Double Insurance Note
When subject matter insured is insured for the same adventure under more
than one policy, double insurance exists. In order to constitute double insurance,
the first requirement of The Marine Insurance Act 1906 is that the insurances must
have been effected by or on behalf of the assured on the same adventure and
interest or on any part thereof. The policies do not have to be the same in all
respects.
In The Marine Insurance Act 1906, Section 32 deals with Double
Insurance and states as follows:
(1) 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, the assured is said to be over-insured by double
insurance.
(2) Where the assured is over-insured by double insurance -
(a) The assured, unless the policy otherwise provides, may claim payment from the
insurers in such order as he may think fit, provided that he is not entitled to receive
any sum in excess of the indemnity allowed by this Act
(b) Where the policy under which the assured claims is a valued policy, the assured
must give credit as against the valuation, for any sum received by him under any
other policy without regard to the actual value of the subject-matter insured.
(c) Where the policy under which the assured claims is an unvalued policy he must
give credit, as against the full insurable value, for any sum received by him under
any other policy
(d) Where the assured receives any sum in excess of the indemnity allowed by this
Act, he is deemed to hold such sum in trust for the insurers, according to their right
of contribution among themselves.
In North British and Mercantile Insurance Co v London, Liverpool, and
Globe Insurance Co (1877) case, the company who own a quantity of grain stored
in the warehouse of another company. The grain was insured by both companies
with different underwriters. When a fire broke out and destroyed the grain, the
warehouse owners were indemnified in full by the plaintiffs North British and
Mercantile Insurance Co who claimed that the defendants, the insurers were liable
for a contribution to the claim which had already been settled in full.
Held that, the defendants were not liable to contribute towards the indemnity
already settled by the plaintiffs, North British Insurance Co. This was because,
although the subject matter of insurance was the same with respect to both
underwriters, the assured under the respective policies were different, thus
avoiding any double insurance.
In Union Marine Insurance Co Ltd v Martin (1866) case, the first
insurance policy covered a vessel from Bombay to Calcutta and for thirty days
after mooring in good safety, while the second policy gave cover at and from
Calcutta to Bombay. Although both policies were taken out with the same insurer,
only the risk covered by the second policy was reinsured. The vessel having
become a total loss while at Calcutta and while the two policies overlapped, the
insurer paid under the second policy and claimed on the reinsurance. The reinsurer
argued that double insurance between the two policies reduced exposure on the
second policy by virtue of contribution and, consequently, reduced the reinsurance
liability.
Held that, upon its true construction, the second policy substituted for the
first, thus avoiding any double insurance.
Therefore, the key words for double insurance are coverage for the same
interests by the same assured for the same perils i.e., if any insured is covered for
the same adventure, interests and perils by two or more insurers, then double
insurance exists.