Excess "other insurance" clauses : to contribute or subrogate? [Discussion of Samancor Ltd v Mutual & Federal Insurance Co Ltd 2005 4 SA 40 (SCA)]
CITATION: Cupido, D.M. 2009. Excess "other insurance" clauses : to contribute or subrogate? [Discussion of Samancor Ltd v Mutual & Federal Insurance Co Ltd 2005 4 SA 40 (SCA)]. Stellenbosch Law Review = Stellenbosch Regstydskrif 20(1):97-123.
The original publication is available at https://journals.co.za/content/journal/ju_slr
Insurers typically insert "other insurance" clauses in order to specify how their policies should interact with other policies covering the same risk. This enables insurers to avoid situations of double insurance and, consequently, claims for contribution by co-insurers. Although it is standard practice in the South African insurance industry to insert "other insurance" clauses into contracts, their functioning has been neglected in the legal literature. This article aims at increasing the understanding of these clauses through evaluating the decision of the Supreme Court of Appeal in Samancor v Mutual and Federal Insurance Co Ltd 2005 4 SA 40 (SCA) In Samancor the opportunity existed to consider and develop the law regarding the impact of “other insurance” clauses on the rights to contribution and subrogation. Unfortunately, the court failed to use this opportunity, since it ignored an “other insurance” clause which allowed for the policy containing it to become an excess policy to other policies covering the same risk. The court failed to entertain the possibility that the “other insurance” clause could have this effect. The oversight appears to be the result of the context within which “other insurance” clauses occur. They operate within the context of rights to contribution and subrogation, which were adopted from English law without due regard to their doctrinal bases. The court’s preoccupation with the concepts themselves resulted in the intention of the insurer, as clearly expressed in the “other insurance” clause, going unnoticed. The conclusion is reached that it has to be re-examined whether there is any need for recognizing rights to subrogation and contribution. It is argued that the South African law of unjustified enrichment and the mechanism of cession make a separate right to subrogation superfluous. However, good policy reasons exist for the retention of the right to contribution.