Ch : 8 Contribution And Subrogation Flashcards
Which condition restricts the insurers liability to its rateable proportion or rateable share of a loss
Contribution condition
Definition of contribution
Contribution is the right of an insurer to revivert part of a claim payment where two or more policies cover the same interest , the same risk and are in force when the loss occurs
How contribution arises
1.two or more policies of indemnity must exist
2.the policies cover a common insurable interest
3.The policies must cover a common peril which gives rise to the loss
4.the policies must cover common subject matter
5.each policy must be liable for the loss
6.Neither policy must contain a non contribution clause
Only applies where the policies cover a common interest in the subject matter
Contribution
Contribution principle was established in the case of
North British and mercantile v. Liverpool and London and globe (1877), known as the King and Queen granaries case
What is rateable proportion
Is the share of any claim that an insurer pays when two or more insurers covers the same risk,usually in proportion to the respective sum insureds
Ways of determining rateable proportion of claim
1.By sum insured
2.By independent liability
Rateable proportion formula * Sum insured )
Policy sum insured ÷ total sum insured ( all policies ) × loss
What is independent liability method
This method calculates the amount payable under each policy as if no other policy existed and the insurers was alone in indemnifying the insured
Which method is use where property policies are subject to average or where an individual loss limit applies within a sum insured
Policy sum insured ÷ total value at risk × loss
Non contribution may be worded as
This policy shall not apply in respect of any claim where the insured is entitled to indemnity under any odr insurance
Definition of subrogation
As the right of an insurer, following payment of a claim ,to take over the insurerds rights to recover payment from a TP responsible for the loss. Its is limited to the amount paid out under the policy
Subrogation rights may arise in 3 ways
1.Tort
2.Contract
3.Statue
Which claims need to b notified within 7 days of the event
Riot ,civil commotion and malicious damage
When can insurer can offer total loss settlement
If the insurer regards that is the subject matter of insurance as being beyond economic repair