James purchased liability insurance with a $100,000 limit from insurer A. To add more coverage, he bought a second liability policy with a $150,000 limit from insurer B. When a $60,000 loss occurs and losses are settled on a pro-rata basis, how much will each insurer pay?

Question

Deangelo Rivera

Business

20 March, 13:32

James purchased liability insurance with a $100,000 limit from insurer A. To add more coverage, he bought a second liability policy with a $150,000 limit from insurer B. When a $60,000 loss occurs and losses are settled on a pro-rata basis, how much will each insurer pay?

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Answers (1)

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Tristen · Answer 1

Answer:A. $24,000

B. 36,000

Explanation:

The loss incurred by James is less than his coverage with each of the insurer.

The sum is apportioned on pro rata basis on the ratio of total insured.

$100,000 + $150,000=$250,000

A share is $100,000/$250,000 / * $60,000

A = $24,000

B = $100,000/$250,000*$60,000

= $36,000