Allocation determines how a single continuing loss is spread across the policies in force during the period of injury. It arises in construction defect, environmental, toxic tort, and abuse claims where harm develops over years.
Two dominant approaches exist. All sums allocation lets the insured select any triggered policy to respond in full, leaving that insurer to seek contribution. Pro rata allocation divides the loss among triggered years, often assigning uninsured periods to the policyholder.
Alternative Names:
Loss Allocation, Coverage Allocation
Why it Matters?
Allocation frequently determines whether available limits are adequate. Under all sums, a single year's limits can be tapped for the entire loss, while pro rata can leave the insured funding years when coverage was unavailable or exhausted. It also drives whether horizontal or vertical exhaustion applies before excess layers respond.
Frequently Confused with
Related terms
Frequently asked questions
What is the difference between all sums and pro rata allocation?
Why does allocation matter for excess carriers?
