Multiple Sources of Recovery

Sources of multiple recovery

Other insurance in the same policy

Other insurance in a similar policy

Other insurance in a dissimilar policy

Noninsurance agreements

Third parties

“Other insurance” provisions

Conflicts among “other insurance” provisions

Other Insurance in the Same Policy

Examples

Auto insurance

Medical payments & uninsured motorists

Medical payments & liability

Commercial package policy

Building & commercial property

Other Insurance in the Same Policy (continued)

Questions:

Carve-out

Stacking

Difference in loss valuation or deductibles

Application of coinsurance clause

Other Insurance in a Similar or Dissimilar Policy

Similar policy - examples

Using neighbor’s car

New homeowners policy on new home

Dissimilar policies - examples

Rental car - Personal auto and fleet coverage

Borrowing sailboat - Homeowners and watercraft

Employee injury - Workers Comp, health

insurance, personal auto

Other Sources of Recovery

Noninsurance agreements

Product warranties or guarantees

Credit card coverage

Rental cars

New purchases

Third parties

First party insurance does not relieve at-fault party of responsibility

“Other Insurance” ProvisionsOther-insurance situations

More than one insurance source provides recovery

Characteristics of “other insurance” provisions

Not necessarily labeled

Usually in conditions section

Multiple “other insurance” provisions if distinct coverages

Single clause may contain multiple provisions

Inconsistency exists

Difficult to apply

Types of “Other Insurance” Provisions

Exonerating provisions

Limiting liability to a proportion of a loss

Limiting liability to excess portion of loss

Making insurance primary

Maintain principle of indemnity

Exonerating Provisions

Prohibition of other insurance

Exclusions

General disclaimer if other insurance applies

Offset to reduce coverage limit by amount of other coverage

Proportional Provisions

Proration by face amountsA’s limit/(A’s limit+B’s limit+…)X Loss = A’s maximum obligation

Proration by amounts otherwise payable (AOP)A’s AOP/(A’s AOP+B’s AOP+…) X Loss = A’s maximum obligation

Contribution by equal shares

Must consider policy limits

Apportionment

Potential for reducing coverage

Fewer problems recently

Excess and Primary Provisions

Example - Auto insurance

Use of other autos

Effect of insolvency of primary insurer

Ocean marine

Primary/excess based on policy effective date

Conflicts Among “Other Insurance” Provisions

Examples

Two exonerating provisions

Excess and exonerating provisions

Excess and proration

Different proration provisions

Building and blanket coverage

Conflicts Among “Other Insurance” Provisions -

continuedMethods to resolve conflicts

Drafting “other insurance” provision

Negotiation

Drafting policy coverage to minimize overlaps

Industry-developed guidelines and procedures

Litigation

Procedures to Resolve Coverage Disputes

Insurer’s Options When Claim is Filed

1 - Accept claim or defend suit

2 - Disclaim obligation under policy

3 - Issue reservation of rights letter or

nonwaiver agreement

4 - Seek declaratory judgment

Legal DoctrinesContract of Adhesion Doctrine

Insurer prepares agreement

Insured prepares agreement

Sophisticated insured rule

Reasonable Expectations Doctrine

Unconscionable Advantage Doctrine

Substantial Performance Doctrine

Waiver and Estoppel

Collateral estoppel

Judicial estoppel