Actuarial Outpost
 
Go Back   Actuarial Outpost > Exams - Please Limit Discussion to Exam-Related Topics > SoA/CAS Preliminary Exams > Short-Term Actuarial Math
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions

Browse Open Actuarial Jobs

Life  Health  Casualty  Pension  Entry Level  All Jobs  Salaries


Short-Term Actuarial Math Old Exam C Forum

Reply
 
Thread Tools Search this Thread Display Modes
  #1  
Old 06-30-2019, 03:46 PM
NoobGingrich NoobGingrich is offline
SOA
 
Join Date: May 2016
Location: Dalton, GA
Studying for STAM
College: Actuary High School
Favorite beer: Steel Reserve
Posts: 24
Default ASM STAM 1st Edition Question 5.3

Hi,

This question below is in chapter 5 of the ASM text and I feel like it isn't correct. The answers say it should be 239,000. Earlier in the chapter it says liability insurance "does not include legal fees in policy limit but fees are no longer paid once they hit the policy limit." So, shouldnt APIC pay 175,000+(45,000-20,000) to reach the limit for the liability then (20,000-1,000) for the separate collision coverage for a total 219,000?

Maybe it's that in the course of settling one case in the occurrence, if they reach the limit then the legal fees are no longer paid. But because the limit wasnt reached before the case was completely settled, the entirety of the fees are paid?


Mini Driver has an automobile insurance policy with the All-Province Insurance Company. She has 200,000 of third party liability coverage (bodily injury/property damage) and has a 1,000 deductible on her collision coverage. Mini is at fault for an accident that injures B. Jones, who is insured by Red Deer Insurance Company. M. Driver is successfully sued by B. Jones for Jones' injuries. The court orders Driver to pay Jones 175,000. Other expenses incurred are: i) Legal fees to All-Province on behalf of Driver: 45,000 ii) Collision costs to repair Driver's car: 20,000 Calculate the total amount All-Province pays out for this occurrence. (A) 175,000 (B) 195,000 (C) 200,000 (D) 219,000 (E) 239,000
Reply With Quote
  #2  
Old 06-30-2019, 04:19 PM
Colymbosathon ecplecticos's Avatar
Colymbosathon ecplecticos Colymbosathon ecplecticos is offline
Member
 
Join Date: Dec 2003
Posts: 6,225
Default

The passage that you quoted isn't the best wording that I have ever seen.

Most personal auto policies in the US cover defense costs without limit; however, once the limit of liability is paid (or would have been paid, but for the insured's insistence that the defense continue,) further defense costs are not covered.

In your example, the liability is $175,000, so under the limit --- defense costs paid w/o imit. Damage to insured's vehicle $20,000, subject to a $1,000 deductible.

Total: 175 + 45 + max(20 - 1, 0) = 239
__________________
"What do you mean I don't have the prerequisites for this class? I've failed it twice before!"


"I think that probably clarifies things pretty good by itself."

"I understand health care now especially very well."
Reply With Quote
  #3  
Old 07-01-2019, 06:08 PM
Abraham Weishaus Abraham Weishaus is offline
Member
SOA AAA
 
Join Date: Oct 2001
Posts: 7,263
Default

Quote:
Originally Posted by Colymbosathon ecplecticos View Post
The passage that you quoted isn't the best wording that I have ever seen.
And it's not the wording in the ASM manual either.
Reply With Quote
  #4  
Old 07-01-2019, 09:30 PM
gauchodelpaso's Avatar
gauchodelpaso gauchodelpaso is offline
Member
SOA
 
Join Date: Feb 2012
College: Eastern Michigan U
Posts: 188
Default

I am not sure I understand what's been discussed here. BTW, the wording of the problem is verbatim I believe to SOA 313. The wording expressed as earlier in the chapter is no way near to what's written by Abe in the manual.

Regardless, this is point I do not have clear either. What if the court ordered to pay 230,000 to the injured person?

Limit of 200,000 would be covered by the policy insurer.

The remaining 30,000 is responsibility of Mini Driver, isn't it? And she will not be covered by the insurer for any legal costs trying to reverse/reduce this amount?

How about the court costs of 45,000? are they still paid by the insurer? Even if it reached the limit of 200,000?

And the 19,000 for the collision damage, is a different subject, not directed to liability to others, isn't it? It will be covered and paid by the insurance company, correct?
Summary would be
All-Province Insurance Company: 200,000+45,000+19,000 = 264,000
Mini Driver $30,000 + costs of trying to reduce it and whatever future liabilities may be found (I am not sure this is allowed? Like if the injured person dies as a consequence, and Mini is sued for a million dollars...). Plus her $1,000 deductible in the collision portion.
__________________

German
______________
Prelims: 1/P - 2/FM - 3F/MFE - LTAM - STAM
VEE: Economics - Corporate Finance - Applied Statistics
Reply With Quote
  #5  
Old 07-02-2019, 08:17 AM
Colymbosathon ecplecticos's Avatar
Colymbosathon ecplecticos Colymbosathon ecplecticos is offline
Member
 
Join Date: Dec 2003
Posts: 6,225
Default

Quote:
Originally Posted by gauchodelpaso View Post
I am not sure I understand what's been discussed here. BTW, the wording of the problem is verbatim I believe to SOA 313. The wording expressed as earlier in the chapter is no way near to what's written by Abe in the manual.

Regardless, this is point I do not have clear either. What if the court ordered to pay 230,000 to the injured person?

Limit of 200,000 would be covered by the policy insurer.

The remaining 30,000 is responsibility of Mini Driver, isn't it? And she will not be covered by the insurer for any legal costs trying to reverse/reduce this amount?

How about the court costs of 45,000? are they still paid by the insurer? Even if it reached the limit of 200,000?

And the 19,000 for the collision damage, is a different subject, not directed to liability to others, isn't it? It will be covered and paid by the insurance company, correct?
Summary would be
All-Province Insurance Company: 200,000+45,000+19,000 = 264,000
Mini Driver $30,000 + costs of trying to reduce it and whatever future liabilities may be found (I am not sure this is allowed? Like if the injured person dies as a consequence, and Mini is sued for a million dollars...). Plus her $1,000 deductible in the collision portion.
Yes, the duty to defend ends when the policy limit has been paid. The only minor point being that Mini doesn't "pay" the deductible --- instead it is $1,000 that she simply doesn't receive. This last point can be significant in certain commercial policies with (very) large deductibles.
__________________
"What do you mean I don't have the prerequisites for this class? I've failed it twice before!"


"I think that probably clarifies things pretty good by itself."

"I understand health care now especially very well."
Reply With Quote
  #6  
Old 07-02-2019, 10:10 AM
gauchodelpaso's Avatar
gauchodelpaso gauchodelpaso is offline
Member
SOA
 
Join Date: Feb 2012
College: Eastern Michigan U
Posts: 188
Default

Just think it as a repair on the vehicle and the payment in total is $20,000... the insurance pays 19,000 and Mini pays 1,000 to the collision center doing the body work... It happened to me... If she needs to replace the car, probably she would pay a lot more...
__________________

German
______________
Prelims: 1/P - 2/FM - 3F/MFE - LTAM - STAM
VEE: Economics - Corporate Finance - Applied Statistics
Reply With Quote
Reply

Tags
asm, liability, mini driver, stam

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 03:24 PM.


Powered by vBulletin®
Copyright ©2000 - 2020, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.39370 seconds with 9 queries