Insurance coverage Fundamentals: “Different Insurance coverage” Clauses

The Eleventh Circuit just lately confirmed the rule that “different insurance coverage” clauses shouldn’t be used to drawback policyholders. Nat’l Cas. Co. v. Georgia Sch. Bd. Ass’n – Danger Mgmt. Fund, No. 22-13779, 2023 WL 5977299, at *1 (eleventh Cir. Sept. 14, 2023). In a dispute between an insurance coverage firm and a public danger administration fund, each insurance coverage insurance policies included “different insurance coverage” clauses stating that every insurer would solely present extra insurance coverage protection the place the policyholder is roofed by different insurance coverage. The district court docket discovered that the clauses have been irreconcilable as a result of each insurance coverage insurance policies couldn’t present solely extra insurance coverage protection—at the very least one coverage would want to offer main protection. Due to the battle, the Georgia federal district court docket utilized Georgia’s irreconcilable-clauses rule and held that every coverage should present protection to the policyholder on a professional rata foundation. The Eleventh Circuit affirmed the district court docket’s utility of Georgia’s irreconcilable-clauses rule.

The district court docket’s ruling was primarily based on utility of Georgia’s irreconcilable-clauses rule, which gives that insurers should share protection and indemnity prices on a professional rata foundation when conflicting “different insurance coverage” clauses are irreconcilable in insurance coverage insurance policies masking the identical danger. The district court docket even licensed to the Georgia Supreme Court docket the query of whether or not Georgia’s irreconcilable-clauses rule utilized to public danger administration funds. The Supreme Court docket answered sure.

“Different insurance coverage” clauses are included in insurance policies to keep away from a number of insurers paying for a similar loss by making one coverage extra to a different coverage the place they cowl the identical danger. The clauses apply solely amongst insurers; they don’t seem to be supposed to use to policyholders and thus mustn’t drawback them. Georgia’s irreconcilable-clauses rule ensures that policyholders are usually not deprived when a battle arises between insurers referring to “different insurance coverage” clauses.

Basic rules referring to “different insurance coverage” clauses embody the next:

  • Escape: “Different insurance coverage” clauses might present that an insurer typically can keep away from its duties to defend or indemnify if different insurance coverage covers the loss. 
  • Extra: “Different insurance coverage” clauses might present that an insurer can restrict its legal responsibility for protection prices and coated loss to solely the quantity exceeding what is roofed by different relevant insurance coverage insurance policies.  
  • Professional Rata: “Different insurance coverage” clauses might present that an insurer will pay its professional rata share of protection prices and coated loss if different insurance coverage exists. 
  • Mutual Repugnancy: The place the “different insurance coverage” clauses are equivalent in two or extra insurance policies, the clauses are usually not given impact. The insurers share the protection prices and coated loss on a professional rata foundation. Georgia’s irreconcilable-clauses rule addresses this idea.
  • Particular versus Normal: When a dispute arises between two insurers over competing “different insurance coverage” clauses, insurers typically contend {that a} extra particular clause ought to govern over a extra common clause. Most courts have rejected this argument. 

Though “different insurance coverage” clauses are supposed to use solely amongst insurers, being aware of the clauses may help policyholders shield themselves.

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