How will a claim usually be settled when more than one policy exists covering the same risk with contribution conditions?

When more than one policy exists that covers the same risk, and contribution conditions are in place, claims are typically settled through a proportional contribution from each policy. This means that each insurer involved shares the responsibility for the loss relative to the amount of coverage they provide.

This method ensures an equitable distribution of the payout according to the terms laid out in the policies, enabling the insured to receive the amount due without over-indemnifying them beyond the total loss incurred. Proportional contribution is grounded in the principle of indemnity, which aims to prevent profit from an insurance claim.

In this context, the other options do not align with the established practice in insurance. Singling out one policy to contribute the full amount would potentially lead to an unfair advantage and is not consistent with the risk-sharing intended in the principles of contribution. Stating that each policy would contribute a full amount would exceed the actual loss and violate the indemnity principle, while suggesting equal contributions fails to account for the differing limits and terms of each policy.