PRINCIPLE OF CONTRIBUTION


PRINCIPLE OF CONTRIBUTION
 The principle is corollary of the principle of indemnity.
•It's applicable to all or any contracts of indemnity.
 Under this principle the insured can claim the compensation and then the extent of actual loss either from anyone insurer or all the insurers.
Principle of Contribution is really a corollary of the principle of indemnity. It applies to all or any contracts of indemnity, if the insured has applied for several policy on a single subject matter. According to the principle, the insured can claim the compensation and then the extent of actual loss either from all insurers or from anyone insurer. If one insurer pays full compensation then that insurer can claim proportionate claim from the other insurers.
As an example: Mr. Arvind insures his property worth Rs. 100,000 with two insurers "AIG Ltd." for `90,000 and "MetLife Ltd." for `60,000. Arvind's actual property destroyed may be worth ` 60,000, then Mr. Arvind can claim the full lack of `60,000 either from AIG Ltd. or MetLife Ltd., or he is able to claim `36,000 from AIG Ltd. And 24,000 from Metlife Ltd.
So, if the insured claims full level of compensation in one insurer he then cannot claim exactly the same compensation from other insurer and make a profit. Secondly, if one insurance company pays the full compensation then it could recover the proportionate contribution from the other insurance company.




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