In which situation would the insurer be liable for a loss?

• A. The insured caused the loss
• B. The insured's property is damaged by flood
• C. The insured is an innocent bystander during a bank robbery
• D. The insured theft of property

Answer: (C)

The key idea is that insurance pays for losses that occur due to a covered peril and that aren’t caused by the insured’s own actions. If the insured causes the loss or engages in illegal conduct, coverage is typically voided or excluded. If a third party, such as a robber, damages the insured’s property, that loss is usually-covered under the policy assuming the peril is included.

In this scenario, the insured is an innocent bystander during a bank robbery, and their property is damaged by the robber. The loss is caused by a crime committed by someone else, not by the insured, so it falls under a covered peril, making the insurer liable. By contrast, if the insured caused the loss, or committed theft themselves, coverage would not apply (and flood damage often requires a separate policy, since standard policies may exclude it).