In a primary and excess indemnity arrangement, which insurer pays first?

• A. The excess insurer
• B. The primary insurer
• C. They pay pro-rata
• D. The insured pays first

Answer: (B)

In a primary and excess indemnity arrangement, the primary insurer pays first. It covers the loss up to its policy limit, and only after that limit is reached does the excess insurer begin to pay the remaining amount, subject to its own limit and attachment point. This sequencing is what defines the relationship between the two layers.

For example, if the primary policy has a 1 million limit and the excess policy attaches above 1 million, a total loss of 2.5 million would be settled by paying 1 million from the primary, and the remaining 1.5 million would be covered by the excess insurer (up to the excess limit). The insured does not pay first in this arrangement, aside from any deductibles or self-insured retention that may apply, which are separate from who pays first within the layers.

This setup differs from pro-rata sharing, where multiple layers might begin contributing to the loss from the start. In primary and excess, the liability is triggered sequentially, not proportionally across all layers.