Fred took his friend, Mary, out to dinner on her birthday. While driving Mary ho

Question

Fred took his friend, Mary, out to dinner on her birthday. While driving Mary home, Fred became ill and asked Mary to drive. While driving Fred's car, Mary negligently injured another motorist when she failed to top at a red light.

Fred has an auto insurance policy with a liability insurance limit of $250,000 per person for bodily injury liability. Mary has a similar auto insurance policy with a liability limit of $100,000 per person.

2) If the liability judgment is $300,000, how much, if any, will each insurer pay? Explain your answer.

Explanation / Answer

As per the general rule of insurance, Liability insurance on a borrowed vehicle is primary and all other insurances are secondary. Therefore in this case, total liability judgement will be first paid by Mary’s auto insurance liability. So mary’s insurer will pay $100,000 and remaining $150,000 will be paid by Fred’s insurer.

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