Double insurance and contribution

Abstract

Fraud is always a concern when an insurer issues a policy to an assured. An assured can take out numerous policies and claim indemnity under all the policies, which would result in the assured receiving more than he is entitled to. Is the fear of fraud justifiable and are such exclusions or limitations in insurance contracts preventing recovery where there is other insurance effective? Further, is there sufficient protection for insurers by way of contribution from other insurers.

It is beneficial to look at the history and development of the law of insurance, to understand how the law relating to double insurance has developed and the factors the courts may take into account when deciding such issues.

The courts in many jurisdictions have tried to deal with the problems which have arisen as a result of such clauses. The courts have also dealt with the question of whether the assured is or should be given any protection when double insurance arises, and if so, whether the insurer has to pay out under the insurance policy.

However, where there are rateable proportion clauses with other types of clauses, the solution is not that clear. It is quite common for judges, when dealing with such cases, to conclude that the case before it is not a case of double insurance. In some cases, even though the trial judge may hold that the case before him, on the facts, were sufficient to give rise to double insurance, on appeal, the appeal courts have come to the conclusion that the facts of the case do not give rise to one of double insurance. This clearly shows what a difficult concept double insurance is. This has resulted in the courts not actually being able, even till now, to provide any real solid rules or guidelines on double insurance .

Further, even though an assured has taken out insurance with numerous insurers he will not be able to recover more than the loss he has actually suffered. This is the general principle of indemnity. The next problem for an assured is then, from which insurer the assured can seek recovery from. Is there a particular order when seeking recovery or can he recover from whichever insurer he chooses? At the moment, the law on this is also unclear.

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