Find the amount paid by each of the multiple carriers.
-The Jason Manufacturing Company had an insured fire loss of $79,000. It had insurance coverage as follows: Company A, $450,000; Company B, $275,000; and Company C, $100,000. Find the
Amount paid by each carrier assuming that the coinsurance requirement had been met.

Question

Quizplus · Accepted Answer

To find the amount paid by each carrier, we need to use the principle of contribution. According to this principle, each insurance company will contribute to the loss in proportion to the limits of insurance that it has provided.

First, we need to calculate the total amount of insurance coverage:

Total insurance coverage = Company A + Company B + Company C
= $450,000 + $275,000 + $100,000
= $825,000

Next, we need to find the contribution of each company:

Contribution of Company A = (Insurance provided by Company A / Total insurance coverage) * Total loss amount
= ($450,000 / $825,000) * $79,000
= $43,090.91

Contribution of Company B = (Insurance provided by Company B / Total insurance coverage) * Total loss amount
= ($275,000 / $825,000) * $79,000
= $26,333.33

Contribution of Company C = (Insurance provided by Company C / Total insurance coverage) * Total loss amount
= ($100,000 / $825,000) * $79,000
= $9,575.76

Therefore, the amount paid by each carrier, assuming that the coinsurance requirement had been met, is $43,090.91 by Company A, $26,333.33 by Company B, and $9,575.76 by Company C. The answer is C. The formula to calculate the amount paid by each carrier is:

Amount paid by a carrier = (Insurance Coverage by the carrier / Total Insurance Coverage) × Total Loss

Using this formula, we get:

Amount paid by Company A = (450,000 / 825,000) × 79,000 = 43,090.91
Amount paid by Company B = (275,000 / 825,000) × 79,000 = 26,333.33
Amount paid by Company C = (100,000 / 825,000) × 79,000 = 9,575.76

Therefore, the answer is option C.

Find the Amount Paid by Each of the Multiple Carriers