How will a covered loss of $150,000 be shared between ABC Roofing's two CGL policies?

In this scenario, the correct answer indicates that KLM Insurance will pay $50,000 and XYZ Mutual will pay $100,000 for the covered loss of $150,000. This distribution reflects how losses are shared between multiple insurance policies under concurrent coverage.

When two insurance policies apply to the same loss, the principle of contribution comes into play. This principle dictates that each insurer contributes to the loss according to its respective coverage limit and the total loss amount. If both policies have limits that apply to the claim, they will pool together to cover the total loss.

In this case, if KLM Insurance has a coverage limit that allows it to pay a maximum of $50,000 for this type of loss, and XYZ Mutual can cover up to $100,000, then the distribution of the loss will occur in accordance with these policy limits. Each insurer pays the amount they are obligated to cover based on their own policy terms, but the total amount they pay must equal the total loss incurred.

Understanding how multiple coverages interact is key for determining how losses will be allocated. This scenario illustrates the operational rules of primary and excess coverages or how limits can dictate payment responsibilities when reliable coverage exists from various sources.