerning coverage or inaccurately depict the nature of insurance obligations, thereby failing to address the core principles of commercial general liability conditions.