Southern Ltd. carries a large volume of stock. It has secured fire policies to cover the stocks from three general insurers, the details of which are as under: Insurer Sum Assured M Insurance Co. Ltd. ₹75,00,000 N Insura

This question calls for an inter-say allocation of liabilities among different insurers who have insured. The main idea of an insurance contract is to indemnify the insured, against losses. The insured cannot gain out of a loss and hence the claim will have to be settled on pro-rata basis by all the three insurers collectively as per their sum insured liability ratios. Since there are three insurers, the liability to settled claims has to be distributed ratably. The claim amount has to be calculated applying the 'SUE' clause in the order namely: S - Salvage U - Under-insurance E - Excess The distribution will be as under: The actual stocks at the time of loss were ₹1,60,00,000. Insurance covers available are ₹75 lakh + ₹25 lakh + ₹50 lakh = ₹1.50 crore. There is under insurance. Loss ₹ 1,60,00,000 Less salvage ₹ 1,50,000 ₹ 1,58,50,000 The loss has therefore to be limited to the maximum of the same assured under the policies. Loss limited to ₹ 1,50,00,000 Less 'Salvage' ₹ 1,50,000 Maximum Allowable ₹ 1,48,50,000 to be distributed among M, N & S in the ratio of 3:2:1 viz. after adjusting for underinsurance clause. The stocks were insured only to the value of ₹1,50,00,000 i.e. upto a value of 93.75%. Hence, the amount payable is to be adjusted for underinsurance after adjustment of salvage, and Excess of ₹10,000. Hence 93.75% of ₹1,48,50,000 = ₹1,39,21,875 which is to be divided amongst the three insurers in rateable proportion after excess adjustment. Actual Total Loss = ₹1,60,00,000 Loss limited to = ₹1,50,00,000 Less (-) 'Salvage' = ₹1,50,000 ₹1,48,50,000 Less (-) Underinsurance (6.25%) = ₹9,28,125 ₹1,39,21,875 Less (-) Mandatory Excess* = ₹10,000 (*5% of every claim subject to a minimum of ₹10,000 is taken as mandatory excess) Balance Amount of loss payable = ₹1,39,11,875 Loss Payable ₹1,39,11,875 to be distributed among M, N & S in the ratio of 3:2:1 (Based on the respective contribution of M, N and S in the Sum Assured) M Insurance Co. Ltd., 3/6 of ₹1,39,11,875 or ₹69,55,938 N Insurance Co. Ltd., 2/6 of ₹1,39,11,875 or ₹46,37,292 S Insurance Co. Ltd., 1/6 of ₹1,39,11,875 or ₹23,18,645