If more than one person has an insurable interest in the property covered under a dwelling policy, how is liability determined?

The correct answer reflects the principle that an insurer's liability is limited to the insurable interest of the insured in the damaged property. This means that if more than one person has an insurable interest in the property, the insurer will assess each individual interest and will only pay out based on those specific interests.

For example, if two people own a property together and one person has a greater share or monetary interest, the insurer will only compensate up to the amount that corresponds to the interest held by the insured party filing the claim. In essence, the coverage is tied directly to the financial stake each insured has in the property rather than the total value of the property or the collective interests of all parties involved. Understanding this principle is critical in scenarios involving multiple interests, as it clarifies that each insured is only entitled to recover what corresponds to their individual investment or stake in the property.