Multiple Sources of Recovery

1. Multiple Sources of Recovery Sources of multiple recovery Other insurance in the same policy Other insurance in a similar policy Other insurance in a dissimilar policy Noninsurance agreements Third parties “Other insurance” provisions Conflicts among “other insurance” provisions

2. Other Insurance in the Same Policy Examples Auto insurance Medical payments & uninsured motorists Medical payments & liability Commercial package policy Building & commercial property

3. Other Insurance in the Same Policy (continued) Questions: Carve-out Stacking Difference in loss valuation or deductibles Application of coinsurance clause

4. Other Insurance in a Similar or Dissimilar Policy Similar policy - examples Using neighbor’s car New homeowners policy on new home Dissimilar policies - examples Rental car - Personal auto and fleet coverage Borrowing sailboat - Homeowners and watercraft Employee injury - Workers Comp, health insurance, personal auto

5. Other Sources of Recovery Noninsurance agreements Product warranties or guarantees Credit card coverage Rental cars New purchases Third parties First party insurance does not relieve at-fault party of responsibility

6. “Other Insurance” Provisions Other-insurance situations More than one insurance source provides recovery Characteristics of “other insurance” provisions Not necessarily labeled Usually in conditions section Multiple “other insurance” provisions if distinct coverages Single clause may contain multiple provisions Inconsistency exists Difficult to apply

7. Types of “Other Insurance” Provisions Exonerating provisions Limiting liability to a proportion of a loss Limiting liability to excess portion of loss Making insurance primary Maintain principle of indemnity

8. Exonerating Provisions Prohibition of other insurance Exclusions General disclaimer if other insurance applies Offset to reduce coverage limit by amount of other coverage

9. Proportional Provisions Proration by face amounts A’s limit/(A’s limit+B’s limit+…)X Loss = A’s maximum obligation Proration by amounts otherwise payable (AOP) A’s AOP/(A’s AOP+B’s AOP+…) X Loss = A’s maximum obligation Contribution by equal shares Must consider policy limits Apportionment Potential for reducing coverage Fewer problems recently

10. Excess and Primary Provisions Example - Auto insurance Use of other autos Effect of insolvency of primary insurer Ocean marine Primary/excess based on policy effective date

11. Conflicts Among “Other Insurance” Provisions Examples Two exonerating provisions Excess and exonerating provisions Excess and proration Different proration provisions Building and blanket coverage

12. Conflicts Among “Other Insurance” Provisions - continued Methods to resolve conflicts Drafting “other insurance” provision Negotiation Drafting policy coverage to minimize overlaps Industry-developed guidelines and procedures Litigation

13. Procedures to Resolve Coverage Disputes Insurer’s Options When Claim is Filed 1 - Accept claim or defend suit 2 - Disclaim obligation under policy 3 - Issue reservation of rights letter or nonwaiver agreement 4 - Seek declaratory judgment

14. Legal Doctrines Contract of Adhesion Doctrine Insurer prepares agreement Insured prepares agreement Sophisticated insured rule Reasonable Expectations Doctrine Unconscionable Advantage Doctrine Substantial Performance Doctrine Waiver and Estoppel Collateral estoppel Judicial estoppel