Under a commercial property policy, the per-occurrence limit is $500,000 and the annual aggregate limit is $1,500,000. The insured suffers three separate covered losses of $400,000 each during the policy year. How much does the insurer pay in total?

Why this is the answer

The per-occurrence limit ($500,000) is the maximum for any single event. The annual aggregate ($1,500,000) is the ceiling for all events combined during the policy period. Loss 1: $400,000 paid (aggregate remaining: $1,100,000). Loss 2: $400,000 paid (aggregate remaining: $700,000). Loss 3: $400,000 paid (aggregate remaining: $300,000). Each loss is within the per-occurrence limit and the three together ($1,200,000) stay under the aggregate, so all three are paid in full: $1,200,000. The aggregate would cut back a payment only after earlier losses had used it up; a fourth $400,000 loss in the same year would be paid only $300,000. FL Outline §II covers occurrence and limits of liability.