Under the Other Insurance condition, what happens if two policies have the same terms?

The scenario describes the "Other Insurance" condition, which deals with situations where multiple insurance policies cover the same risk or claim. When two policies have the same terms, the principle of "pro-rata liability" typically applies. This means that in the event of a loss, each insurance company will contribute to the payment based on the proportion of their coverage limits relative to the total limits of all applicable policies.

In this case, option B correctly reflects this understanding. Each insurer agrees to pay its share of the claim proportionate to the amount of coverage it provides, ensuring that the insured is fairly compensated without the insurer having to bear the full financial burden alone. This arrangement helps prevent a scenario where an insured could potentially receive more compensation than the actual loss incurred, maintaining equity among the participating insurers.

The other options do not accurately represent how insurers typically handle losses under the Other Insurance condition: one policy covering the entire claim does not align with the basic principles of shared liability, primary insurance canceling another policy is not a standard practice, and there is no such stipulation regarding excess policies paying only a specific amount as described.