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Explaining the Application of Other Insurance Clauses  

https://zalma.com/blog

Every third-party liability policy contains an \\u201cother insurance\\u201d clause  that attempts to control disputes when there are two or more policies  insuring the same risk. The term \\u201cother insurance\\u201d is used in a special  sense in insurance contracts. It describes the situation where two or  more policies of insurance cover the same risk in the name of, or for  the benefit of, the same person. Difficulties arise when the two or more  policies have other insurance clauses that conflict with each other and  the insurers and the insureds must find a way to resolve the conflicts.  There are generally three types of \\u201cother insurance\\u201d clauses.. [Croskey  et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group  2009) \\xb6\\xb6 8:15 to 8:20, pp. 8-5 to 8-8.]   Pro Rata:  Under a pro rata other insurance clause, the insurer seeks to limit its  liability to \\u201cthe proportion that its policy limits bear to the total  coverage available to the insured.\\u201d [Id}   Excess Only:  Under an excess only other insurance clause, \\u201c[i]f there is other valid  and collectible insurance, the insurer is liable only to the extent the  loss exceeds such other insurance.\\u201d [Fireman\\u2019s Fund Ins. Co. v. Maryland  Casualty Co., Supra, 65 Cal.App.4th at p. 1305.]   Escape:  Under an escape other insurance clause, the \\u201cexistence of other valid  and collectible insurance extinguishes the insurer\\u2019s liability to the  extent of such other insurance.\\u201d [Id.]   In many states, it is a type of the crime of insurance fraud to present  the same claim to two different insurers.  The need for other insurance clauses arose when it was found that people  would have more than one insurance policy covering the same risk by  error, accident, or incompetence rather than as a part of an attempt to  defraud the insurer. [ Federal Ins. Co. v. Commercial Union Ins. Co.,  126 A.D. 2d 892, 893, 510 N.Y.S. 2d 785, 786 (3d Dept 1987), appeal  denied, 69 N.Y. 2d 610, 511 N.E. 2d 84, 517 N.Y.S. 2d 1025 (1987); Wyman  v. Allstate Ins. Co., 29 A.D. 2d 319, 288 N.Y.S. 2d 250 (2d Dept 1986)   How the other insurance clause effects the insured is of primary  importance to the insurance claims adjuster and the lawyer representing  an insured or insurer. The resolution of these conflicts has been the  subject of a great deal of disputed claims and litigation between  insureds and insurers.