CML Working Paper: Co-insured’s subrogation immunity – how to express and what to express in the underlying contract

ABSTRACT

Co-insurance is common in the construction industry. However, as the case law illuminates clearly, it has caused significant complexities and perhaps surprising outcomes for the defendant co-insureds. Whilst the law appears by no means to be clear and certain, it is suggested that the balance is shifting towards the underlying contract in which the parties’ intention and authority would be found firstly as to the identity of the parties to be co-insured and secondly the scope of the cover to be obtained under the co-insurance policy. The terms of the insurance contract will then be read together with the underlying contract. It is essential that the details of what the parties meant to agree in the underlying contract are explicitly and precisely stated in the insurance contract to ensure that the insurance policy terms will not be interpreted as either ambiguous or not meant to insure the defendant at all or, if insured, not co-extensively with the other co-insured(s).

Keywords: Subrogation, subrogation immunity, co-insurance, underlying contract, definition of ‘insured’, co-extensive cover, exclusion of liability