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tional insurance, which has been permitted by the company, is cancelled or allowed to expire, and an equal or smaller amount is 6secured in another company to take its place, no violation of the other insurance clause is generally considered to have taken place.
The Other Insurance Clause in Marine Insurance. —At this point it may not be out of place to state that the practice of arranging for other insurance in American marine policies is totally different from that just explained. The clause common to marine policies insured by American companies reads as follows: "Provided always, and it is hereby further agreed, that if the said assured shall have made any other assurance upon the premises aforesaid,
prior in day of date to this policy, then the said
Company shall be answerable only for so much as the amount of such prior assurance may be deficient toward fully covering the premises hereby assured, and the said
Company shall return the premium upon so much of the sum by them assured, as they shall be by such prior assurance exonerated from, and in case of any assurance upon the said premises, subsequent in day of date to this policy, the said
Company shall nevertheless be answerable for
the full extent of the sum by them subscribed hereto, without right to claim contribution from such subsequent assurers, and shall accordingly be entitled to retain the premium by them received, in the same manner as if ifo such subsequent assurance had been made. Other assurance upon the premises aforesaid, of date the same day as this policy, shall
be deemed simultaneous herewith, and the said
Company shall not be liable for more than a ratable contribution in proportion of the sum by them insured to the aggregate of such simultaneous assurance.'' This clause not only explains the manner in which the various insurers of a marine risk contribute to the payment of a loss, but clearly indicates, in view of the absence of any clause prohibiting the taking of additional insurance without permission, that other insurance may thus be taken. It should be noted, however, that the subsequent policies have a large measure of protection, since in case of loss the prior policies must first be exhausted, before any liability attaches.
CONTRIBUTION IN FIRE INSURANCE
'' Contribution, '' or the apportionment of loss where several fire-insurance policies have been written on the same interest, involves some of the most important and, at the same time, most perplexing problems to be met with in the adjustment of losses.1 Lines 96 to 100 of the standard fire policy provide that "this company shall not be liable under this policy for a greater proportion of any loss on the described property, or for loss by and expense of removal from premises endangered by fire, than the amount hereby insured shall bear to the whole insurance, whether valid or not, or by solvent or insolvent insurers, covering such property, and the extent of the application of the insurance under this policy or of the contribution to be made by this company in case of loss, may be provided for by agreement or condition written hereon or attached or appended hereto.''
Apportionment of Loss where the Policies are Concurrent.—Where the several policies covering the same interest are alike in all their terms, i.e., are "concurrent," the application of the foregoing rule is a simple matter. For the purpose of explanation, let us assume that the owner of a
1The best discussion of contribution, involving an explanation of the various rules for apportionment of losses, and a statement of the principal legal decisions, is contained in W. H. Daniel's "The Apportionment of Loss and Contribution of Compound Insurance." Published by Rough Notes Co., Indianapolis, Ind., 1904. An excellent discussion, from a legal standpoint, is also found in Ostrander's "The Law of Fire Insurance."
property valued at $40,000 has the same insured to the extent of 80 per cent of its value, or $32,000, in three different companies as follows: in Company "A" $8,000, in Company "B" $10,000, and in Company "C" $14,000. Now let us assume that a loss of $10,000 occurs. If all the policies agree in their wording, and cover the same interest, it follows from the apportionment clause just quoted that each insurer is liable for the payment of only a ratable proportion of the $10,000 loss. Since Company "A" carried only $8,000 of insurance on the risk, it will not be liable for a greater proportion of the $10,000 than the amount of its insurance ($8,000) bears to the whole insurance on the property ($32,000), or one fourth. In the same way Company "B" will only be liable for of the $10,000 loss, i.e., the proportion that its insurance, $10,000, bears to the total insurance of $32,000, and Company "C's" liability will be limited to ^f. Company "A," therefore, will pay $2,500 of the loss, Company "B" $3,125, and Company "C" $4,375. It will be apparent that if the insured carries insurance equal to or greater than the amount of the loss, this loss will be paid in full. In fact, the courts have decided again and again that where the insurance exceeds the loss, no rule of apportionment can be recognized which will not fully indemnify the insured.
Special mention should be made of that section of the contribution clause, which provides'for pro-rata apportionment among all the policies, "whether Valid or not, or by solvent or insolvent insurers." Such a clause avoids many troublesome questions, as to the validity of policies and the solvency of companies, which would frequently arise where a number of policies cover the same property and which would have to be settled before the loss could be apportioned. But by expressly declaring that invalid policies or policies issued by insolvent companies must contribute just like the others, it becomes possible to avoid the expense and delay always connected with any inquiries into the validity of policies or the solvency of companies. This part of the apportionment clause is also of the greatest importance to the property owner who may rely upon the chance that he will only suffer a partial loss, and may, therefore, feel that he can afford, in part at least, to take cheap insurance in an unreliable company. If the policies of insolvent companies were not considered as contributing with those of the solvent companies, it would inevitably follow that property owners, who are constantly on the lookout for cheap insurance, would take part of their insurance in reliable companies charging adequate rates, with a view to covering their partial losses, and then, as a protection against unusual losses which they hardly expect, would take other insurance in unreliable companies charging inadequate rates. The contribution clause as it stands, however, gives fair warning to property owners that such a practice can prove of no benefit because, whether the loss be partial or total, all policies in companies unable to pay will be considered as contributing on a pro-rata basis with those issued by solvent insurers. If in the foregoing illustration Company "C" should have been able to pay only 50 cents on the dollar, it would, nevertheless, be considered as having contributed ^4 °f the $10,000 loss. Companies A and B, despite the insolvency, would pay only their respective portions of \ and of the loss, and the property owner would be the loser of one half of Company C's liability, or $2,187.50.
Contribution when the Policies are Non-Concurrent.—As contrasted with the foregoing, much greater difficulties present themselves in the apportionment of a loss when two or more policies are issued on the same interest and are "nonconcurrent," i.e., do not agree in their terms. As sometimes happens, a number of policies may be written on the same interest, and differ as to the description of the property, one policy insuring the building, another covering the