Equal Shares Clause: A Comprehensive Guide to Its Legal Implications
Definition & meaning
An equal shares clause is a provision in insurance law that requires multiple insurers to share the payment of a claimed loss equally. This means that each insurer is responsible for paying an equal portion of the loss until they reach their individual policy limits. If the total loss exceeds the limits, the insurers will continue to contribute equally until the loss is fully paid or until each insurer has paid its limit in full.
Legal use & context
This clause is commonly used in the context of property and casualty insurance. It ensures that when multiple insurers are involved, they share the financial responsibility fairly. This can be particularly relevant in cases where multiple policies cover the same risk. Users can manage related forms and procedures through resources like US Legal Forms, which offer templates for insurance claims and agreements.
Real-world examples
Here are a couple of examples of abatement:
For example, if three insurance companies insure a property for $100,000 each, and a loss of $250,000 occurs, each insurer would initially pay $100,000, reaching their limit, and then they would share the remaining $50,000 equally until the loss is fully covered or until the limits are exhausted.