Third Party Claims for Uninsured Losses
It often occurs that a large insured loss will also result in a significant uninsured (as opposed to underinsured) loss. For example, when a loss covered under a policy of property insurance also results in an uninsured loss of rental income.
When this happens, disputes can arise between the Insured and the Insurer as to which of them has conduct of the action. In the absence of any specific policy provision, the general rule is that the parties are entitled to separate representation to protect their interests, although the Court will not permit two sets of solicitors to appear on the record, and is even less likely to allow the Claimant to recover two sets of solicitors’ costs.
In practice the party with the larger loss will usually take the lead in the action.
In circumstances where there is a mixture of insured and uninsured losses, and the Insurer has conduct of the action, the Insurer will usually pay the costs of advancing the subrogated claim, but will require a contribution to the legal costs associated with the claim for the uninsured losses.
In such cases it is important to agree early on how any recovery will be distributed. This is because a global settlement offer which does not apportion the settlement sum between the individual heads of claim can cause tension between Insured and Insurer, especially when certain heads of claim are perceived to be more speculative than others.
Invariably the Insurer will argue that the balance of the recovery should go to the easily provable material damage claim, say, and not to the more abstract claim for consequential losses. A prior agreement will avoid these disputes and assist in the sensible appraisal of settlement offers.
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