Contribution

Question 1

[Where is double insurance defined?

Answer 1

Marine Insurance Act 1906

Question 2

Double insurance definition

Answer 2

Where 2 or more policies are affected by or on behalf of the assured on the same adventure
- Marine Insurance Act (1906)

Question 3

Rules for Double Insurance as per the Marine Insurance Act (1906)?

Answer 3

1. Insured can choose which insurer to recover from but can’t receive more money than entitled
2. If valued policy - Insured must account for any payments received from other insurers
3. If unvalued policy - Insured must credit the payment received from other Insurers against the actual Insurable value
4. If Insured gets more money than they are entitled too then they must hold the extra amount in trust for the Insurers who an recover their share.

Question 4

Rateable proportional clause? (3)

Answer 4

• Seeks to limit the insurers liability to the PH to it’s share of the loss if there is any other insurer covering the same loss.
• Rateable proportional clause can be over-ridden by excess clause - NFU v HSBC Insurance (2010)
• If 2 or more policies contain clause - if one insurer makes full payment past their share they may not be able to recover balance from other by way of contribution

Question 5

What is an excess clause?

Answer 5

• Excludes cover when other insurance in force

Question 6

For contribution to arise must have? (3)

Answer 6

1. Same subject matter
2. Same insured
3. Same peril

Question 7

Same subject matter?

Answer 7

1. Must be overlap in property insured
2. Doesn’t have to be identical cover
3. Think property & garage example.

Question 8

Same Insured in respect of diff interest? (3)

Answer 8

1. Both or more policies cover same PH
2. Same property can be insured by diff parties, although same property insured there are diff interests insured
3. King and Queen Granaries (1877)

Question 9

King and Queen Granaries (1877) ?

Answer 9

• Bailees and owners insured the grain
• Bailee’s insurers paid claim following fire
• Tried to recover from owners insurer
• Court held couldn’t as not concurrent policies as the interests insured by the policies were different

Question 10

Same peril? (1)

Answer 10

1. Both policies must include the peril giving rise to the loss or damage

Question 11

When is IL method used?

Answer 11

1. Argued that it provides the most realistic basis
2. Usually when average is applicable

Question 12

IL Calculation?

Answer 12

1. POLICY A - SI/VAR X LOSS =IL What policy A would have been if not for contribution
2. POLICY B - SI/VAR X LOSS = IL What policy B would have paid if not for contribution
3. POLICY A - IL/TIL X LOSS = Amount to be paid
4. POLICY B - IL/TIL X LOSS = Amount to be paid

Question 13

SI/ML Method

Answer 13

1. POLICY A - SI/TSI X LOSS = Amount paid
2. POLICY B - SI/TSI X LOSS = Amount paid

Question 14

When is ML method used?

Answer 14

1. When average does not apply