Contribution

Question 1

What is the Principle of Contribution?

Answer 1

An insurer who has indemnified an insured to call upon other insurers liable for the same loss to contribute proportionately to the cost of the indemnity payment.

Question 2

Why was the term Corollary of indemnity developed for?

Answer 2

To prevent the insured with two or more policies from being more than indemnified for some loss.

Question 3

List the following conditions that are essential of contribution

Answer 3

The policies must be:

• be in force at the time of loss
• must cover a common interest
• must cover a common peril which gives rise to the loss
• must involve the same subject matter covered by all the policies
• the policies must be legally enforceable

Question 4

What is the contribution condition?

Answer 4

This is used to state when the contribution applies, the insured obliged to claim against all insurers, each of whom will have to pay a rateable proportion of the loss in accordance with their respective sum insured.

Question 5

What is the formula used to calculate the “Amount Payable” for the loss?

Answer 5

(Sum Insured - Each Insurer) / (Total Sum insured) - (All insurers) X Total amount of the loss