Q

When two insurance companies provide property coverage in equal amounts on the same dwelling, can the insured recover more than the face value of the larger of the two polices?

In this situation, Company A provides $30,000 on the dwelling, and Company B, $40,000. The amount of the loss is $50,000. How much should each insurance company pay?

Texas Subscriber

A

We assume that you are referencing the type of other insurance clause that appears in the ISO homeowners policy forms. This states that, when a loss is covered by other insurance, the homeowners insurer will pay only the proportion of the loss that the policy's limit bears to the total amount of insurance covering the loss.

Therefore, if both policies apply, there is $70,000 of coverage available. Company A's limit is 43 percent of that amount ($30,000/$70,000 = 43%). Company B's limit is 57 percent of that amount ($40,000/$70,000 = 57%).

Therefore, Company A would pay 43 percent of the loss, or $21,500. Company B would pay 57 percent of the loss, or $28,500.

The insured may recover the entire amount of $50,000 as long as there are no coinsurance problems.