Hot off the presses!
A recent Nebraska case, American Family Mut. Ins. Co. v. Regent Ins. Co., 288 Neb. 25 (May 2, 2014) provides us with many coverage nuggets to digest in the coming weeks! We begin with a basic tenet that is rarely discussed:
Contribution is allowed between two insurers who insure the same policyholder and the same risk.
Contribution is an equitable remedy. This means that a court will apply general rules of fairness to hold wrongdoers accountable for a loss. Contribution is available when a party pays a debt that is concurrently or partly owed by another party. Indemnity is available when a party has paid all of a debt owed by another party.
To recap: Indemnity is repayment in full. Contribution is repayment in part.
Insurance companies can recover contribution from each other if the polices insure the same entity, the same interest in the property and the same risk. It does not matter if the actual policy language is inexact:
When considering whether insurance polices cover the ‘same risk,’ it is not necessary that the policies provide identical coverage in all respects. As long as the particular risk is actually covered by both policies, the coverage is concurrent and contribution will be allowed.
Stay tuned to see how the contribution was awarded and split between the insurers in the American Family case!
BOTTOM LINE: Indemnity is repayment in full.
Contribution is repayment in part.