Free ASHRM CPHRM Study Guides Exam Questions and Answer
CPHRM Exam Dumps, CPHRM Practice Test Questions
ASHRM CPHRM Exam Syllabus Topics:
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NEW QUESTION # 70
The due diligence process in acquisitions is undertaken to:
- A. Remove compliance requirements
- B. Avoid reviewing contracts
- C. Hide liabilities
- D. Reduce unanticipated costs and risks; support valuation and post-acquisition performance
Answer: D
Explanation:
Due diligence is a structured risk-identification and validation process used in mergers/acquisitions to understand clinical, legal, regulatory, operational, and financial exposures before closing. Objectives include discovering hidden liabilities (claims history, compliance gaps, credentialing issues, cybersecurity risks), validating revenue assumptions, assessing quality and safety maturity, and estimating integration costs. This informs valuation (including potential price adjustments), deal terms (representations/warranties, indemnities), and post-close priorities to improve performance and reduce adverse surprises. Risk management objectives include ensuring continuity of safe care during transition, aligning policies and governance, and preventing inherited regulatory violations or claims tail exposures.
NEW QUESTION # 71
For a risk management program to be effective, it needs:
- A. Only incident reporting software
- B. Only insurance coverage
- C. Organizational commitment, visibility/access, and physician engagement
- D. Only a policy manual
Answer: C
Explanation:
Effective risk management requires more than tools-it needs organizational commitment (tone at the top), operational visibility (access to events, leaders, data), and physician engagement because many high-severity risks involve medical decision-making and clinical leadership. Risk management objectives include preventing harm (patient safety), reducing financial loss (claims and insurance costs), ensuring compliance, and building a learning culture. Without executive and board support, corrective actions stall; without visibility, emerging risks are missed; without physician buy-in, clinical process redesign fails. Successful programs integrate with quality, patient safety, compliance, legal, and operations, and they use structured methods (RCA/FMEA, audits, claims trend analysis) to drive measurable improvement. This also strengthens defensibility: it shows governance, action, and continuous improvement-key elements in regulatory review and litigation.
NEW QUESTION # 72
Per The Joint Commission and CMS patient visitation standards, a hospital may restrict an individual's ability to visit a patient if the visitor
- A. is not the patient's immediate family member.
- B. is known to be a drug seeker in the community.
- C. is not the patient's designated healthcare surrogate.
- D. administered the patient an unknown drug via IV.
Answer: D
Explanation:
According to Health Care Risk Management standards supported by ASHRM, CMS Conditions of Participation, and The Joint Commission patient visitation standards, hospitals must have written visitation policies that respect patient rights. Patients generally have the right to designate visitors of their choosing, including individuals who are not immediate family members. Visitation cannot be restricted based on non- clinical factors such as relationship status or surrogate designation.
However, facilities may impose clinically reasonable or safety-based restrictions. If a visitor administers an unknown drug intravenously to a patient, this presents a clear and immediate threat to patient safety. Such conduct justifies restricting visitation to protect the patient from harm, maintain clinical control of treatment, and prevent unsafe interference with care.
Being known as a drug seeker in the community, without evidence of disruptive or harmful behavior during the visit, does not alone justify restriction under patient rights standards. Similarly, visitation cannot be denied solely because the individual is not the designated healthcare surrogate.
Legal and regulatory objectives emphasize balancing patient rights with safety and security. Therefore, a hospital may restrict visitation when a visitor's actions pose a direct threat to patient safety.
NEW QUESTION # 73
The first layer of insurance that will respond to a specific type of loss or exposure is called
- A. foundation.
- B. primary.
- C. baseline.
- D. frontline.
Answer: B
Explanation:
According to Health Care Risk Management principles supported by ASHRM and the American Hospital Association Certification Center, insurance coverage for liability exposures is often structured in layers. The first layer of insurance that responds to a covered loss is known as the primary policy.
Primary insurance provides initial coverage once any applicable deductible or self-insured retention has been satisfied. It is responsible for defense and indemnity payments up to the policy's stated per-occurrence and aggregate limits. Only after the primary policy limits are exhausted do excess or umbrella policies respond.
Terms such as baseline, foundation, and frontline are not recognized technical classifications in layered insurance structures. In professional and general liability programs, organizations commonly maintain a primary layer followed by one or more excess layers to protect against catastrophic losses.
Risk financing objectives emphasize understanding policy structure, limits, attachment points, and coordination between layers to ensure adequate protection of organizational assets. Therefore, the correct term for the first layer of insurance that responds to a loss is the primary policy.
