What does the Pro-Rata Liability Clause in a fire policy do?

The Pro-Rata Liability Clause is an important component in fire insurance and other types of property insurance policies, and it functions primarily to share loss among multiple applicable policies. When an insured property is covered by more than one insurance policy, the Pro-Rata Liability Clause determines how much each insurer will pay in the event of a loss.

This clause ensures that no one policy is burdened with the full amount of the loss when multiple policies are in place. Instead, each insurer covers a portion of the loss that corresponds to the proportion of their coverage limit in relation to the total coverage provided by all applicable policies. This method helps to ensure fairness and prevents the insured from receiving more than the actual loss suffered.

While some other clauses in insurance policies may deal with duplicate coverage or specific exclusions, the primary function of the Pro-Rata Liability Clause is to allocate responsibility among insurers evenly and justly in cases where multiple policies are involved.