Alabama Property and Casualty Practice Exam

What triggers liability coverage under a BOP?

1. Claims made

2. Occurrence

3. Named peril

4. Policy declaration

The correct answer is: Occurrence

Liability coverage under a Businessowners Policy (BOP) is triggered by occurrences. This means that the coverage provides protection for liability claims that arise from incidents that happen during the policy period, regardless of when the claim is actually made. As long as the event that caused harm or injury took place while the BOP was in effect, the policy will respond to the claim, promoting a sense of security for business owners. Understanding the terminology is crucial in this context. An "occurrence" refers to an event or incident that causes damage or injury, distinguishing it from claims-made policies, which cover claims only if they are made during the policy period. This is essential for businesses to know, as it influences how they manage their risk and financial exposure. Although other options pertain to different aspects of insurance coverage, they do not specifically address how liability coverage is activated within a BOP. Seeking clarity on the specific nature of occurrences helps reinforce why this aspect is critical in the liability framework of business insurance.