NEW QUESTION # 74
An unstable patient in the emergency department needs transfer to another hospital. Which of the following statements is true regarding the refusal of an on-call physician to treat this patient?
- A. The on-call physician is never relieved of duty to accept a patient needing specialized services.
- B. The on-call physician may refuse to participate in the care of a patient, as long as that refusal is not based on insurance status or other financial concerns.
- C. The on-call physician may refuse to participate in the care of any patient, for any reason.
- D. The on-call physician is relieved of duty only if unavailable because of caring for another patient, or because of other circumstances outside the physician's control.
Answer: D
Explanation:
Under Health Care Risk Management standards supported by ASHRM and the American Hospital Association Certification Center, obligations under the Emergency Medical Treatment and Labor Act EMTALA govern on-call physician responsibilities. When a hospital maintains an on-call roster to provide specialty services for emergency department patients, physicians listed on call are required to respond and participate in the evaluation and stabilization of patients with emergency medical conditions.
An on-call physician may only be relieved of duty if legitimately unavailable due to circumstances beyond their control, such as actively caring for another patient or being otherwise unable to respond in accordance with hospital policy. Refusal to treat for convenience or non-clinical reasons may constitute an EMTALA violation and expose both the hospital and physician to regulatory penalties.
A blanket right to refuse care is inconsistent with EMTALA requirements. While financial discrimination is prohibited, refusal for other non-justifiable reasons may still violate federal law. Conversely, stating that a physician is never relieved of duty is inaccurate, as legitimate unavailability may excuse performance under specific circumstances.
Legal and regulatory objectives emphasize compliance with EMTALA, proper on-call coverage policies, and documentation of availability. Therefore, the correct statement is that relief occurs only when the physician is unavailable due to circumstances outside their control.
NEW QUESTION # 75
Which of the following is the MOST likely root cause of medication errors in healthcare entities?
- A. look-alike, sound-alike drugs
- B. system or process failure
- C. manual medication delivery systems
- D. illegible physician handwriting
Answer: B
Explanation:
According to Health Care Risk Management standards supported by ASHRM and patient safety principles endorsed by The Joint Commission, the most likely root cause of medication errors is system or process failure. Modern patient safety frameworks emphasize that errors rarely result from isolated individual mistakes. Instead, they typically arise from weaknesses in processes, workflow design, communication systems, technology integration, or inadequate safeguards.
Illegible handwriting, manual systems, and look-alike or sound-alike drugs are recognized contributing factors. However, these elements represent components within a broader system. For example, illegible handwriting becomes problematic when standardized order entry systems are lacking. Look-alike medications pose risks when storage, labeling, or verification processes are insufficient. Manual medication delivery systems increase risk when redundancy and double-check mechanisms are absent.
Root cause analysis methodologies consistently demonstrate that unsafe system design, poor communication processes, lack of standardized procedures, and inadequate training contribute to medication errors. A systems-based approach aligns with just culture principles and focuses on improving processes rather than assigning individual blame.
Clinical and patient safety objectives emphasize system redesign, standardization, and continuous quality improvement. Therefore, system or process failure is the most likely root cause of medication errors.
NEW QUESTION # 76
According to Joint Commission findings, what is a primary cause of wrong-site surgery?
- A. Weather conditions
- B. Pharmacy stock-outs
- C. Laundry delays
- D. Communication failure
Answer: D
Explanation:
Wrong-site surgery is a high-severity, preventable event. Joint Commission analyses repeatedly identify communication failuresas a leading root cause-breakdowns in scheduling, consent/site verification, handoffs, and intraoperative confirmation. Risk management objectives therefore emphasize standardized verification systems: correct patient/procedure/site documentation, pre-op verification, surgical site marking, and a robust time-out performed with full team engagement. Communication failures can include ambiguous documentation, incorrect or incomplete handoff information, and hierarchy barriers that prevent speaking up.
Improving communication reduces reliance on memory and individual vigilance and increases system reliability. In addition, organizations must audit compliance, address workarounds, and strengthen team empowerment so any member can stop the line if a mismatch is detected.
