A Virginia contractor's insurance policy has a $2 million aggregate limit and $1 million per occurrence limit. They have three separate claims: $600,000, $800,000, and $900,000. What amount will the contractor pay out of pocket?
Correct Answer
C) $300,000
Per occurrence limit applies to each claim: $600K (covered), $800K (covered), $900K (covered). Total claims = $2.3M. With $2M aggregate limit, contractor pays $300K out of pocket.
Why This Is the Correct Answer
The per-occurrence limit of $1 million means each individual claim is capped at $1 million. All three claims ($600K, $800K, $900K) individually fall under the $1M per-occurrence cap, so each is fully covered. The total covered = $600K + $800K + $900K = $2.3M. The aggregate limit is $2M. The insurer pays $2M; the contractor pays the remaining $300K out of pocket.
Why the Other Options Are Wrong
Option A: $200,000
$200,000 is incorrect. This may come from miscalculating which claims exceed the per-occurrence limit, or from incorrectly applying the aggregate cap.
Option B: $100,000
$100,000 does not correspond to any correct calculation of the gap between total claims and the aggregate limit.
Option D: $0
$0 would be correct only if total claims did not exceed the aggregate limit. Here, $2.3M in total claims exceeds the $2M aggregate, leaving $300K uncovered.
Memory Technique
Two-step coverage check: STEP 1 — Is each claim under the per-occurrence cap? STEP 2 — Does the total of all covered claims exceed the aggregate? If yes to step 2, the excess is out-of-pocket. Think of the aggregate as a 'seasonal budget' — once it's spent, no more coverage.
More Virginia Questions
Under Virginia law (Title 54.1), what is the minimum net worth requirement for a Class A contractor license?
A Virginia contractor fails to pay a subcontractor $18,500 for completed work. Under Virginia mechanics lien law, within how many days must the subcontractor file a memorandum of lien to preserve their lien rights?
A Virginia contractor employs 8 workers with a total annual payroll of $420,000. Using the standard construction rate of $8.50 per $100 of payroll, what is the annual workers' compensation premium?
A Virginia contractor fails to pay subcontractors on a $180,000 project. Under Virginia mechanics lien law, what is the maximum time period a subcontractor has to file a mechanics lien after last furnishing labor or materials?
Under Virginia contractor law, what happens to a contractor's license if they fail to maintain required insurance coverage?
A contractor fails to pay a subcontractor and the subcontractor files a mechanics lien. Under Virginia law, within how many days must the general contractor post a bond to release the lien from the property?
A Class B contractor in Virginia completed $850,000 worth of work in the current license period and has contracts totaling $1,200,000 for the next period. What action must the contractor take?
A homeowner hired an unlicensed contractor for a $45,000 kitchen renovation. Under Virginia law, what remedy is available to the homeowner?
Calculate the required bond amount for a Virginia Class A contractor with average annual gross receipts of $2,800,000 over the past three years.
A Class C contractor in Virginia wants to install a residential HVAC system valued at $12,000. The contractor's specialty classification is electrical work. What must the contractor do to legally perform this work?
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
Calculate the mechanics lien priority: First lien filed June 1st for $25,000, second lien filed May 15th for $18,000, both for work completed April 30th. Which has priority?
Next Question
A contractor's license is suspended by the Virginia Board for Contractors. Under Title 54.1, what is the maximum suspension period for a first offense?