Insurance is a contract by which the insurer undertakes to indemnify the insured against loss arising from the destruction of or injury to the insured's property as a result of certain causes. By its very nature an indemnity contract obligates the insurer to reimburse the insured for the amount of actual loss suffered by the insured. There are, however, situations in which multiple insurance coverage exists; that is, the same interest and the same risk are insured at the same time by more than one separate and distinct insurance contract, each presumably liable in the event of loss of or destruction to the insurable interest. Where multiple insurance exists, a loss occurs, and every policy meets its obligation to reimburse the insured for loss suffered, the insured gets a windfall, and the indemnity principle underlying the insurance concept is violated. A perplexing problem then arises in determining which insurer should be held primarily liable for reimbursing the insured for the loss suffered, and, if all insurers are primarily liable, how to apportion the loss among them.
Paul K. Campsen,
Primary Liability under Excess Insurance Clauses: State Capital Insurance Co. v. Mutual Assurance Society Against Fire on Buildings,
U. Rich. L. Rev.
Available at: https://scholarship.richmond.edu/lawreview/vol13/iss1/8