How do primary and excess insurance policies coordinate when multiple coverages apply to the same loss?

How do primary and excess insurance policies coordinate when multiple coverages apply to the same loss?

• A. Primary coverage pays first until its limits are exhausted, then excess coverage pays.
• B. Primary and excess policies always split the loss equally.
• C. Excess coverage pays first until its limits are exhausted, then primary covers the rest.
• D. They do not interact; you must choose one policy to apply.

Answer: (A)

When multiple coverages apply, the primary policy responds first, paying losses up to its limit. If the loss exceeds that limit, the excess policy kicks in to cover the remaining amount, up to its own limit. This sequencing is what keeps the policies coordinated rather than competing with each other. For example, if the primary limit is 100,000 and the loss is 150,000, the primary pays 100,000 and the excess pays the remaining 50,000 (assuming the excess limit is at least 50,000). If the loss were 600,000 and the excess limit is 500,000, the primary would pay 100,000 and the excess would pay 500,000, leaving 0 after the excess layer is exhausted. The important point is that the excess policy does not pay until the underlying primary limit has been reached.

When multiple coverages apply, the primary policy responds first, paying losses up to its limit. If the loss exceeds that limit, the excess policy kicks in to cover the remaining amount, up to its own limit. This sequencing is what keeps the policies coordinated rather than competing with each other.

For example, if the primary limit is 100,000 and the loss is 150,000, the primary pays 100,000 and the excess pays the remaining 50,000 (assuming the excess limit is at least 50,000). If the loss were 600,000 and the excess limit is 500,000, the primary would pay 100,000 and the excess would pay 500,000, leaving 0 after the excess layer is exhausted. The important point is that the excess policy does not pay until the underlying primary limit has been reached.