Contribution between insurers

The consequences of double insurance

It has been settled law for some 250 years that if there are two policies covering the same person, the same subject matter and the same interest, then the assured is perfectly free to claim from the insurers in such proportion and amount as he thinks fit, but only up to the full amount of his loss. If one insurer has paid a disproportionate share of the loss, it is entitled to seek contribution from the other so that each ultimately pays its own share. The purpose of these rules is to transfer from the assured the risk that one or other of the insurers has become insolvent, as he can then sue the other and leave that other to recover what it can from the insolvent insurer. In O’Kane v Jones [2003] EWHC 2158, [2004] Lloyd’s Rep IR (forthcoming), Richard Siberry QC, sitting as a deputy High Court judge, was faced with a series of fundamental questions concerning the operation of contribution, including the definition of the interest of the assured, the calculation of the amount of contribution where the policies are for different amounts and the much disputed issue of whether the right of contribution against an insurer depends upon the right of the assured to claim against it at the date of the loss or upon the right of the assured to claim against the insurer at the date on which the paying insurer has made payment. The case is an important one and is considered in some detail in the following paragraphs.