Excess for one event under three different Fire Insurance policies
An owner of a factory insured its assets (Building, Plant & Machinery and Stock) through 3 different polices from 3 different Insurers. The sum insured under each policy is more than Rs 100crs, therefore, the minimum excess is Rs 5 lakhs. A fire took place and claim has arisen under each policy and total claim amount is Rs 20 lakhs. The question is raised whether each Insurer will apply the excess of Rs 5 lakhs for assessing their liability as a result the insured may get the claim only Rs 5 lakhs (Rs 20 lakhs- Rs 15 lakhs) as the total excess would be Rs 15 lakhs.
No, it is not properly interpretation of the “excess clause” under exclusions of All India Fire Tariff as it is “Event Based” therefore the minimum excess Rs 5 lakhs should be divided in the proportion of sum insured under each policy. The principle of contribution should be applied in such claims.