Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

If an architectural firm is sued for construction issues from 2006, would their current policy cover damages?

1. COVERED

2. NOT COVERED

3. PARTIALLY COVERED

4. CONDITIONAL COVERAGE

The correct answer is: NOT COVERED

In the context of liability insurance policies, coverage is typically based on the principle of "occurrence" versus "claims-made." Most professional liability policies, including those utilized by architectural firms, are often structured on a claims-made basis. This means that coverage is activated when a claim is made rather than when the event that caused the claim occurred. Since the construction issues arose in 2006, and if the firm is being sued in a current policy period, the policy in effect at the time the claim was filed would need to include coverage for incidents that originated prior to the policy's inception. If the architectural firm did not have a continuous claims-made policy that extended its coverage back to 2006, or if the current policy specifically excludes claims stemming from events that occurred before the start date of the coverage, then it would not provide coverage for damages related to the lawsuit. Therefore, without specific provisions or endorsements that would allow for coverage of prior incidents, the current policy would typically not cover damages resulting from a claim based on construction issues that occurred in 2006.