A contractor's general liability insurance policy has a $1,000,000 per occurrence limit and a $2,000,000 aggregate limit. After two claims of $800,000 each in one policy year, how much coverage remains for additional claims?
Correct Answer
B) $400,000
Aggregate limit of $2,000,000 minus two claims totaling $1,600,000 leaves $400,000 remaining coverage for the policy year.
Why This Is the Correct Answer
Option B ($400,000) is correct. The aggregate limit of $2,000,000 is the total amount the insurer will pay for all claims during the policy year. Two claims of $800,000 each total $1,600,000 paid out. Subtracting from the aggregate: $2,000,000 − $1,600,000 = $400,000 remaining for the rest of the policy year.
Why the Other Options Are Wrong
Option A: $200,000
$200,000 would result if someone incorrectly subtracted each claim from the per-occurrence limit ($1,000,000 − $800,000 = $200,000) rather than tracking the aggregate. The per-occurrence limit caps any single claim, but the aggregate tracks cumulative payouts across all claims.
Option C: $600,000
$600,000 would result from subtracting only one $800,000 claim from the $1,000,000 per-occurrence limit, which conflates per-occurrence math with aggregate math and only counts one claim instead of two.
Option D: $0
$0 would be correct only if the two claims totaled $2,000,000 or more. The two claims total $1,600,000, which is under the aggregate, so coverage has not been fully exhausted.
Memory Technique
Think of the aggregate as a shared bank account for the year: $2,000,000 deposited. Each claim withdraws from it. Two withdrawals of $800,000 = $1,600,000 spent. Balance remaining = $400,000. The per-occurrence limit is just a cap on any single withdrawal — it doesn't affect the running balance calculation.
More Hawaii Questions
What is the minimum general liability insurance coverage required for Hawaii contractors under HRS 444?
A contractor's license expires on June 30th. What is the late renewal penalty fee in Hawaii?
A contractor completes $85,000 worth of work on a residential project in Hawaii. The property owner fails to pay. Under HRS 507, what is the maximum lien amount the contractor can claim?
A contractor's insurance policy has a $1 million aggregate limit and a $500,000 per occurrence limit. Two separate incidents occur: one causing $400,000 in damages and another causing $300,000. How much will the insurance cover?
Under Hawaii's mechanics lien law, a subcontractor must provide preliminary notice within how many days of first furnishing labor or materials?
A subcontractor provides $28,000 worth of plumbing work but is not paid by the general contractor. Under HRS 507, what is the priority of the mechanics lien compared to a mortgage recorded before construction began?
A contractor discovers contaminated soil during excavation of a residential property. Under Hawaii environmental regulations, who must be notified immediately?
A contractor working on a project in a Hawaii historic district must obtain approval from which entity before beginning work?
A contractor fails to obtain required building permits before starting work. The property owner discovers this and terminates the contract. Under Hawaii law, what is the contractor's right to payment?
A contractor has 12 employees with a total annual payroll of $480,000. If the workers compensation rate is $12.75 per $100 of payroll, what is the annual premium?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass
Related Study Resources
Previous Question
A contractor is working on a project where the total contract amount is $180,000. If workers compensation insurance costs 6.8% of total labor costs, and labor represents 65% of the contract, what is the workers compensation premium?
Next Question
An employee earning $800 per week is injured on a Hawaii construction site. What is the approximate weekly workers compensation benefit?