Molly borrows her friend Dom's car to run to the grocery store. On the way home, she rear-ends a van, injuring the driver and 3 other passengers. Each of the passengers suffers $45,000 in injuries, while the driver suffers $40,000. Assuming Dom has a liability policy with limits of $50/100/$50, while Molly has $25/50/$25 coverage, how much will the primary policy cover?

Rationale

$100,000 will be covered by the primary policy.

Dom's liability policy, which has limits of $50,000 per person and $100,000 per accident, will cover the injuries sustained by the van's driver and passengers up to these specified limits. Since the total injuries exceed the policy limits, the policy will cover up to its maximum limit of $100,000 for the accident.

A ($150,000) YOUR ANSWER

This amount represents the total injuries incurred by the passengers and the driver, which sums to $180,000 ($45,000 x 3 + $40,000). However, this exceeds the maximum coverage provided by Dom's liability policy, which only allows for a maximum of $100,000 per accident.

B ($50,000) YOUR ANSWER

This figure reflects the individual limit for bodily injury per person under Dom's policy. While his policy covers up to $50,000 for each injured person, the total injuries exceed the policy limits, meaning that the maximum coverage will actually be $100,000 for the accident, not just $50,000.

C ($25,000) YOUR ANSWER

This amount corresponds to the minimum limit of coverage under Molly's own liability policy. It does not relate to Dom's primary policy, which is the one that provides coverage for this incident. Thus, this figure is irrelevant to the question regarding how much will be covered by the primary policy.

D ($100,000) CORRECT

This is the correct total amount that Dom's liability policy will cover. The policy has a maximum limit of $100,000 per accident, which applies in this case since the total injuries exceed the maximum coverage of the policy.

Conclusion

In this scenario, Dom's liability insurance will cover a maximum of $100,000 for the total injuries resulting from the accident. While the total claim amount exceeds this limit, the policy's constraints dictate that it can only pay up to its maximum coverage, thereby ensuring that the primary policy will address the costs associated with the injuries sustained by the van's driver and passengers up to that limit.

$100,000 will be covered by the primary policy.

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