Pro rata liability applies. Each policy pays a percentage of the loss based on the percentage of coverage that policy provides. Company A carries 1/3 of the total coverage ($20,000 + $40,000 = $60,000). Therefore, it is responsible for 1/3 of the $24,000 loss, or $8,000.
Representations are written or oral statements made by the applicant that are
A Guaranteed to be true.
B Found to be false after further investigation.
C Immaterial to the actual acceptability of the insurance contract.
D Considered true to the best of the applicant's knowledge.