Final answer:
Each of the four insurers with a pro rata liability clause would pay 25% of the loss, assuming total loss. Since each policy covers $100,000 and the total coverage is $400,000, each would be responsible for a quarter of the claim amount.
Step-by-step explanation:
When an insured has multiple insurance policies on the same property, and each policy includes a pro rata liability clause, the payments for any claim will be shared by the insurers in proportion to the coverage they provide. In this scenario, the insured has four separate, identical policies, each covering a $100,000 portion of a $400,000 building. If there is a loss, each insurer is responsible for paying a share of the claim based on the ratio of its coverage amount to the total coverage amount from all policies.
To calculate what each insurer would pay in the event of a total loss to the building, you would divide the individual policy limit by the sum of all the policy limits, then multiply by the loss amount. Since the building's value and the sum of the policies are both $400,000, each policy covers 1/4 of the total value. Therefore, each insurer would pay 25% of the loss.
For example, if there is a total loss of $400,000, each of the four insurers would pay:
- Insurer's share of the loss: (Policy Limit of Insurer) / (Total Coverage from all Policies) x Loss Amount
- Insurer's share of the loss: $100,000 / $400,000 x $400,000 = 25% of $400,000
- Total paid by each insurer: $100,000
Note that this example assumes a total loss. If the loss is less than the total value of the building, the payment from each insurer would be adjusted accordingly.