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

The correct answer focuses on the specific stipulations of a loss sustained policy regarding the discovery clause. This provision allows for claims to be made for losses that are discovered within a specified time frame, even if the actual loss occurred before the policy was in force or after it has expired.

In this context, loss sustained policies are designed to ensure that insured parties can claim losses that they may not have noticed or discovered until after a certain period, which is often one year after the policy expiration. This is crucial for providing continued protection to the policyholder, as it acknowledges the reality that not all losses are immediately evident. Therefore, a loss that is discovered up to one year after the policy expiration can indeed be covered under the discovery clause, as long as the loss occurred during the time the policy was in effect.

Other options do not align with the standard definitions and interpretations of loss sustained policies and their discovery clauses. A loss occurring before the policy activation, for instance, would typically not be covered, as there is no policy in place to provide that coverage at the time the loss occurred. Similarly, losses discovered only during the policy period would not account for the extended period allowed under the discovery clause, limiting the opportunity for recovery beyond the immediate policy term. Lastly