Legal Definitions - apportionment clause

An apportionment clause is a provision in an insurance policy that determines how the insurance proceeds will be distributed among the policyholders. The distribution is based on the proportion of coverage each policyholder has.

For example, let's say there are three policyholders with a total coverage of $300,000. Policyholder A has coverage of $100,000, Policyholder B has coverage of $150,000, and Policyholder C has coverage of $50,000. If there is a loss of $150,000, the insurance company will distribute the proceeds based on the proportion of coverage each policyholder has. Policyholder A will receive $50,000, Policyholder B will receive $75,000, and Policyholder C will receive $25,000.

The apportionment clause ensures that each policyholder receives a fair share of the insurance proceeds based on their coverage. It is a common provision in insurance policies, especially those that cover multiple policyholders or properties.