Before-the-event legal expenses insurance as a funding route for tribunal claims, including double insurance and contribution between insurers. NFU Mutual Insurance Society Ltd v HSBC Insurance (UK) Ltd.
Double insurance; mutual repugnancy; 'other insurance' clauses. Where two insurance policies each contain escape or excess clauses purporting to exclude liability if other insurance exists, and construing them literally would leave the insured with no cover under either policy, the clauses are mutually repugnant and must be disregarded. Both insurers must then contribute to the loss as if neither had the clause. Rowlatt J: it would be absurd to give effect to mutually exclusive clauses in a way that deprives the premium-paying insured of all indemnity. The doctrine of mutual repugnancy requires courts to treat such clauses as cancelling each other out so that both insurers bear a rateable share.
Double insurance; apportionment; independent liability method. The correct method of apportioning liability between co-insurers in a double insurance situation is the 'independent liability' method: each insurer contributes in proportion to the maximum amount it would have been independently liable to pay on the claim, had no other insurance existed. This produces a proportionate contribution based on policy limits. Contrast the 'maximum liability' method (ratio of policy limits). The independent liability method prevents an insured who happens to have excess cover from being treated as a co-insurer of their own loss. Mackinnon J: the right of contribution is a right as between the insurers themselves; it creates no obligation on the insured to bear any part of the loss.
Double insurance; contribution; the insured is not a co-insurer. The Court of Appeal held that the right of contribution in double insurance situations exists between co-insurers as an equitable right; it does not require the insured to participate in the apportionment exercise or to bear any share of the loss personally. An insured is not a co-insurer of their own loss simply because they hold multiple policies covering the same risk. The insured is entitled to claim in full against any one of the co-insurers, leaving that insurer to seek contribution from the other(s). A managing agent or insurer that purports to impose a personal contribution on an insured on the basis of their holding an excess policy with a third insurer has no legal foundation for that demand.
Double insurance; 'other insurance' clauses; hierarchy of clause types. An excess/escape clause takes priority over a rateable proportion clause. Where one insurer's policy contains an escape clause triggered by the existence of other insurance, and the other insurer's policy contains a rateable proportion clause, the escape clause takes effect first. This leaves no 'other insurance' in existence to trigger the rateable proportion clause, so the insurer with the rateable proportion clause must respond in full up to its limit. The decision resolves the apparent conflict by applying the clauses sequentially rather than simultaneously. Applied in BTE legal expenses insurance disputes to prevent managing agents pulling excess policies into primary-layer apportionment exercises.
Double insurance; mutual repugnancy; 'other insurance' clauses; broker's duty. Where an insured holds multiple policies each containing excess/escape-type 'other insurance' clauses, those clauses may be mutually repugnant and cancel each other out, leaving each insurer liable to contribute to the full loss up to its policy limit. The court rejected the broker's argument that mutual repugnancy effectively reduced the insured's total cover to a single policy limit. The insured was entitled to recover up to the combined limit of all three policies. The decision affirms a broad interpretive principle: 'other insurance' clauses must be construed so as not to produce an absurd or uncommercial result for the policyholder, particularly where simultaneous coverage creates mutual repugnancy. Relevant to BTE disputes involving multiple legal expenses policies with conflicting 'other insurance' provisions.