In the context of a professional negligence claim against an insurance broker, the commercial court has provided some helpful guidance on the operation of competing double insurance clauses in Watford Community Housing Trust v Arthur J Gallagher Insurance Brokers Ltd [2025] EWHC 743 (Comm), (the Watford Case, Watford CHT v AJG).
Double insurance arises where the policyholder is insured with two or more insurers for the same interest on the same subject matter against the same risks. That is, more than one insurer covering the same loss; for example, two policies providing cover for the same building for damage caused by fire.
To combat the potential for fraud and abuse if an insured sought payment from multiple insurers for the same loss, common law, via the indemnity principle, has long ensured that an insured cannot recover more than its actual (or agreed) losses. Double insurance does arise legitimately, for example intentionally to protect against insurer insolvency, or unintentionally where different policy may contain some overlap in cover for certain losses.
The general rule surrounding double insurance is that an insured can recover the whole loss from either insurer. Subject to policy wording (which can bring its own difficulties and disputes), this leaves insurers entitled to recover a contribution as between themselves.
However, the terms of the relevant policies often conflict with one another. Many policies will now include an “other insurance” clause. The intention of the insurer being to avoid or reduce the indemnity payable if a loss also triggers another policy.
As the judge noted in the Watford Case, citing the judgment in, The National Farmers Union Mutual Insurance Society Limited v HSBC Insurance (UK) Limited [2011] “other insurance” clauses generally fall into three main classes:
- “escape” clauses, which exclude liability altogether if other insurance is available
- “rateable proportion” clauses, which limit liability to a share of the loss
- “excess” clauses, which make the policy respond only after other cover is first exhausted
Background - the Watford case
In the Watford case, they alleged that AJG (as their broker) had failed to properly notify a data breach to one of three available insurance policies. Breach of duty was admitted, however, AJG argued that no loss was caused because each of the three policies contained double insurance provisions (in the form of 'other insurance clauses') which, according to AJG, limited the total indemnity recoverable by Watford CHT to a sum (a £5 million maximum limit of indemnity in total) less than what the insurers had already agreed to pay (£6 million) - ie Watford CHT could and would never have recovered more even if all notifications had been properly made.
The policies
The three policies in place were:
- A "cyber policy", which provided cover subject to an aggregate limit of £1,000,000 (inclusive of defence costs) and an excess of £5,000 each and every claim.
Its cover was subject to the following other insurance clause and aggregation provision.
"OTHER INSURANCE
This insurance shall apply in excess of any other valid and collectible insurance available to You, including any excess or deductible portion thereof, unless such other insurance is written only as specific excess insurance over the limit of liability of this Policy." (Our emphasis) - A "combined policy", with cover subject to an aggregate sub-limit of £5,000,000 (inclusive of defence costs) and an excess of £500 any one occurrence.
The combined policy was subject to the following other insurance clause.
"10.17 Non-Contribution
If at the time of any claim under this policy there is any other valid and collectible insurance available to the insured... other than insurance that is specifically stated to be in excess of this policy... then the insurance afforded by this policy will be in excess of and will not contribute with such other insurance." (Our emphasis) - A "PI policy", which provided such cover subject to a limit of £5,000,000 any one claim (but with defence costs being in addition to that limit) and an excess of £5,000 each claim or loss.
As for the PI Policy, its cover was subject to the following other insurance clause."
"Other insurance
We will not make any payment under this policy where you would be entitled to be paid under any other insurance if this policy did not exist except in respect of any amount in excess of the amount that would have been payable under such other insurance had this policy not been effected." (Our emphasis).
All three policies included excess clauses. None of the policies contain a rateable proportion clause.
The issues for the court
The court considered that preliminary issues needed to be resolved around the operation of the double insurance clauses. In particular, the following key questions needed to be answered:
1. Did the other insurance clause in the PI policy make that policy a contract of excess insurance providing Watford CHT with a vertical layer of excess cover for £5 million (plus defence costs) on top of a horizontal primary layer of double insurance consisting of the cyber policy and the combined policy?