NEW QUESTION # 77
A hospital uses the same labels for all prescriptions, but they don't fit on small containers, so employees must cut/paste labels in a special way. This is an example of:
- A. Value-added work
- B. Extra processing (Lean waste)
- C. Clinical decision support
- D. Risk financing
Answer: B
Explanation:
In Lean terms,extra processingis work that does not add value from the patient's perspective and often introduces defect risk. Cutting and reformatting labels is a classic extra-processing waste: it consumes time, creates variability, and increases the likelihood of mislabeling-one of the most serious medication safety hazards. Risk management objectives prioritize eliminating rework and standardizing the labeling process through right-sized labels, standardized print templates by container type, barcode integration, and human factors design (font size, tall-man lettering where appropriate). Removing extra processing improves efficiency and reduces cognitive load and workaround culture-both strongly associated with error.
Operationally, this is a system design failure: staff are compensating for poor equipment/process fit. Fixing the system reduces the chance of a high-severity adverse event and strengthens defensibility by demonstrating proactive hazard elimination.
NEW QUESTION # 78
What group reports information (historically HIPDB content; now within NPDB) related to fraud/abuse oversight?
- A. Restaurant inspectors
- B. Any patient advocacy blog
- C. Peer review organizations (for certain state/federal reporting categories)
- D. School boards
Answer: C
Explanation:
The Healthcare Integrity and Protection Data Bank (HIPDB) was created to combat healthcare fraud and abuse; it isno longer operational as a separate bank, and its content was merged into the NPDB. Reporting and querying are governed by HRSA rules defining authorized entities, including certain peer review and oversight organizations in specific reporting frameworks. Risk management objectives include ensuring organizations understand which actions must be reported, ensure due process, and comply with data handling rules. Proper reporting supports system integrity by preventing practitioners or entities with serious adverse actions from moving undetected across organizations. For hospitals and health plans, this strengthens credentialing and contracting decisions, reducing organizational exposure to negligent credentialing and improper network participation risks.
NEW QUESTION # 79
Information from the Data Bank (NPDB; includes former HIPDB content) can be requested by:
- A. Social media investigators
- B. Professional societies with formal peer review (as permitted)
- C. Any member of the public
- D. Patients requesting a clinician's full file
Answer: B
Explanation:
Access to NPDB information is restricted to authorized entities for credentialing, privileging, and oversight- not public browsing. HRSA's NPDB rules identify who can query and report;professional societies with formal peer revieware listed among entities that may query under certain circumstances. This limited-access model supports patient safety objectives by enabling credentialing bodies to identify adverse licensure actions, certain negative clinical privilege actions, and other reportable events, while protecting due process and confidentiality. From a risk management perspective, proper querying supports defensible credentialing and reduces negligent credentialing exposure. Equally important: organizations must maintain secure handling of NPDB responses and follow permitted-use rules to avoid compliance violations.
NEW QUESTION # 80
All of the following are examples of an adverse drug event EXCEPT
- A. administration of a drug by the wrong route.
- B. a drug reaction experienced by the patient.
- C. an error in ordering or dispensing a drug.
- D. controlled substance inventory discrepancy.
Answer: D
Explanation:
Under Health Care Risk Management principles defined by ASHRM and the American Hospital Association Certification Center, an adverse drug event refers to patient harm or potential harm related to the use of medication. This includes medication errors and adverse drug reactions that directly affect patient safety.
Administration of a drug by the wrong route is a medication error that may result in patient harm and therefore qualifies as an adverse drug event. A drug reaction experienced by the patient is, by definition, an adverse drug reaction and falls within the broader category of adverse drug events. Similarly, an error in ordering or dispensing a drug represents a medication error that may cause or has the potential to cause harm to a patient.
In contrast, a controlled substance inventory discrepancy relates to regulatory compliance, diversion risk, or financial accountability, not direct patient injury. While such discrepancies are serious and fall under legal, regulatory, and operational risk domains, they do not constitute an adverse drug event unless patient harm occurs.
Clinical and patient safety objectives emphasize distinguishing between medication-related patient harm and regulatory or operational issues. Therefore, the controlled substance inventory discrepancy is not an adverse drug event.
NEW QUESTION # 81
A risk manager is reviewing the hospital's incident reporting system and notices that very few medication errors are being reported despite known high volumes of medication administration. Which of the following is the MOST appropriate action?
- A. Conduct a root cause analysis on the reporting system.
- B. Assess the organizational culture and barriers to reporting.
- C. Discipline staff members for failure to report errors.
- D. Notify the liability insurer immediately.
Answer: B
Explanation:
Within Health Care Risk Management frameworks supported by ASHRM and the American Hospital Association Certification Center, effective incident reporting systems depend heavily on organizational culture. When underreporting is identified, the most appropriate first step is to evaluate whether a just culture exists and whether staff perceive reporting as safe, nonpunitive, and constructive. Fear of retaliation, lack of feedback, time constraints, and unclear reporting procedures are common barriers that suppress reporting rates.
