Legal Definitions - other-insurance clause

An other-insurance clause is a provision in an insurance policy that limits coverage if the insured has other coverage for the same loss. There are three major types of other-insurance clauses:

• Pro rata clause: This clause states that the insurance company will only pay a proportionate amount of the loss based on the amount of insurance the insured has with their policy compared to the total amount of insurance they have with all policies covering the same loss.
• Excess clause: This clause states that the insurance company will only pay if the other insurance policies covering the same loss have been exhausted.
• Escape clause: This clause states that the insurance company will not pay if there is any other insurance policy covering the same loss, regardless of whether that policy pays or not.

For example, let's say you have two car insurance policies, each with a $10,000 limit for collision coverage. If you get into an accident and the damage to your car is $15,000, the pro rata clause would require each insurance company to pay $7,500 (half of the total loss) since you have equal coverage with both policies. The excess clause would require one policy to pay the full $10,000 before the other policy pays anything. The escape clause would mean that neither policy would pay anything since you have other insurance covering the same loss.

These clauses are important to understand because they can affect how much coverage you have and how much you will be reimbursed in the event of a loss.