A court finds the insured responsible for third party damages of $3,000,000. Which statement is FALSE regarding the insurer's obligations?

The correct understanding of the situation lies in the obligations of the insurer when a court finds the insured liable for damages that exceed the policy limit. In this context, the insurer typically has a liability cap up to a specified limit, which in this case is $2,000,000.

When a court awards damages of $3,000,000 against the insured, the insurer’s obligation is to pay the policy limit of $2,000,000. Any interest accruing on the judgment amount beyond this limit is generally not covered by the insurer. Therefore, for any damages awarded over the policy limit, the insurer is not responsible for paying interest on the amount exceeding $2,000,000.

In stating that the insurer is responsible for the interest on the full $3,000,000 from the judgment date, it inaccurately represents the obligations of the insurer as it suggests coverage for an amount beyond what is contractually obligated under the terms of the insurance policy. The key principle influencing this scenario is the definition of coverage limits within insurance policies, where the insurer’s liability is strictly tied to the agreed-upon upper limits, and they are not liable for additional amounts or interest related to judgment amounts that exceed those limits.

Consequently, the