Registered Insurance Brokers of Ontario (RIBO) Practice Exam

You have an automobile with liability coverage under one policy ($500,000) and another automobile with liability coverage under a separate policy ($1,000,000). How much will policy B pay if you were involved in an accident involving an automobile you do not own?

1. 1/3 of the claim

2. 2/3 of the claim

3. 3/4 of the claim

4. All of the claim

The correct answer is: 2/3 of the claim

Option A is incorrect because it assumes that policy A would pay for 2/3 of the claim, which is not how liability coverage works. Option C is incorrect because it assumes that policy A and B would split the cost, which is also not how liability coverage works. Option D is incorrect because it assumes that policy B will pay for the entire claim when it is only responsible for 2/3 of the total coverage. In this scenario, policy B would pay $333,333.33 and policy A would pay $166,666.67, totaling $500,000 - the overall liability coverage for both policies. This is because when multiple policies have overlapping liability coverage, it is called "pro-rata," meaning that each policy will pay a proportional amount based on their coverage limit. Therefore, in this situation, policy B will cover 2