(October 2023)
This endorsement is used only when multiple companies agree to split a particular risk’s coverage. It explains how they split loss payments.
This endorsement obligates the insurance company to provide a specified percentage of the total limit for each coverage on the endorsement schedule, on the declarations, or as later endorsed to the policy. However, there is no provision to name the other property carriers or to indicate their percentage of the total limit.
This endorsement helps carriers with limited capacity write larger risks. It can also help a carrier that has underwriting concerns that may be satisfied only by sharing coverage with another carrier or carriers. Another possibility is that the named insured wants to split the coverage with more than one insurance company for various reasons.
This endorsement does not address the coverage provided. It addresses the percentage of the total limits for a specific coverage that a particular carrier writes. It provides a total limit for each of the following coverages. The total limit(s) on this endorsement must equal the total limit(s) on the same endorsement that the other insurance carrier(s) provide.
The actual percentage to be applied to the limit must be entered in the space provided.
When the insurance carrier on this policy does not write the liability coverage, the name of the insurance carrier that does write the liability coverage and the policy number must be entered in the spaces provided.
An insurance company that writes a policy this endorsement modifies is obligated to apply its percentage of the total limit on the endorsement schedule (or elsewhere in the policy) to all insurance that covers the same property. The company pays this percentage for any loss caused by a covered peril, but it does not pay more than the percentage of the limit on the endorsement schedule.
Note: The limit that applies may also be entered on the declarations or another endorsement.
IMPORTANT: The
listed percentage of coverage applies even if there is no other coverage in force
when the loss occurs.
This proportional obligation extends to special limits of coverage the policy refers to that this endorsement modifies. This is because every participating insurer is supposed to provide the same type of coverage, and it is logical to preserve the accepted percentage of limit for each property coverage for each carrier.
With respect to this endorsement, the policy provisions under How Much We Pay for Loss or Claim, Insurance Under More Than One Policy do not apply to the policy or policies of another carrier or carriers.
This endorsement’s wording appears to address only a single company’s obligation for the shared coverage. There may be coordination problems if the contract or endorsement wording between carriers that share the coverage is different.
This endorsement does not contain a separate reporting requirement. It also does not require identifying the other company or companies that provide the rest of the limits for the coverage(s). The concern is that the named insured could lose track of the carriers that provide the coverage and how it (they) provide it.
This endorsement does not require periodic review of the total limit(s) and appropriate adjustments. Not having such a provision means that the limits carried could be inadequate to cover a loss if the property increases in value over time and the named insured does not change the limits on this endorsement’s schedule. It would be helpful to address how the policy responds to the amount of coverage in force at the time of a loss if it is inadequate.
This concern is an extension of the concern about the lack of policy review. The issue is how this endorsement coordinates with FO-184–Automatic Adjustment of Limits. The question is if the percentage responds to the total limit on the endorsement schedule or to the amount determined by applying the selected increase percentage. It could be assumed that the limits on this endorsement’s schedule are automatically increased by the way that FO-184 operates. However, it seems that it would be better if this endorsement stated how it handles this situation the way it does with several other equally relevant issues.
The issue is how the named insured’s total coverage is affected by the coverage another carrier or carriers provides. It appears that some degree of monitoring should periodically take place concerning any other coverage.
The named insured and the agent who recommended this approach must address these concerns. This endorsement is worded in a way that limits the participating insurer’s coverage obligation, regardless of what may occur with other carriers. It leaves the named insured with the obligation to be certain that the coverage he or she needs is in force to cover losses. While this places a high burden on an insured, it is basically the same burden as with using scheduled coverage or other situations where property values must be monitored, and coverage tracked in order to be certain that the proper coverage and limits are in place.