College Composition CLEP Prep Practice Exam

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A commercial policy states that compliance with a particular claim notification requirement is a condition precedent to the insurer's liability for that claim. What is the main significance of this wording?

Breach automatically cancels every section of the policy from inception The condition only applies when the insurer suffers financial prejudice Compliance may be required before liability for the affected claim arises The insurer must ignore the condition if the claim is large

Correct Answer:

Compliance may be required before liability for the affected claim arises

Explanation:

A condition precedent to liability makes compliance relevant to the insurer's obligation on the affected claim. It does not necessarily avoid the entire policy from inception.

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