When multiple policies cover the same property and payments are distributed by each policy's share until the lowest limit is reached, what method is used?

When multiple policies cover the same property and payments are distributed by each policy's share until the lowest limit is reached, what method is used?

• A. Contribution by Equal Shares
• B. Pro Rata Liability
• C. Split Liability
• D. Combined Single

Answer: (A)

When more than one policy covers the same property, insurers must decide how much each policy will pay. The described approach—sharing the loss in equal portions among all policies until a policy reaches its limit—is Contribution by Equal Shares. In this method, every policy has the same responsibility to contribute a portion of the loss, regardless of its individual limit. The policy with the smallest limit will be exhausted first, and any remaining loss is then borne by the other policies, continuing to share in equal portions among those remaining. This contrasts with Pro Rata Liability, where payments are allocated from the start strictly in proportion to each policy’s limit relative to the total available limits.

When more than one policy covers the same property, insurers must decide how much each policy will pay. The described approach—sharing the loss in equal portions among all policies until a policy reaches its limit—is Contribution by Equal Shares. In this method, every policy has the same responsibility to contribute a portion of the loss, regardless of its individual limit. The policy with the smallest limit will be exhausted first, and any remaining loss is then borne by the other policies, continuing to share in equal portions among those remaining. This contrasts with Pro Rata Liability, where payments are allocated from the start strictly in proportion to each policy’s limit relative to the total available limits.