While driving the company car on business, Jack causes an accident with a bus carrying a sports team. Five people were injured in the accident, and the injuries totaled $240,000. Jack's company's business auto policy only covers up to $100,000 in bodily injury per accident. Which of the following would help cover the remaining liability caused by Jack's accident?

Rationale

Excess liability policy

An excess liability policy is designed to provide additional coverage above the limits of an underlying insurance policy, such as a business auto policy. In this scenario, since Jack's company's policy only covers up to $100,000 in bodily injury liability, the excess liability policy would help cover the remaining $140,000 in injuries from the accident.

A (Extended liability policy) YOUR ANSWER

An extended liability policy typically provides broader coverage options or higher limits for specific risks but does not necessarily cover amounts beyond existing liability limits. In this case, it would not specifically address the shortfall in coverage presented by the accident.

B (Excess liability policy) CORRECT

This policy is specifically designed to cover claims that exceed the limits of an underlying liability policy. In Jack's situation, since the total injuries exceed the $100,000 limit, the excess liability policy would come into effect to cover the additional $140,000 in liability.

C (Commercial general liability policy) YOUR ANSWER

A commercial general liability (CGL) policy primarily covers general business risks, such as property damage and bodily injury occurring on business premises or due to business operations. However, it does not provide coverage for auto-related incidents, making it insufficient for this particular scenario.

D (Business owners policy) YOUR ANSWER

A business owners policy (BOP) combines various coverage types tailored for small businesses, including property and liability coverage. However, like the CGL, it does not extend to cover auto accidents specifically and would not fill the gap left by the business auto policy in this case.

Conclusion

In the context of Jack's accident, an excess liability policy is the most suitable option to cover the amount exceeding the $100,000 limit of the company’s business auto policy. While other options may provide various forms of coverage, they do not address the specific need for additional liability coverage resulting from the accident's total costs. This highlights the importance of having adequate liability protection in place to safeguard against significant financial exposure in business operations.

Excess liability policy

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