1. Fritz has an open fire insurance policy on his home for a maximum liability o
ID: 2446034 • Letter: 1
Question
1. Fritz has an open fire insurance policy on his home for a maximum liability of $60,000. The policy has a number of standard clauses, including the right of the insurer to restore or rebuild the property in lieu of a monetary payment, and it has a standard coinsurance clause. A fire in Fritz’s house destroys a utility room and part of the kitchen. The fire was caused by the overheating of an electric water heater. The total damage to the property is $10,000.00. The property at the time of loss is valued at $100,000.00. Fritz files a proof-of-loss claim for $10,000.00. What is the insurer’s liability in this situation? Explain fully
Explanation / Answer
The insurer’s liability in the above situation:-
10000 * 60000 /100000 = 6000
(Note:- Insurer will bear proportionate liability only.Out of claim of $10,000, insurer liability will be limited to 60 % i.e., maximum liability at the time of policy taken to the total property value at the tome of loss.)
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