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Principles of Risk Management and Insurance, 13th Edition by Michael McNamara, George E. Rejda

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Other-Insurance Provisions

Other-insurance provisions typically are present in property and casualty insurance and health insurance contracts. These provisions apply when more than one contract covers the same loss. The purpose of these provisions is to prevent profiting from insurance and violating the principle of indemnity. If the insured could collect the full amount of the loss from each insurer, there would be profiting from insurance and a substantial increase in moral hazard. Some dishonest insureds would deliberately cause a loss to collect multiple benefits.

Some important other-insurance provisions in property and liability insurance include (1) the pro rata liability clause, (2) contribution by equal shares, and (3) primary and excess ...

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