A contractor's general liability insurance policy has a $1 million per occurrence limit and $2 million aggregate limit. After two claims totaling $800,000 and $600,000, what coverage remains?
Correct Answer
B) $600,000
Aggregate limit ($2,000,000) - Total claims paid ($800,000 + $600,000 = $1,400,000) = $600,000 remaining coverage
Why This Is the Correct Answer
$600,000 remains. The aggregate limit is the total the insurer will pay across all claims during the policy period. Total claims paid = $800,000 + $600,000 = $1,400,000. Remaining aggregate = $2,000,000 − $1,400,000 = $600,000. Note that the first claim ($800,000) was capped by the $1,000,000 per-occurrence limit, so the full $800,000 was paid. The second claim ($600,000) was below the per-occurrence limit, so the full $600,000 was paid.
Why the Other Options Are Wrong
Option A: $200,000
$200,000 would result from subtracting only the second claim ($600,000) from the remaining aggregate after the first claim, as if the first claim exhausted $1,800,000. This reflects a misunderstanding of how aggregate limits work.
Option C: $400,000
$400,000 might result from incorrectly capping the first claim at the per-occurrence limit and calculating $2,000,000 − $1,000,000 − $600,000 = $400,000, which double-applies the per-occurrence limit as a deduction from the aggregate rather than a cap on individual payments.
Option D: $800,000
$800,000 might result from subtracting only the second claim from the aggregate ($2,000,000 − $600,000 = $1,400,000) and then subtracting the first claim incorrectly, or from applying only the $1,200,000 in claims incorrectly.
Memory Technique
Think of the aggregate as a bucket: it starts at $2M. Each paid claim drains the bucket. Per-occurrence is just a cap on how much any one claim can drain at once. Add up the claims: $800k + $600k = $1.4M drained, leaving $600k in the bucket.
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