Insurance – Insurer’s Right of Restitution For (1) Excessive Payment Made in Discharge of the Liability of a Coinsurer and (2) Costs of Defense

The increasing use of the “pro rata” or “other insurance” clause in liability insurance policies has given rise to new instances of coinsurer relationships. Such a clause typically provides that the insurer will not be liable under its policy for a greater proportion of any loss than the applicable limit of liability of its policy bears to the total applicable limit of all valid and collectible insurance against such loss. It has been frequently stated that the existence of such clauses in two policies covering the same loss renders the liability under each of the policies several and not joint, and accordingly that neither insurer has any right of contribution from the other. It is the purpose of this comment to consider whether this rule is properly applicable in all cases involving a coinsurer relationship.