A punitive response such as disciplining staff may further discourage transparency and undermine patient safety initiatives. Conducting a root cause analysis may be appropriate if a specific adverse event occurred, but in this scenario the systemic issue is underreporting itself, which is primarily cultural and operational in nature. Immediate notification of the liability insurer would not address the underlying safety system weakness.
Health care operations objectives emphasize creating a culture of safety that encourages voluntary reporting, learning, and system improvement. By assessing and strengthening reporting culture, leadership can improve data accuracy, enhance early risk identification, and support proactive patient safety management.
NEW QUESTION # 82
Which of the following is a program of the Food and Drug Administration FDA post market surveillance system for medical devices that requires healthcare facilities to report patient deaths or injuries related to a medical device?
- A. Patient Safety Organization PSO
- B. Emergency Medical Treatment and Active Labor Act EMTALA
- C. Safe Medical Devices Act SMDA
- D. Occupational Safety and Health Act of 1970 OSHA
Answer: C
Explanation:
Under Health Care Risk Management standards recognized by ASHRM and the American Hospital Association Certification Center, the Safe Medical Devices Act SMDA is part of the FDA's post market surveillance system for medical devices. The SMDA requires healthcare facilities to report to the FDA and, in some cases, to the manufacturer when a medical device has or may have caused or contributed to a patient death or serious injury. This mandatory reporting system enhances device safety monitoring and supports regulatory oversight after products enter the market.
EMTALA governs emergency medical screening and stabilization obligations, not device reporting. The Occupational Safety and Health Act focuses on workplace safety for employees rather than patient device- related injuries. Patient Safety Organizations operate under the Patient Safety and Quality Improvement Act and facilitate voluntary reporting of patient safety events, but they do not replace FDA-mandated device reporting requirements.
Legal and regulatory objectives in healthcare risk management emphasize compliance with federal reporting statutes, timely submission of required reports, and maintenance of documentation to mitigate regulatory exposure. Therefore, the Safe Medical Devices Act is the correct answer regarding mandatory FDA post market surveillance reporting for device-related deaths or injuries.
NEW QUESTION # 83
If there is no OSHA standard for a given potential health hazard, OSHA may:
- A. Have no authority at all
- B. Transfer it to the FDA
- C. Ignore it if it is expensive
- D. Govern it under the General Duty Clause
Answer: D
Explanation:
OSHA can cite employers under theGeneral Duty Clausewhen a recognized serious hazard exists and no specific standard applies. Risk management objectives require proactive hazard identification and controls even when regulations are not prescriptive: risk assessments, engineering controls where feasible, administrative controls (policies, training), and PPE as a final layer. In healthcare, this is relevant for emerging hazards (novel chemical exposures, workplace violence risks, certain ergonomic hazards) where specific standards may be limited. Maintaining documentation of hazard recognition and mitigation is essential for defensibility during inspections and for staff safety outcomes.
NEW QUESTION # 84
All of the following are valid reasons for performing risk management review of policies and procedures EXCEPT
- A. identifying potential risk exposures.
- B. maintaining staff competency.
- C. monitoring compliance with standards.
- D. ensuring consistency between practice and policy.
Answer: B
Explanation:
According to Health Care Risk Management standards supported by ASHRM and the American Hospital Association Certification Center, periodic review of policies and procedures is essential to ensure alignment with current laws, regulatory standards, accreditation requirements, and best practices. Reviewing policies helps ensure consistency between written procedures and actual clinical practice, thereby reducing liability exposure.
Policy review also supports identification of potential risk exposures by detecting outdated language, conflicting guidance, or gaps in processes that could lead to adverse events. Additionally, monitoring compliance with standards-such as federal regulations, state statutes, and accreditation requirements-is a central purpose of policy review, ensuring that organizational practices meet required benchmarks.
Maintaining staff competency, however, is primarily addressed through education, training programs, credentialing, and performance evaluation processes. While policies provide guidance for staff conduct, competency assessment is not the primary objective of policy review itself.
Health Care Operations objectives emphasize governance oversight, regulatory compliance, and risk mitigation through clear, current policies. Therefore, maintaining staff competency is not a direct reason for performing risk management review of policies and procedures, making it the correct exception.
