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

question 32

Multiple Choice

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.

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Definitions:

Financial Loss

The negative impact experienced when expenses exceed revenues, or when assets lose value, affecting an individual's or entity's overall financial health.

Volenti Non Fit Injuria

A defence in torts based on the plaintiff’s voluntarily assuming a clear legal risk.

Physical Risk

Refers to the likelihood of bodily harm or injury in a given environment or activity.

Legal Risk

The potential for losses or damages resulting from legal proceedings, actions, or changes in law.