Which of the Following Accurately States the Legal Effect of the Insured's

question 30

Multiple Choice

Which of the following accurately states the legal effect of the insured's violation of an increase of hazard clause in a property insurance policy?

• A)An increase of hazard clause provides that the insurer's liability will be terminated if the insured takes any action materially increasing the insurer's risk.
• B)The insurer acquires the right of subrogation.
• C)The insurer cannot avoid having to pay the insured for a loss unless the loss resulted from the condition that constituted a violation of the increase of hazard clause.
• D)The insured becomes obligated to pay punitive damages to the insurer.

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Definitions:

Rent Expense

Rent expense is the cost incurred by a business or individual for the use of property or equipment leased from another entity.

Accounts Payable

The financial obligations incurred by a company towards its suppliers or creditors for receiving goods and services that remain unpaid.

Lease Term

The duration for which a lease agreement is effective, usually specified in months or years.

Plant Asset

Plant assets are long-term tangible assets that are used in the production or supply of goods and services, such as machinery, buildings, and vehicles.