A contractor's general liability policy has a $2 million aggregate limit and $1 million per occurrence limit. After two claims of $800,000 each, how much coverage remains?
Correct Answer
A) $400,000
Aggregate limit applies to total claims per policy period: $2,000,000 - ($800,000 + $800,000) = $400,000 remaining.
Why This Is the Correct Answer
The aggregate limit is the maximum the policy will pay for all claims combined during the policy period. Two claims totaling $1,600,000 are subtracted from the $2,000,000 aggregate: $2,000,000 − $1,600,000 = $400,000 remaining. Each claim ($800,000) was within the $1 million per-occurrence limit, so both were paid in full.
Why the Other Options Are Wrong
Option B: $600,000
$600,000 would result from subtracting only one $800,000 claim from the remaining balance after misapplying the per-occurrence limit, or from using an incorrect starting total.
Option C: $1,000,000
$1,000,000 incorrectly treats the per-occurrence limit as the remaining aggregate, ignoring that two separate claims have already been paid from the aggregate pool.
Option D: $200,000
$200,000 results from subtracting $1,800,000 total instead of $1,600,000, or from incorrectly capping each claim at a different amount.
Memory Technique
Aggregate = the bucket. Per occurrence = the biggest single scoop. Each claim ($800K) fits within the $1M scoop limit, so both are paid in full from the bucket: $2M − $0.8M − $0.8M = $0.4M left in the bucket.
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