In the case of a covered loss, how would the payment be split according to contribution by equal shares?

The correct answer reflects the principle of contribution by equal shares, which is a method used in insurance to distribute the payment of claims among multiple insurers when a loss occurs. Under this approach, each insurer shares the responsibility of paying the loss equally up to the policy limits available in each contract.

In contribution by equal shares, if there are two or more insurance policies in effect for the same loss, each insurer will contribute a specified portion of the loss, typically divided equally among them. This method ensures that no single insurer bears a disproportionate amount of the financial burden, thus promoting fairness and equitable distribution of claims.

In contrast, other methods of contribution rely heavily on the specific terms of the policies or the order of responsibility. For instance, payment based solely on policy limits would imply that each insurer pays according to their individual policy limit rather than contributing equally. Similarly, relying on the insured’s selected company or having only the primary company pay would not align with the concept of equitable sharing of loss across multiple insurers, which is essential in contribution by equal shares.