Insurance Contribution - Same Subject Matter
Insurance Contribution - Same Subject Matter
Section 32 of the Marine Insurance Act 1906, which in many cases (including contribution) applies both to marine and non-marine insurance, provides that double insurance occurs: "where two or more policies are effected by or on behalf of the assured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this Act.. This takes into account the distinction which must be made between co-insurance and double insurance.
Co-insurance occurs when several insurers agree to take a specified percentage of the cover required by the insured, thereby spreading the risk more widely. Double or over-insurance arises where an insured has obtained two or more policies of insurance which, if paid in full by each insurer following a loss, would result in the insured recovering more than 100 per cent of the loss or damage suffered.
The criteria which must be satisfied before any claim for contribution can be made between insurers are as follows:
In Boag v. Economic Insurance Co. Ltd. [1954] 2 Lloyd's Rep 581 a lorry load of cigarettes were destroyed by fire whilst temporarily stored at a factory. The question was whether the fire insurers of the factory were liable to contribute towards the payment made by the all risks insurers covering the cigarettes. It was held that the cigarettes did not form part of the insured's stock in trade at the factory so that the fire insurers of the factory were not liable to contribute.
Of course, had the cigarettes been delivered to the factory rather than just being stored temporarily, the fire insurers would have been liable in full, and the all risks insurers would not have been liable because the cigarettes had changed from being goods in transit to stock.
Nevertheless, the policies need not be identical in scope or in limits for the principle of contribution to operate between insurers.
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