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8/10 W01/March 2017 Award in General Insurance

Key points

The main ideas covered in this chapter can be summarised as follows:
Contribution
• Contribution is defined as the right of an insurer to call upon others similarly, but not necessarily equally, liable to
the same insured to share the cost of an indemnity payment.
• Although contribution always exists where there is more than one insurance covering the same loss, many policies
include a contribution condition, which compels the insured to make a claim under each valid policy for the sum for
which each insurer is liable.
• For contribution to apply the insurable interest, peril and subject-matter must be common to all the policies.
• Each insurer pays their rateable proportion of any claim, which is calculated either by the sum insured method or
by the independent liability method.
• Contribution can be modified by non-contribution clauses and by more specific insurance clauses.
Subrogation
• Subrogation is defined as the right of one person, having indemnified another under a legal obligation to do so, to
stand in the place of that other and avail himself of all the rights and remedies of that other, whether already
enforcedornot.
• Subrogation rights may arise out of tort, contract or statute.
• In certain situations insurers cannot or will not exercise subrogation rights. They cannot where the policyholder has
no right against a negligent third party or the policy is a benefit policy. Reference copy for CII Face to Face Training

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Chapter