In the scenario where Wendy's house fire began before midnight and a replacement policy took effect at midnight, which insurer will pay the neighbor's claim?

• A. Insurer B will pay the entire loss.
• B. Insurer A will pay the entire loss.
• C. Both insurers will share the loss.
• D. The insured pays the entire loss.

Answer: (B)

The key idea is that the policy in effect when a loss occurs determines who pays. Since the fire began before midnight, the loss happened under the policy that was already active at that time. A replacement policy that starts at midnight doesn’t retroactively cover events that happened earlier. So the earlier policy (Insurer A) is the primary coverage, and it would pay the neighbor’s claim in full (up to its limits). The later policy would only come into play if there were remaining uncovered losses beyond the first policy’s limits.