When two or more policies apply to a loss, which practice describes the payment from each?

The concept being described involves how multiple insurance policies respond to a loss. The term "Pro Rata Payment" refers to the method used to allocate the payout when more than one policy covers the same risk or loss. Under pro rata payment, each insurer pays a share of the loss based on the proportion that their coverage bears to the total amount of insurance available from all policies applicable to the loss.

This approach ensures that the insured does not receive more than the actual loss sustained, while also preventing any duplication or overpayment from multiple insurers. Each insurer's liability is calculated in relation to the total coverage provided across all active policies. This practice aligns insurance payouts more appropriately with the level of coverage each policy provides, ensuring fairness among the insurers.

In contrast, subrogation involves the right of an insurer to pursue a third party that caused a loss, while apportionment typically relates to how losses are divided among insurers based on specific terms. Proportionate liability often refers to legal principles in torts rather than the specific context of insurance payouts related to a claim. These distinctions clarify why "Pro Rata Payment" correctly captures the method of distributing payments from multiple policies in the event of a loss.