When several insureds are liable for a single loss, how is the policy's limit of liability affected?

The correct answer highlights how a policy's limit of liability interacts with multiple insured parties involved in a single loss. In instances where several insureds are liable, the policy typically imposes a per occurrence limit, which caps the total amount the insurer is obligated to pay for that specific loss. This means that despite the number of insured parties involved, the maximum payout remains bound by the limit set forth in the policy for each occurrence.

In practical terms, if an incident occurs that results in a loss affecting multiple insureds under the same policy, the payout will not exceed the per occurrence limit, thereby preventing any single insured from receiving more than what the policy has stipulated as the maximum during that occurrence. This approach ensures that the insurer maintains fiscal control, avoiding disproportionate payouts regardless of the number of claimants.

Other choices suggest different interpretations of liability that do not align with standard insurance principles. For instance, pro rata liability would imply a division of liability based on each party’s loss, which could surpass the overall limit, while claiming that each insured receives the full limit individually would contravene how limits work in collective scenarios. Lastly, stating a homeowners policy can have only one insured is inaccurate as these policies typically cover multiple insureds as part of the household