Report No. 21
General.-This deals with the important topic of double insurance.
Meaning of double insurance.-Where the assured takes out several policies on the same subject-matter, the combined value of the several policies may or may not exceed the value of the subject-matter. If it does not exceed the value of the subject-matter, there is not much difficulty as there is no over-insurance and the section does not come into play.1 Where it exceeds the value of the subject-matter, there is "over-insurance" by double insurance. In such a case, the section provides that the assured cannot receive more than the indemnity allowed by the Act. Thus, if cargo worth £ 5,000 is insured on two policies, one for £ 3,000 and the other for £ 2,500, not more than £ 5,000 is recoverable under both the policies together. The assured may
(i) claim first under the higher policy and then under the lower policy; or
(ii) claim first under the lower policy and then under the higher policy; or
(iii) claim simultaneously under both the policies.
In the situation at Nos. (i) and (ii) above, he has to give credit for what he has received from the first insurance. In the situation at No. (iii) above, he cannot recover more than the value of the subject-matter.
Contribution and return of premium.-As to contribution, see section 80 of the English Act. As to return of premium, see section 84 of the English Act.
Double insurance-essentials of -Over-insurance by double insurance requires that the policies must have been effected
(i) on the same adventure
(ii) against the same risk;
(iii) in respect of the same interest in the same subject-matter; and
(iv) for sums exceeding the indemnity allowed by the law.
Therefore, there is no double insurance where different subject-matters or different interests in the same subject-matter are recovered by the policies. For example, as pointed out by Dover,2 where the buyer of goods insures them and so does the seller, their interests are distinct, because the policy effected by one will not protect the interest of the other (unless so expressly provided), and there is no question of double-insurance.
Double insurance-advertent and inadvertent.-Double insurance is effected advertently where, for "example, the assured has some doubt as to the financial standing of the first insurer. It can arise inadvertently, for example, where the consignor of goods insures them on behalf of the consignee but the consignee is already covered by a floating policy.
1. See also section 27 of the English Act-clause 24 and notes thereto.
2. Dover, p. 345.