Form CA0005 language
c. Non-reporting Premium Basis
If, when "loss" occurs, the total value of your covered "autos" exceeds the Limit of Insurance shown in the Declarations, we will pay only a percentage of what we would otherwise be obligated to pay. We will determine this percentage by dividing the Limit of Insurance by the total actual value at the "loss" location at the time the "loss" occurred.
If we have a policy limit of $250,000 and total value is $328,000 how much would this policy pay? I note it says "what we would otherwise be obligated to pay" not "policy limit".
So, would it be (250,000/328,000)=.762
.762*250,000=190,548.78 payment
or would they pay the policy limit of 250k?
Maine Subscriber
You have calculated the loss accurately by applying the factor to the total insured limit. What the policy language is saying in effect is that there is a penalty to be applied for not reporting the actual values upon which the premium was based. Therefore, if the values at loss were higher than those reported, then the insured will not receive the benefit of the full insurance coverage they purchased, much like a coinsurance penalty.If the .762 were applied to the total loss limit of $328,000, then the insured would receive the full amount of $250,000. Since the policy says they will receive only a percentage of what the policy would normally pay, then it only makes sense that the .762 be applied to the total insured limit.