One of the clauses in an insurance policy which is most ignored by insured as well as brokers is a clause called “Other Insurance Clause”. In some policies, the sub-heading “Other Insurance” may not be mentioned but the wording is clearly having the same intention. The clause reads as:

“This Insurance shall be excess of any other insurance available to the Insured covering a loss or damage covered hereunder except such other insurance which is written specifically as excess insurance over this Insurance”.

Looks very innocuous clause-but it is one of the clauses which could have serious consequences.

This clause is invariably found in Political Risk, Political Violence and Terrorism & Sabotage Insurance.

Let’s assume a violent event which led to the loss. One insurer calls it Riot and the other insurer calls it Terrorism. There is a famous caselaw related to this but cannot be discussed here due to the need to keep the blog short. In such situation, even if an insured has an IAR/Fire Policy as well as Political Violence/T&S policy, it is possible that neither insurer pays the claim. And the key culprit will be the “Other Insurance Clause”.

Fire/IAR policy also has an “Other Insurance Clause” even though it is not named as such. It is related to marine coverage. If this marine policy happens to be a global master policy, imagine the impact this other insurance clause in the IAR/Fire policy could have.

Quite common clause in Liability products.

Very careful look is required whenever this innocuous looking clause appears in your policy.

Blog by Atmaram Cheruvu