In full or 100 percent co-insurance, if the value of the property equals or is less than the face of the policy, the risk is entirely upon the insurer; if the value of the property exceeds the face of the policy, then the insured and the insurer assume the risk in the ratio of the face of the policy to the excess in value.
The insured (plaintiff) owned six parcels of property covered by blanket policies of insurance in the aggregate amount of $8,000. Insurers one and two each issued $3,000 policies and insurer three issued a $2,000 policy. The policies in question were full or 100 percent co-insurance policies that contained identical apportionment clauses. After a fire damaged four of the six parcels, plaintiff insured brought three separate actions against defendant insurers, seeking to recover under "full co-insurance policies" covering the insured's real property. Without a jury, the three actions, which involved the same questions, were tried together before the court.
Of two admissible constructions of an insurance contract, should the one against the insurers be preferred because they dictate its form and are the authors of its ambiguity?
The court entered a judgment in favor of the insured. With respect to co-insurance policies, the court held that the apportionment rule did not apply where the amount of the liability of all the insurers was less than the actual loss. Under such circumstances, the court held that the insurers were liable in proportion of the face amount of their coverage to the aggregate amount of coverage. Thus, insurers one and two were liable for three-eighths and insurer three was liable for two-eighths of the total liability under the three policies in suit. As such, the insured was liable for the excess of damages.