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When contribution operates
At common law
We have already seen in many article that When an insured has more than one insurer, he can confine his claim to one of them if he so wishes. That insurer must meet the loss to the limit of his liability and at common law can only call for contribution from the other(s) after he has paid. This is still the position in marine policies, and it means that this unfortunate insurer has to layout all of the money until such time as he makes a recovery. He also has the trouble of negotiating the method of sharing the loss. To overcome this difficulty most non-marine policies contain a "contribution condition".
By contractual condition
The condition contained in most policies states that the insurer is liable only for his "rateable proportion" of the loss. The insurer is liable for his share only, and the insured is left to make a claim against the other insurer if he wishes to be indemnified. It should be noted that the condition does not require the insured to claim from the other policies, although in practice he will elect to do so.
The basis of contribution
The application of contribution and loss apportionments will be studied in considerable depth by many readers in later years and it is sufficient for the purposes of this book to indicate in outline the basic methods of application.
Other property policies
In the case of policies which are subject to average, or where an individual loss limit applies within a sum insured, one must use the "independent liability" method to calculate the payments. The "independent liability" is the amount which an insurer would be obliged to pay if it were the only or independent insurer.
As more policies become subject to average, and as terms limiting liability below the indemnity figure become more common, this method will become almost universal in use. Even at present, where contribution does arise, it is the most frequently used method.
Modifications of the principle Non-contribution clauses
Sometimes the equitable right to contribution is removed by a clause in one or both of the policies, e.g.:
This policy shall not apply in respect of any claim where the insured is entitled to indemnity under any other insurance except in respect of any excess beyond the amount which would have been payable under such other insurance had this insurance not been effected.
Under this full clause the insured may have a claim under the policy containing it but only if the other policy does not pay indemnity, and then only for the balance of loss, i.e. there is not "rateable" sharing. Some clauses do not contain the words in italics, in which case the policy would not pay whether the insured had received an indemnity or not.
More specific insurance clauses
When a policy is issued covering a wide range of property, clauses similar to that shown above are sometimes inserted to prevent contribution between the wide range policy and any which might be more specific. For example, a fire policy on stock anywhere in the UK would not contribute with a marine policy covering a particular cargo consignment in a dock-side warehouse, nor a house contents policy in respect of a ring insured under an all risks policy.
Common law agreement
We can see more articles directory related to Common law agreement.Many insurers are party to an agreement in relation to injuries suffered by employees being carried in the employer's vehicle in the course of their employment. In these circumstances there could be a claim in law under the motor policy and the employer's liability policy.
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