What is the significance of Newly Acquired Organization coverage?

• A. It requires notice to the insurer for automatic coverage to apply
• B. Automatic coverage for a newly acquired subsidiary or organization for a limited period, subject to notice and policy limits
• C. It terminates existing coverage upon acquisition
• D. It applies only to affiliates within the same corporate group

Answer: (B)

Newly acquired organization coverage is a liability policy extension that protects you during a transition when you buy another company. It automatically covers a newly acquired subsidiary or organization for a limited period after the acquisition, giving you immediate protection while you arrange permanent inclusion. The coverage is conditioned on notifying the insurer within the policy’s rules and staying within the policy limits, so the protection isn’t open-ended but time-bound and capped.

This matters because without it, there could be gaps in coverage for claims arising from the new entity’s activities right after the acquisition. The period is short (often 30–90 days, depending on the policy), and after that window you’d need to endorse the new entity onto the policy to maintain coverage.

The other options don’t fit because they either omit the time limit and the notice condition, imply that coverage ends existing coverage upon acquisition, or unnecessarily limit the scope to affiliates within the same corporate group.