NEW QUESTION # 85
The source of many medication errors is:
- A. Patient wristbands
- B. Radiology scheduling
- C. Elevator delays
- D. Verbal/telephone orders (when avoidable and not properly verified)
Answer: D
Explanation:
Verbal/telephone orders are widely recognized aserror-pronebecause they can be misheard, misunderstood, or transcribed incorrectly-especially with sound-alike drug names, confusing numerals (15 vs 50), background noise, accents, and interruptions. ISMP and patient safety advisories recommend minimizing verbal orders whenever possible and using safeguards such as read-back/confirm-back, spelling drug names, stating digits individually, and documenting promptly. Risk management objectives include reducing reliance on memory and imperfect communication by prioritizing written or electronic orders (CPOE), standardizing when verbal orders are permitted (true emergencies), and auditing compliance to prevent unsafe normalization. Because medication errors can cause severe harm, controlling verbal order risk is a high-yield safety intervention and improves legal defensibility by aligning practice with recognized safety recommendations.
NEW QUESTION # 86
Which of the following documents will an insurance underwriter use to provide an insurance quote?
- A. application
- B. certificate of insurance
- C. certificate of need
- D. declaration page
Answer: A
Explanation:
Under Health Care Risk Management principles supported by ASHRM and the American Hospital Association Certification Center, the insurance application is the primary document used by an underwriter to evaluate risk and generate a premium quote. The application provides detailed information about the organization's operations, services, patient volume, claims history, risk control measures, governance structure, and prior insurance coverage. This information enables the underwriter to assess exposure, determine eligibility, and calculate appropriate pricing and coverage terms.
A certificate of insurance is issued after a policy is in force to verify coverage to third parties and does not serve as a quoting document. The declaration page is part of an existing insurance policy and summarizes coverage limits, deductibles, and endorsements; it reflects finalized terms rather than information used to generate a quote. A certificate of need is a regulatory document related to state approval of healthcare facilities or services and is unrelated to underwriting.
Risk financing objectives emphasize accurate disclosure and thorough completion of insurance applications, as misrepresentation or omission may affect coverage validity. Therefore, the application is the document used by an underwriter to provide an insurance quote.
NEW QUESTION # 87
A 78-year-old patient in the ICU is unable to speak or swallow. The physician states that she is terminally ill and believes she lacks decision-making capacity. As such, he has deferred to her properly executed advance directive that clearly outlines her wishes for no life-prolonging treatment. The patient's three sons know of the directive, but insist that a PEG tube be placed to assist with feeding. The physician is opposed to placing the tube. The nurse calls the risk manager for advice. Which of the following should the risk manager advise?
- A. The patient has the right to autonomy, and the advance directive is proper; support the physician.
- B. More facts are needed; request an ethics consultation.
- C. More facts are needed; decision making capacity must be determined before moving forward.
- D. The family will outlive the patient, and they have the right to sue; support the family.
Answer: A
Explanation:
Under Health Care Risk Management principles recognized by ASHRM and the American Hospital Association Certification Center, a properly executed advance directive carries legal authority when a patient lacks decision-making capacity. The physician has assessed that the patient is terminally ill and lacks capacity, triggering activation of the advance directive. If the directive clearly states refusal of life-prolonging treatment, including artificial nutrition and hydration, those wishes must be honored in accordance with state law and the Patient Self-Determination Act framework.
Patient autonomy is a foundational ethical and legal principle in health care. Once capacity is lost, previously expressed wishes through a valid advance directive govern care decisions. Family members do not have authority to override a valid directive unless legal defects or ambiguity exist. Their disagreement does not negate the patient's documented preferences.
Although ethics consultation can be helpful in managing conflict, the directive here is described as properly executed and clear. Additional determination of capacity is unnecessary because the physician has already made that assessment.
Risk management objectives emphasize compliance with advance directive statutes, respect for patient autonomy, and reduction of liability through adherence to documented patient wishes. Therefore, the appropriate advice is to support the physician in honoring the advance directive.
NEW QUESTION # 88
Which of the following should be included in a risk management plan?
* purpose of the program
* budget for the department
* process of risk management activities
* structure of the program
- A. 2, 3, and 4 only
- B. 1, 3, and 4 only
- C. 1, 2, and 4 only
- D. 1, 2, and 3 only
Answer: B
Explanation:
According to Health Care Risk Management standards defined by ASHRM and the American Hospital Association Certification Center, a formal risk management plan is a governance document that outlines the framework, scope, and operational processes of the program. It is intended to define how risk management activities support organizational objectives and regulatory compliance.
