Marine Insurance: Law and Practice




28.1 Several insurance policies may be effected which, to some extent, cover the same interest, in the same subject matter, in respect of the same risk. This is likely to be the case where there are several persons with an insurable interest in the subject matter, with each party wanting to ensure that his interest is fully covered. In such a case, the parties may well have entered into a contract with each other. Such contracts may have several effects so far as the relationships between the parties and insurers are concerned. Thus, the contract may impose on one or more of the parties an obligation to effect specific insurance. If the whole interest in the subject matter is insured and the insured is bound to account to the other party for the value exceeding his own interest, he may obtain the full amount from the insurer.1 If he fails to procure the insurance, he will be liable to the other party for any loss he suffers in consequence.2 28.2 A common object of commercial contracts is to allocate risks between the parties. This will affect which of the parties suffers a loss for insurance purposes. Thus, if in a contract to provide construction or repair services to a ship the shipowner agrees to insure against the cost of repairs caused by flooding and to pay over the indemnity recovered from the insurer to the shipyard but the broker instructed by the shipowner fails to procure the insurance, the shipowner’s liability constitutes a loss which is recoverable from his broker.3 28.3 Where a shipbuilders’ contract or the like allocates risk between the parties, this may also affect the relationship between an insured party and the insurer: for, if the shipbuilder’s contract is to be effective to safeguard a negligent builder against loss, it may exclude rights of recourse by the shipowner against the builder and of necessity extinguish rights of subrogation that would otherwise be enforceable by the owner’s insurer, which could be a breach of the insurance contract.4 28.4 The remainder of this chapter examines the consequences of multiple policies for the rights and/or liabilities of the assured and the several insurers. It first examines the concept of double insurance. It then examines the respective rights of assured and insurer, and the rights of several insurers inter se, where there is double insurance. It finally examines the effect of policy terms on the existence and extent of double insurance—what can be collectively called “other insurance” clauses.

The concept of double insurance

28.5 A definition of double insurance is of limited value, except in so far as legal consequences follow from its existence. For present purposes, it is sufficient to note the generally cited definition, which is that double insurance exists to the extent that there are two or more policies, existing for the benefit of the same assured, covering the same interest, in the same subject matter, in respect of the same risk.5 The same definition is reflected in the Marine Insurance Act 1906, section 32(1), which defines “overinsurance by double insurance” as existing 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.

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