Question 1: If they are independent causes of loss, do the ship owners recover for the loss of the cruise liner sinking?
Yes | No

Answer: No, because the heavy seas and the torpedo were enough by themselves to sink the ship – “but for” one, the ship still would have sunk. And “but for” the other, the ship still would have sunk. Cannot identify the proximate/dominant cause.

Question 2: If they are interdependent causes of loss, do the ship owners recover for the loss of the cruise liner sinking?
Yes | No | It depends on exclusions

Answer: It depends on exclusions – if the torpedo was an act of terrorism and excluded, no cover (although there probably would be cover in the USA. If the torpedo event was simply uninsured rather than expressly excluded, there is cover.<.p>

Question 3: In theory, does wide area damage give rise to “windfall” profits?
Yes | No

Answer: Yes

Question 4: Is it true that the worse the insured event, the less the coverage?
Yes | No

Answer: No

Question 5: If the BI losses are presented individually under each extension, what does Hotel California recover for its BI losses?
$5m, $10m, $15m, $20m

Answer: $15m – it is 50% damaged and so BI from damage is 50% of limit + $1m each for the 5 extensions = $15m

Question 6: If the BI losses are presented individually under each extension, what does Hotel New York recover for its BI losses?
$5m, $0

Answer: The answer is $0 because there is only one policy covering both hotels on a “per event” basis and the owners of both hotels have already recovered for each extension for Hotel California.

BONUS POINT: Silly Island was in lockdown before the hurricane and the arrival of infected passengers. So the correct answers to questions 5 and 6 could be $0!