I have been refused insurance cover and the reason I was given was “dual insurance”, what does this mean and what can I do about it?

Dual insurance (sometimes called double insurance) is when someone (or a company) has two policies in force that cover the same risk at the same time. While this is not illegal unless you try and use both policies to claim with the intention of making a profit or receiving payment higher than the main policy would provide. This can lead to unforeseen complications for insurers who may well have decided not to offer cover had they known.

In theory the policyholder can make a claim against whichever policy they choose but they should disclose the potential dual insurance to the insurance company they are claiming against. The insurance company and not the policyholder should contact the other insurance company with regards to how they should settle the claim between them.

The different insurers will have different policy wordings, terms and conditions and potentially responsibilities that will affect how much they will have to contribute. Some examples of this would be:

  • A notification clause – this is a clause that states you must specifically advise the insurer if you will have dual insurance in force and failure to do so will entitle them to not pay a claim.
  • A rateable proportion clause – this clause means that both insurers would pay their relevant proportion of a claim and no more than their rateable proportion.
  • An escape clause – this clause normally means they will not pay a claim, except for any part the other policy does not cover. For example if the policy with the escape clause had no excess and the other policy did, or the policy had higher limits than the other policy and they would pay the difference over and above the other policy up to their own policy limit, or some other clause that would have limited the payments made.
  • An excess clause – a limited version of an escape clause, where the policy only responds if it has a higher limit than the other policy and will pay the amount over and above the other policy’s limit.
  • An Appropriate clause – whichever policy would be deemed the most “appropriate” or relevant, with the business description and intention of the policy being the closest matching the claim. For example a shop policy and a market trader policy, if the claim happened at the market that policy should apply and vice versa.

In some cases both insurers may have the same clauses in their wordings and as such some resolutions have been established to ensure a policy holder is compensated appropriately:

  • Two notification clauses – The second insurer which wasn’t notified, will be considered to be “off risk” and the first insurer will be liable.
  • Two rateable proportion clauses – If the sums insured are the same both insurers will be equally liable. If the sums insured are different the insurers will be liable for their proportion of the claim.
  • Two escape clauses – these would cancel each other out.
  • Two excess clauses – these would cancel each other out.
  • Two Appropriate clauses – the most appropriate should respond or as rateable proportion if this cannot be established.

As such you will find many good brokers and insurers will do their best to prevent dual insurance from occurring and keeping their customers claims processes as streamlined and efficient as possible. Many will insist on insuring the whole business rather than separate parts for this reason and also to try and minimise potential gaps in cover!