Under the discovery clause in the loss sustained policy, what is covered?

The correct response focuses on the nature of a loss sustained policy, specifically in the context of the discovery clause. Under this clause, the coverage extends to losses that are discovered within a specified period after the policy has expired, which is typically up to one year. This means that if a covered loss occurs during the policy period but is only identified after the policy has ended, it remains eligible for coverage as long as it is discovered within that allotted timeframe.

The rationale for this provision is to protect insured parties by ensuring they are not left unprotected for losses that may not be realized until some time after a policy has lapsed. This is particularly relevant in cases where the effects of a loss may not be immediately apparent, allowing for a more comprehensive safety net for policyholders.

In contrast, losses that are not discovered would not trigger coverage, as there is no awareness of the loss to report and claim. Additionally, losses occurring strictly during the policy period or within 30 days post-expiration do not encompass the full extent of protection intended by the discovery clause. Thus, the emphasis on discovering a loss up to one year after the expiration of the policy highlights the importance of recognition in the claims process and the sustained nature of coverage beyond the immediate policy term