James purchased liability insurance with a $100,000 limit from Insurer A.When Insurer A denied a claim that James thought should be covered,he bought a second liability insurance policy with a $150,000 limit from Insurer B.Before he cancelled the policy with Insurer A,a $60,000 loss occurred.If this loss is settled on a pro rata basis,how much must each insurer pay?
A)Insurer A will pay $10,000 and Insurer B will pay $50,000.
B)Insurer A will pay $20,000 and Insurer B will pay $40,000.
C)Insurer A will pay $24,000 and Insurer B will pay $36,000.
D)Insurer A will pay $40,000 and Insurer B will pay $20,000.

Question

Quizplus · Accepted Answer

The total coverage from both insurers is $250,000 ($100,000 from Insurer A + $150,000 from Insurer B). The loss is $60,000. Insurer A's share of the total coverage is 40% ($100,000 / $250,000), and Insurer B's share is 60% ($150,000 / $250,000). Therefore, Insurer A pays 40% of $60,000, which is $24,000, and Insurer B pays 60% of $60,000, which is $36,000.

James Purchased Liability Insurance with a $100,000 Limit from Insurer