Principle of Contribution under Fire Insurance
There is a condition no. 11 of Fire insurance policy which is based on Principle of contribution” as under:
“If at the time of any loss or damage happening to any property hereby insured there be any other subsisting insurance or insurances, whether effected by the insured or by any other person or persons covering the same property, this Company shall not be liable to pay or contribute more than its rateable proportion of such loss or damage”.
A person insured his stock as ‘Held in Trust” lying with the jobber where the excess is Rs 25000/- . The Jobber has also insured the stock of all the suppliers as “Held in Trust” where the excess is Rs 5 lakhs. The stock of A is damaged due fire and filed a claim. His Insurer is invoking condition no. 11 and demanding the contribution from the other Insurer but other Insurer is taking the plea that in his policy is excess is Rs 5 lakhs therefore NIL amount is payable.
The question arises whether “Principle of contribution” is applicable. In my opinion, this principle is not applicable and A Insurer should settle the claim without contribution as per conditions of Principle is as under:
- Two or more policies of Indemnity should exist
- The policies must cover a common interest
- The policies must cover a common peril which is the cause of loss
- The policies must cover a common subject matter
- The policies must be in operation at the time of loss
The above mentioned policies do not meet the basic features of the principles i,e. No common subject matter as the Jobber is having stock which is different type of many suppliers and there are two different Insured.
Further the Principle of contribution is applicable among the Insurers not with the Insured and the condition 11 cannot overrule the ‘Principle of Contribution”. The conditions which are beneficial to Insured can be incorporated but not otherwise.