What does the Other Insurance Clause state regarding multiple insurance policies?

The Other Insurance Clause is a provision found in many property and casualty insurance policies that addresses situations where multiple policies cover the same risk. This clause ensures that in the event of a loss, the primary insurance policy will cover the bulk of the claim, while any additional policies will contribute to the payment of the remaining amount in a prorated manner.

By stipulating that the primary insurance pays the most and others prorate the excess, this approach prevents the insured from profiting from multiple insurance policies for the same loss. It also helps insurance companies manage claims and maintain equitable treatment among policyholders. This is crucial in ensuring that policyholders do not receive a disproportionate benefit from overlapping coverages, which would not be in line with the principle of indemnity.

In contrast, other options might imply full liability by each policy or suggest that all policies pay equally, which would not realistically reflect the common practices in insurance. The clause is designed to clarify the order and proportion of payouts, thereby maintaining fairness in the handling of claims.