Which of the following scenarios best exemplifies a situation where the "Liberalization" clause may come into effect?

The "Liberalization" clause is designed to provide coverage enhancements when a policyholder's existing insurance policy benefits from broader terms introduced during the policy term, without the insured needing to pay an additional premium for those improvements.

In the scenario where a new policy is introduced with broader coverage during the policy period, the Liberalization clause applies directly because it reflects the insurer's commitment to offering enhanced benefits to current policyholders when new policy features are made available. This ensures that current insureds can take advantage of advancements in coverage options without having to negotiate or pay extra for them, effectively protecting them from losing out on better coverage simply due to timing.

The other scenarios do not pertain to the Liberalization clause. For instance, if a claim is denied due to lack of coverage, this suggests a situation of policy limitations rather than enhancements. A competitor introducing a similar policy at a lower rate does not affect the current policy's terms or coverage, and changes to existing coverage limits requested by the Named Insured pertain to modifications of an established contract rather than the automatic coverage upgrades that the Liberalization clause entails.