If a liability policy has a limit of 100,000 and the insured's claim involves 85,000 in damages and 25,000 in defense costs, what is the total payment by the insurer?

If a liability policy has a limit of 100,000 and the insured's claim involves 85,000 in damages and 25,000 in defense costs, what is the total payment by the insurer?

• A. 85,000
• B. 100,000
• C. 25,000
• D. 110,000

Answer: (B)

In liability coverage, the limit of liability is the most the insurer will pay for a single claim, and defense costs typically count toward that limit. Here, damages are 85,000 and defense costs are 25,000, totaling 110,000. Since the policy limit is 100,000, the insurer pays up to that limit. The remaining 10,000 would be the insured’s responsibility. So the total payment by the insurer is 100,000.

In liability coverage, the limit of liability is the most the insurer will pay for a single claim, and defense costs typically count toward that limit. Here, damages are 85,000 and defense costs are 25,000, totaling 110,000. Since the policy limit is 100,000, the insurer pays up to that limit. The remaining 10,000 would be the insured’s responsibility. So the total payment by the insurer is 100,000.