Multiple insured policies
What is a multiple insured policy?
General insurance policies can be either single insured or multiple insured policies. Single insured policies are simpler to administer as the insurer has to deal with only one person or entity as the insured.?Examples of such policies include property and marine insurances, where one party has sole title or ownership to the asset, thereby possessing exclusive insurable interest.?
However, multiple insured policies can have several insured parties with varying degrees of complexity, such as liability or project insurance policies. The insured party contracting with the insurer may be representing several insured parties. The insured parties can be named or unnamed. There can be principal insured and additional insureds. The parties can also be joint-insureds.?
Rights and responsibilities of insureds:
When multiple insureds are involved, the policy must provide for modalities, in so far as discharge of duties and obligations of the insured are concerned. These duties may include information disclosure, duty of care, loss notification, subrogation and?cancellation.?
Usually, the rights and obligations of the principal insured can be senior to that of additional insureds. The latter may not necessarily be entitled to all benefits under the policy and their indemnification can be conditional. Additional insureds may be covered only to the limited extent of their contractual requirement insured under the policy. Therefore, one must not assume that all insureds in a multiple insured policy shall have equal rights to the policy and that they are insured as if they are the sole insured. The principal insured may not be obliged to inform or take concurrence of the additional insured, when changes or modifications to coverage are being done, including cancellation of cover.?
However, in some other multiple insured policies, the principal insured may be acting on behalf of the other insureds and all insureds may have equal rights under the policy. Hence, for some or all changes in coverage, they may need to take consent of the other insureds. For instance, if financiers are involved in the policy as joint insured, they may require that their consent is required for changes in policy, such as cancellation of cover.?
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Enabling provisions for resolving conflicts of interest:
To address situations where actions of one insured party having conflicting interests with other parties in the same insurance policy, there can be specific provisions in the policy. Non-invalidation or severability provisions is one such provision.?
As per this provision, the cover under the policy shall apply in the same manner and to the same extent, as if individual policies had been issued to each such insured party. However, that said, the total liability of the Insurers to all of the insured parties collectively shall not exceed the sums insured and limits of indemnity.?
In such cases, where there is a vitiating act such as fraud, misrepresentation, non-disclosure or breach of any warranty or condition of the policy, such act will not be held by the insurer against innocent insureds to rescind their liability under the policy.?Any rescission of cover shall apply only to the defaulting insured party.
However, such conduct of vitiating acts will mean the insured party at fault will no longer remain insured under the policy, who then will be deemed as a third party for all intent and purposes, entitling the insurer to exercise his subrogation rights against such party.?
Non invalidation or severability can be conditional and may not necessarily apply to all situations. Some provisions of the policy can be deemed paramount so the breach of such conditions can void the contract in toto, regardless of the consideration that all the parties were not at fault.
Multiple insured policies also may have an order of payment or allocation provision where apportionment of claim has to be made against different insureds claiming indemnity together under the policy. This is usually required in liability insurances. However, this provision is not required in policies where one party receives the claim on behalf of all others such as project insurances.?
Conclusion:
Status of insured parties in a multiple insured policy and their duties, responsibilities, benefits including? rights to indemnity differ from policy to policy. Careful attention to the policy construction is advised while negotiating such policies.?
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1 年hi
Technical Consultant Worked with Cholamandalam Ms Gen Insurance, New India Assurance co. Ltd
1 年Yes multiple insured policies have to be dealt with on case to case basis and in my view the ideal case study will be insurance of customs bonded warehouse.It involves 1) property insurance by owner 2) building insurance by owner of building 3) Contents insurance by lesse of customs bonded warehouse for good held in trust 4) marine insurance of good warehouse to warehouse for the good duty with and without termination of insurance at Port 5)bonded warehouse customs duty coverage taken by customs authorities 6) Liability insurance taken by warehouse owner and tenant Remember if the interest are not understood how much time and money is wasted in a post claim scenario especially when there are deficit wording and clauses.
Regional Underwriting Head at The New India Assurance Co. Ltd.
1 年Apart from the severability clause and the non-vitiation clause policies with multiple insureds should make a distinction between the principal insured and the other insureds. The principal insured is the one who takes the policy on his behalf and on behalf of the others. The duties and the onus of the principal insured would be different from others. The issues of multiple insured policies are different for policies like project policies with defined & finite SI/risk and for policies like policy with no finite risk. In project policies, each insured might have an interest in only a part of the subject matter. The best way to administer such policies is for the contractor to get into an agreement with the sub-contractors that they would be reimbursed for their losses and take a single policy in the name of the principal contractor so that there is a single insured in the policy. The premium can be collected from the sub-contractors by the principal contractor. In case of liability policies things are not so simple as the risk is infinite and not defined for each insured. So, we need to have multiple insureds under the policies. The payouts may have to be even apportioned amongst the insureds in some cases.
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1 年Great breakdown of multiple insured policies! Your insights into the intricate dynamics among insured parties, are truly enlightening. Given the evolving legal landscape, I'm curious about the impact of recent judgments or regulatory shifts on the future of these policies, particularly in Commercial General Liability (CGL) and Directors and Officers (D&O) liability scenarios. Any thoughts from the community on how these changes might shape the way we navigate insurance complexities?
wtax act & ibbi regd valuer p&m , msc Real.estate , licensed insurance surveyor , Chartered engineer , engineering consultant .
1 年In this respect I draw your attention to law on restriction of unregistered partnership firm or a partner thereof in filing a suit in case of (contract )dispute . I am not fully conversant on the issue but would be worthwhile to study the law on the subject. As the little I know.