What is the Principle of Contribution?
An insurer who has indemnified an insured to call upon other insurers liable for the same loss to contribute proportionately to the cost of the indemnity payment.
Why was the term Corollary of indemnity developed for?
To prevent the insured with two or more policies from being more than indemnified for some loss.
List the following conditions that are essential of contribution
The policies must be:
- be in force at the time of loss
- must cover a common interest
- must cover a common peril which gives rise to the loss
- must involve the same subject matter covered by all the policies
- the policies must be legally enforceable
What is the contribution condition?
This is used to state when the contribution applies, the insured obliged to claim against all insurers, each of whom will have to pay a rateable proportion of the loss in accordance with their respective sum insured.
What is the formula used to calculate the “Amount Payable” for the loss?
(Sum Insured - Each Insurer) / (Total Sum insured) - (All insurers) X Total amount of the loss