The plan should clearly state the purpose of the program, establishing its mission, goals, and alignment with patient safety and enterprise risk management strategies. It must also describe the structure of the program, including reporting relationships, committee oversight, leadership roles, and accountability mechanisms.
Additionally, the process of risk management activities should be detailed, including event reporting, investigation procedures, claims management, education initiatives, and performance evaluation methods.
While financial planning is important for departmental operations, the budget for the department is typically addressed in administrative or financial planning documents rather than the risk management plan itself. The plan focuses on governance, structure, and operational processes rather than line-item budgeting.
Therefore, inclusion of the program's purpose, structural framework, and operational processes appropriately defines a comprehensive risk management plan.
NEW QUESTION # 89
What are risk treatment strategies?
- A. Litigation, denial, delay
- B. Risk avoidance, risk retention, risk transfer (and risk reduction/mitigation)
- C. Public relations, branding, advertising
- D. Staff vacation scheduling
Answer: B
Explanation:
Core risk treatment strategies includeavoidance(stop the activity),reduction/mitigation(controls that reduce likelihood/severity),retention(accept risk within appetite and fund losses via reserves/self-insurance), and transfer(contracts/insurance shifting financial consequences). In healthcare, the highest priority is often mitigation for patient safety risks (standardization, technology, training), with financing mechanisms ensuring the organization can absorb residual loss without destabilizing operations. ERM aligns these strategies to enterprise objectives so leadership invests in the best mix of prevention and financing.
NEW QUESTION # 90
What are the types of quality problems identified by the Institute of Medicine's Roundtable on Health Care Quality?
- A. Access, cost, and satisfaction
- B. Timeliness, equity, and efficiency
- C. Misuse, overuse, and underuse
- D. Abuse, fraud, and waste
Answer: C
Explanation:
The IOM's quality framing highlights three categories of quality problems:underuse(failing to provide beneficial care),overuse(providing care where harms outweigh benefits), andmisuse(errors/defects in delivering appropriate care). This triad matters to risk management because harm arises not only from mistakes (misuse) but also fromomissions(underuse) andunnecessary interventions(overuse). For example, missing a diagnostic test can cause deterioration (underuse), while ordering a risky, non-indicated procedure can cause avoidable complications (overuse). Misuse connects strongly to patient safety incident analysis and reliability engineering. Together, these categories provide a comprehensive lens for prioritizing improvement:
reduce preventable adverse events, close evidence-based gaps, and avoid low-value care that increases complications and cost. Using this IOM model supports a balanced quality/risk program that prevents harm across the full spectrum of clinical decision-making and care delivery.
NEW QUESTION # 91
An organization has recently changed insurance. The risk manager receives a claim from a former patient on July 3, 2004, claiming injury and alleging negligence by the surgery staff on September 5, 2003. Which of the following would apply to this claim?
* a claims-made policy for the period 1/1/03 to 1/1/04 with a retro date of 1/1/02
* an occurrence policy for the period 1/1/03 to 1/1/04
* a claims-made policy for the period 1/1/03 to 1/1/04 with a 1-year tail coverage
* an occurrence policy for the period 1/1/04 to 1/1/05
- A. 3 and 4 only
- B. 2 and 3 only
- C. 1 and 2 only
- D. 1 and 4 only
Answer: B
Explanation:
According to Health Care Risk Management standards supported by ASHRM and the American Hospital Association Certification Center, coverage determination depends on both the policy trigger and relevant dates. The alleged negligence occurred on September 5, 2003. Under an occurrence policy in effect from 1/1
/03 to 1/1/04, coverage applies because the event occurred during that policy period, regardless of when the claim was filed. Therefore, option 2 applies.
For a claims-made policy covering 1/1/03 to 1/1/04, coverage would require that the claim be made and reported during the policy period unless tail coverage is in place. Because the claim was received on July 3,
2004, after expiration of the 1/1/03 to 1/1/04 claims-made policy, coverage would apply only if a 1-year tail was purchased. Thus, option 3 applies.
Option 1 would not apply because the claim was made after the claims-made policy period ended, and no tail is specified. Option 4 would not apply because occurrence coverage from 1/1/04 to 1/1/05 would not cover an event that occurred in 2003.
Risk financing objectives emphasize understanding policy triggers, reporting requirements, and tail coverage.
Therefore, the applicable coverage scenarios are the occurrence policy for 2003 and the claims-made policy with tail coverage.
NEW QUESTION # 92
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