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Pro Rate Liability Clause


Definition of "Pro rate liability clause"

Clause often provided in property insurance policies that distributes the liability to pay an indemnification among several insurers in proportion to the liability exposure each on a covered property. For example, John has a $3 million fire insurance policy on a commercial office building, and there is a pro rata liability clause distributed among three different insurers. Insurer A has provided a $1,500,000 fire policy while insurer B provides $1,000,000 and insurer C provides $500,000. In the event of a total loss due to fire, each insurer would be liable up to the maximum coverage provided under the terms of the policy.



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