Exploring the Apportionment Clause [Insurance]: Definition and Implications
Definition & Meaning
An apportionment clause is a provision found in insurance policies that outlines how the insurer's liability for a loss will be determined when multiple insurance policies cover the same property. This clause ensures that any insurance payouts are distributed proportionally based on the total coverage available. Essentially, it helps clarify how much each insurer will pay in the event of a claim when there is overlapping coverage.
Legal Use & context
The apportionment clause is primarily used in the context of insurance law. It is relevant in cases where a property is insured under more than one policy, which is often referred to as double insurance. This clause is crucial for determining the responsibilities of different insurers in the event of a claim. Users can manage their insurance policies effectively by understanding how these clauses work, and they may find it helpful to use legal templates from US Legal Forms to draft or review insurance agreements.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A homeowner has two insurance policies covering their house, one for $200,000 and another for $300,000. If a loss occurs that results in $100,000 in damages, the apportionment clause would dictate that the first insurer pays 40% ($40,000) and the second insurer pays 60% ($60,000) based on the total coverage available.
Example 2: A business has multiple policies for its equipment. If equipment worth $50,000 is damaged and there are two policies covering it for $30,000 and $25,000 respectively, the apportionment clause will determine how much each insurer contributes to the claim. (hypothetical example)