Allocation and attachment of losses
Produced in partnership with Rupert Warren of Holman Fenwick Willan and Celia Richardson of Holman Fenwick Willan

The following Insurance & Reinsurance practice note produced in partnership with Rupert Warren of Holman Fenwick Willan and Celia Richardson of Holman Fenwick Willan provides comprehensive and up to date legal information covering:

  • Allocation and attachment of losses
  • Allocation
  • Allocation to a policy period
  • The standard position
  • Aggregation
  • Indivisible damage
  • Reinsurance
  • Allocation to a policy within a particular period
  • Attachment
  • Common issues with attachment
  • More...

Allocation and attachment of losses

Allocation

In the context of insurance and reinsurance, ‘allocation’ is the determination of which insurance policy a loss or part of a loss is covered by.

In most insurance claims, the issue does not arise. If a driver crashes his car, his automobile insurance policy in place as at the date of the crash will respond. However, in the minority of cases where the issue does arise, it can be very significant both in relation to a (re)insurer's ‘inwards’ liability and the availability of its ‘outwards’ reinsurance.

  1. take for example, a company which employs an employee for 40 years. Throughout those 40 years, the employee is exposed to asbestos and, following his retirement, develops mesothelioma and dies. His estate sues his former employer. The company had workers compensation/employers' liability insurance in place throughout the period of the employee's employment on annual, but which policy, if any, should respond to the claim?

  2. what about an insurance company which insures a power station that burns down? The insurer has prudently purchased facultative reinsurance covering the risk in question and treaty reinsurance covering all of its power station risks, but which responds and in what order? There is unlikely to be an issue as to the relevant policy period, but the reinsurers will both argue that the other's policy should take priority

These, and other, thorny

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