A blanket limit of $900,000 covers two buildings reported at $700,000 and $500,000 on the statement of values, under an 80 percent coinsurance clause with no deductible. A $250,000 covered fire loss strikes the smaller building. The insurer pays:
Explanation
Under a blanket limit the coinsurance test runs against the combined values on the statement of values, not building by building. The amount required is 80 percent of $1,200,000, or $960,000, and only $900,000 was carried, so the insurer pays $900,000 / $960,000 x $250,000 = $234,375. Dividing by the full $1,200,000 of values gives $187,500 and skips the 80 percent step, and multiplying the loss by 80 percent gives $200,000, which misreads the clause as a flat copayment.
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