Final answer:
The Other Insurance provision in CGL policies determines how coverage is applied when multiple policies may cover a claim. The occurrence form generally pays first, followed by the claims-made form as excess coverage. This is based on principles of risk management and actuarial fairness.
Step-by-step explanation:
The question addresses the Other Insurance provision in Commercial General Liability (CGL) policies, which determines how claims are covered when more than one policy may apply.
According to this provision, the sequence of payment will depend on whether the policies are on a claims-made or occurrence basis.
Neither answer A, B, nor D is universally correct because it depends on the specific circumstances and the language of the insurance contracts involved.
However, if both a claims-made form and an occurrence form are valid for a single claim, typically, the occurrence form would be the primary coverage, and the claims-made form would provide excess coverage.
This means the occurrence form would pay first, up to its limits, and any amount over that limit would then be picked up by the claims-made form, if its policy terms allow for excess coverage.
It's also essential to recognize that insurance is a means of risk management that operates under the principle that premiums gathered must cover the losses claimed, the cost of operating the company, and allow for profit margins
Members of different risk groups might face varying insurance terms due to the likelihood of a claim occurring, which is a concept known as actuarial fairness.