Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

What is the status of coverage when a pub proprietor cancels an event due to water damage and is sued for breach of contract?

1. COVERED

2. NOT COVERED

3. PARTIALLY COVERED

4. CONDITIONAL COVERAGE

The correct answer is: NOT COVERED

In this scenario, the coverage status for the pub proprietor would likely be classified as not covered due to the nature of the claim arising from a breach of contract. When an event is canceled because of circumstances like water damage, the insurance policy will typically provide coverage for physical damages or losses related to insured perils. However, damages or claims that arise from contractual obligations, such as breach of contract lawsuits, are generally not covered under standard liability insurance policies. Insurance policies are designed to address accidents, damages, or negligence rather than the failure to fulfill a contractual agreement. Therefore, the financial repercussions of canceling an event and subsequent legal actions taken against the pub owner for this breach would fall outside the scope of the coverage typically provided in general liability or commercial property policies. This approach aligns with the principles of insurance, which delineate personal liability from contractual obligations, leading to the conclusion that such claims for breach of contract arising from necessary cancellations due to unforeseeable circumstances do not trigger the coverage of the policy.