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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Double Insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest. (Section 95, Insurance Code)
Over Insurance exists when the insured takes out an insurance over the property insured in an amount which is in excess of the value of his insurance interest.
Double Insurance
Under Section 95 of the Insurance Code, double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest.
Double insurance per se is not prohibited under the law unless the policy contains a stipulation to the contrary. Generally, insurance policies contain a clause regarding other insurance, which requires disclosure of other existing insurance policy with the same subject to prevent the perpetration of fraud.
In case of loss when there is double insurance, each insurer will be liable only up to the face value of their respective policies.
The case of Multi-Ware Manufacturing Corporation v. Cibeles Insurance Corporation, et al. (G.R. No. 230528, February 01, 2021) explains the rationale behind clauses regarding other insurance in the following manner:
The rationale behind the incorporation of “other insurance” clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property’s value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.
Over Insurance
Over insurance exists when the value of the insurance exceeds the value of the insurable interest. Like double insurance, over insurance is not void per se. In case of over insurance, recovery is allowed only to the extent of the loss or damage incurred by the insured.
In case of loss when there is over insurance, the insurers will pay pro-rata or, in case there is a clause in the insurance policy regarding excess, based on such clause.
Section 64 of the Insurance Code provides that no cancellation of an insurance policy (other than life insurance) shall be effective unless there is discovery of other insurance coverage that makes the total insurance in excess of the value of the property, among others. (Section 64, par. f thereof.)
Further, the law says:
In case of an over insurance by several insurers other than life, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk. (Section 83, Insurance Code)
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