Where there are two or more insurers and only one of those insurers pays out following a claim by the insured, that insurer can claim a contribution from the other insurers.

Many insurers deal with this problem by including specific wording in their policies to negate cover where there is other insurance in place.

In a property context there is no requirement of a seller to insure the property following an exchange of contracts.  The common law provides that the risk passes to the buyer on exchange of contracts. In most cases the sale contract will deal with the issue of insurance whereby either the seller or the buyer contractually covenants with the other to insure the property up to actual completion.

Where the contractual position is unclear, or, where the contractual position is clear but both the seller and the buyer have each insured the property and damage occurs to the property between exchange of contracts and actual completion, a claim may be made by both the seller and the buyer to their respective insurers.

Double insurance is generally undesirable given that one or more of the insurance policies could be invalidated by double insurance or in some cases the insured is not able to claim the full extent of its loss.

In the recent case of National Farmers Union Mutual Insurance Society Limited v HSBC Insurance (UK) Limited the interesting question arose relating to the fact that both the seller and buyer had insured the property between exchange of contracts and completion. Damage occurred to the property prior to completion. Was this double insurance?  The seller’s insurance policy was expressed to include any buyer of the property until completion but cover was negated where the property was covered by other insurance.  As the buyer had insured the property the seller’s insurance policy was negated.  It was held that there was no double insurance, and the buyer’s insurer was not entitled to a contribution from the seller’s insurer.

In practical terms this may present a problem for a buyer of property as its insurer may not agree to provide cover without sight of the seller’s insurance policy.  Both the seller and the buyer should consider the insurance provisions of the sale contract carefully to avoid double insurance.

For more information on these issues please contact

Simon Jones

or your usual Lewis Silkin contact