2. If the other insurance clauses in all three policies cancel each other out so that Watford CHT had available to it a horizontal layer of primary insurance for £1 million (under the cyber policy), £5 million (under the combined policy) and £5 million plus defence costs (under the PI policy), does a general principle of rateable contribution or the wording of the policies limit the Claimant's maximum indemnity to £5 million?
The question here being would all three insurers contribute 1/3 to the first £1 million, and then the combined policy and PI policy insurers contributing 50% each to the next £4 million.
The court’s decision
The judge applied the (much) earlier decision in Weddell v Road Transport & General Insurance Co Ltd [1932] 2 KB 563. Where the application of competing “other insurance” clauses would result in an insured having no primary cover, those clauses are to be treated as cancelling each other out. The court held, therefore, that the “other insurance” clauses in each of the three policies cancelled out one another and none would apply.
As a result of that decision, each policy was treated as a primary policy, all providing cover to Watford CHT. As such, Watford CHT had the benefit of triple cover for its losses arising from the data breach; a combined £1 million of cover under the cyber policy, £5 million of cover under the combined policy and a further £5 million of cover under the PI policy, thereby a total limit of indemnity across all three policies of £11 million.
Furthermore, the court affirmed the common law position discussed at the start of this article - where there is no rateable contribution clause, an insured is entitled to claim for its loss up against whichever insurer it chooses, up to the limit provided by that insurer. The indemnity principle would still apply and an insured would still, therefore, only claim up to the maximum of its actual loss. The policyholder would not need to claim proportionate amounts from different insurers. It would then be up to the insurers to seek contribution from other insurers covering the same loss, but that is of no concern to the insured.
As a result of the court’s decision, Watford CHT were able to recover from AJG any losses caused by the data breach above the £6 million already paid by the cyber and combined policy insurers and up to a maximum of £11 million (as per the combined limit of indemnity).
Did the court answer all of the issues?
Not quite. The judge intentionally left some unanswered questions. Most notably, the court didn't answer the questions around situations where an insured has multiple primary policies (a horizontal layer) followed by an excess policy above, and whether the entire horizontal layer must first be exhausted before the excess policy responds. Guidance on this point would have been very useful, however, the judge (some may say taking the easy option) determined that this was a very complex issue which in the end did not arise in this claim such that there was no need to consider this question, and it was best left to being answered properly in a future court case if and when the question arose.
What have we learnt?
The decision in the Watford case provides some welcome clarity and reinforcement of existing principles. It’s one that is ultimately favourable to policyholders.
Where there are competing ‘other insurance’ clauses, which would leave the insured without any primary cover if they all applied, these will cancel each other out, providing vital protection for insureds. Furthermore, the insured’s freedom to choose which policy to claim against (and to what extent) remains in place in the absence of a rateable contribution clause.
The Watford case is a salutary reminder to insurers that “other insurance” clauses will not always achieve what they intend. This is particularly the case where insurers aim to transfer all liability to any other insurance policy (escape and excess clauses). To combat the risk that the other insurance clause within the policy is not cancelled out by like clauses in other policies, insurers may wish to consider including a rateable other insurance clause in addition to any excess or ‘escape’ clause in order to limit their potential contribution.
For brokers, care is needed on (i) advice to clients on the operation of “other insurance” clauses, so that the insured knows which policies are more likely to respond (and to what extent and in what order) and (ii) ensuring compliance with policy terms and conditions, particularly around notification where there is potentially more than one policy that could respond. Assuming that notification to one insurer is not required because of other insurance clauses is likely to open up the prospect of a negligence claim. There’s an obvious risk to brokers in a scenario where notification is only made to one insurer, only to find that the terms of that policy defers liability to a second policy, but that condition precedents to liability for the second policy may have been breached such that the second policy might not response.
The non determination of the questions around where an insured has multiple primary policies (a horizontal layer) followed by an excess policy above, is of course no help to insureds and brokers as they look to structure primary and excess layers. When considering layering cover and reviewing policy wording, it's crucial to ensure that the desired effect will follow, and not deviate, from the intended structure.
If you’ve found this article useful then you’ll be interested in our Cover Talk webinar series which focuses on policy coverage questions and, in particular, this webinar on double insurance and contribution.
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