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Shares the loss(in an event of a claim) among insurers who cover the loss.
Contribution supports the principle of indemnity


Why do insurers customary include Contribution condition in their policies

This is because if they don't include it Insured is entitled to claim the whole amount from any of the insurers liable to pay. They will leave one insurer and move on to another to recover the approriate shares


What does the Contribution condition restrict

They restrict the insurers liability to its relatable proportion or relatable share of a loss


What is the effect of the contribution condition

It's to compel the insured to make a claim under each valid policy for the sum for which each insurer is liable,if they wish to receive full settlement


What is Contribution

Is the right of an insurer to recover part of a claim payment when two or more policies cover the same interest, the same risk and are in force when the loss occurs


What should be common for contribution to arise

There should be a common insurable interest, Peril and subject matter.
And there must be some overlap between one policy and another


Under contribution, Insurers contribute to a claim on what basis

Under Contribution Insurers contribute to a claim on basis of relatable proportion.
Relatable proportion is the share of claim, that an insurer pay when two or more cover the same risk


What are the two possible ways of determining relatable proportion of a claim

1.Sum Insured
2.Independent Liability


How is the relatable proportion calculated in relation to Sum Insured

policy Sum Insured/Total Sum Insured( All Policies)* Loss


Method of using Sum insured to access contribution is used commonly in which policy

this method is commonly used in Property Polices which are not subject to averaging


What does the sum insured method ignore

It ignores the fact that the different restrictions such as averaging or excess may apply to each policy


How is independent liability method used to calculate amount payable

This method calculates the amount payable under each policy as if no other policy existed and the insurer was alone in indemnifying the market.The loss is then shared in proportion to the independent liabilities of the two policies


When is the independent liability method most commonly used

Its used in property policies that are subject to averaging or when an individual loss limits applies with sum insured. Also calculates contribution in Liability Insurance


What is the independent liability formula

Policy Sum Insured/Total value of the risk * Loss


which situations modify the principle of contribution

1.Non-Contribution Clauses
2.More specific Insurance clauses
3.Market Agreement


What is the common wording for non- contribution clauses

The policy shall not apply for any claim where the insured is entitled to indemnity under other insurance(meaning policy will not contribute if there is another insurance policy in force)


What happens to situation where both policies have the same non- contribution clause

They are treated as cancelling each other out. And each insurer has to pay their relatable proportion



This is a common law. This is the right of an insurer, following a claim payment,to take over the insured's right to recover payment from a third party responsible for the loss. It is limited to the amount paid out under the policy


How may Subrogation Rights arise

They arise from three ways


What is a Tort

Under Common law, everyone has a duty to act in a reasonable way towards others. Thus a breach of duty is called a Tort.
And the person who has suffered this breach is entitled to be compensated


How do contracts give rise to subrogation rights

under certain contracts a breach entitles the aggrieved party to compensation regardless of fault


Most insurers require that claims for riot, civil commotion and malicious damage to be notified within how many days of the event

Seven Days of the event. This is because under the terms of the Riot regulations 2011 insurers may have rights of recovery against the police for riot damage, but have only 42 days from the date of the riot to do so.


What does it mean when a subject matter is beyond economic repair

This means the market practice tends towards repair exceeding 60% of the market value, thus being uneconomic and offer total loss settlement


What is Salvage

The residual value on the subject-matter being insured


Who is entitled to recieve the salvage value

If the insurer meets the loss in full it is the insurer that is entitled to the benefit of the salvage value.The value of sales proceeds from salvage belong to the insurer
The Financial Ombudsman Service (FOS) states that the insured should always be given the opportunity to retain the salvage, provided a suitable deduction is made to the claim payment to take it's value into account.
Amount will be agreed upon between the insured and the insurer


What does the ABI memorandum set out for subrogated Motor Claim

It sets out principles for subrogated motor claims that are based on honesty and transparency


What are the four key elements incorporated in the ABI memorandum, in order to avoid disputes about quantifying subrogated claims, reduce cost and ensure prompt settlements

1.Consistency of practice in the control of own damage claims regardless of any subrogation rights
2. Subrogation costs, should represent the net cost to insurers after all the discounts, and certain items like emergency treatment fees are excluded
3.All materials supporting documentary evidence should be volunteered, together with salvage value and the basis of calculation for written off
4.Legal cost should be avoided wherever possible


What is an immobile property agreement

In the past this used to be operated under motor and property polices. It covered impact damage by motor vehicle.
Whenever a vehicle collided with a building this agreement meant that each insurer would contribute towards the loss in the proportion already agreed


Precluded Subrogation right

There are some situations in which insurers are barred from exercising subrogation rights or where they agree not to exercise them


What are situations where the insurer cannot exercise subrogation right

1.When the Insured has no right. Insurers subrogation rights depend on the fact that the insured has rights against a negligent third party.Thus in circumstances where the insured waves those rights by saying signing a hold harmless clause, the insurer cannot reacquire them
2.Benefit Policies, even if a person negligently causes an accident in which the insured is injured, the personal accident insurer will have no right of recovery, even it the insured successfully sues the negligent third party and receives financial compensation for the injuries, insured is entitled to keep the personal accident benefit and the court award
3.Subrogation waiver, there are times an insurer agree to waive their subrogation rights through a subrogation waiver clause, they are common in commercial insurance. This clause prevents the insurer from pursuing subrogation rights it may have against parent or subsidiary company of the insured
4.Negligent Fellow employees, Insurers have generally agreed(except in extreme circumstances) not to pursue recovery rights against negligent fellow workers