Explaining the Application of Other Insurance Clauses
Every third-party liability policy contains an “other insurance” clause that attempts to control disputes when there are two or more policies insuring the same risk. The term “other insurance” 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 “other insurance” clauses.. [Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2009) ¶¶ 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 “the proportion that its policy limits bear to the total coverage available to the insured.” [Id} Excess Only: Under an excess only other insurance clause, “[i]f there is other valid and collectible insurance, the insurer is liable only to the extent the loss exceeds such other insurance.” [Fireman’s Fund Ins. Co. v. Maryland Casualty Co., Supra, 65 Cal.App.4th at p. 1305.] Escape: Under an escape other insurance clause, the “existence of other valid and collectible insurance extinguishes the insurer’s liability to the extent of such other insurance.” [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.