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INSURANCE POLICIES FOR MULTIPLE INSUREDS: THE EFFECT OF A COMPOSITE APPROACH TO CONSTRUCTION?

Lloyd's Maritime and Commercial Law Quarterly

INSURANCE POLICIES FOR MULTIPLE INSUREDS: THE EFFECT OF A COMPOSITE APPROACH TO CONSTRUCTION?

Brian Harris*

This paper examines whether insurance policies for multiple insureds have been underpinned, or undermined, by the adoption of a composite approach to their construction. It evaluates the currently accepted alignment between concepts of insurable interest and co-insurance. Also, it analyses the effects of such conceptual alignment on insurers, insureds and their respective agents and proposes some conceptual realignment as to composite policies.

I. INTRODUCTION

The underwriting of diverse risks for various assureds within a single policy is, irrespective of the insurance risk market in which the insurance is underwritten, an established feature of insurance contracts governed by English law. It is a feature particularly prevalent in certain of those insurance markets, such as residential and commercial property, contractors’ risks, fidelity, and also marine.1 In marine insurance it is a commercial reality embodied in the notion of the marine adventure in which any person may be “interested … where he stands in any legal or equitable relation to the adventure”2 and, as regards which, any interest may be insured against “the losses incident to marine adventure”.3 This commercial reality has been central to an understanding of marine insurance for well over 200 years.4 Now, however, the prevailing orthodoxy in the construction of co-insureds’ policy obligations is to distinguish between the co-insurance of joint and several interests, characterising the collective insurance of joint insurable interests as a “joint insurance” and of several insurable interests as a “composite insurance”. The joint Law Commissions of England & Wales and Scotland (“the Law Commissions”), in recently inviting responses on a proposal to protect an innocent party from the fraud of another insured party with the same insurable interest, in their Issues Paper 7,5 appear broadly content with the continuation of this interpretative approach. This article seeks to evaluate the distinction made between joint and composite
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