IIQE Paper 1 Core Functions of an Insurance Company question: third party sues

IIQE Paper 1Core Functions of an Insurance Company

A third party sues an insured under a public liability policy. Besides whether the policy responds, the insurer must establish whether:

A the third party holds an IA licence
B the insured paid the premium in cash
C the third party has insurance of its own
D the insured is liable at law to the third party

Show the answer and explanation

Answer: D. the insured is liable at law to the third party

Answer: the insured is liable at law to the third party. For liability insurance, the insurer must also ascertain whether the insured is liable at law to the third party claimant.Why not the others:• the third party holds an IA licence: the claimant's licence status is irrelevant.• the insured paid the premium in cash: the payment method does not affect liability.• the third party has insurance of its own: the claimant's own cover does not decide the insured's liability.Watch out: Stopping at policy liability and forgetting legal liability in liability classes.Rule: Liability claims have two liability questions: under the policy, and at law to the third party.Source: IA P1 Study Notes 2024 Ed. §4.7(c)(i), p.4/6