DOUBLE INSURANCE

DOUBLE INSURANCE FROM A LEGAL PERSPECTIVE

PART ONE

§ 1 DOUBLE INSURANCE AS A CONCEPT

Double insurance is regulated in Article 1467 of the Turkish Commercial Code, and its 1st paragraph provides the definition of double insurance. The definition of double insurance contained in Article 1286 of Law No. 6762 has essentially been preserved. As an innovation, the case where the interest is insured by different persons has also been accepted as double insurance, provided that the other conditions are also fulfilled, and the gap in the TTK has thus been remedied.¹

Double insurance arises where an interest has been insured with more than one insurer against the same peril and the total of the sums insured exceeds the insurable value, or where the aggregate amount of the insurance indemnity to be paid by the insurers exceeds the total amount of the loss. ²The meaning attributed to the term double insurance in the Commercial Code with respect to indemnity insurances in the nature of land insurance and with respect to life insurances in the nature of sum insurance is, however, quite different. Evidently, to use a more accurate form of expression, it has been regulated by enacting provisions of such a nature as to require it to be understood differently.³

Today, double insurance is no longer regarded as a “ground of invalidity”; all the insurances constituting double insurance are deemed valid, and it is not accepted that each of the insurers should be held fully liable towards the policyholder within the framework of its own contract. With this in mind, it is envisaged that the insurers shall be jointly and severally liable on the basis of the lowest sum insured (up to that sum). However, the policyholder is also prevented from receiving, by virtue of the excess cover, a payment greater than the loss suffered. Within this framework, this is not with regard to prohibited insurance contracts, but with regard to the indemnity to which the policyholder is entitled exceeding the amount of the loss.⁴ Pursuant to 1486 / 2, which regulates the protective provisions, article 146 is absolutely mandatory; contractual terms to the contrary are invalid.⁵

§ 2 DIFFERENCES BETWEEN DOUBLE INSURANCE AND CERTAIN SIMILAR INSURANCES

I. Difference between double insurance and multiple insurance

Although co-insurance, under-insurance (kısmi sigorta) and double insurance were regulated in Law No. 6762 under the main heading “multiple insurance”, there was no article containing the common features of all three insurance practices, in other words providing a general definition of “multiple insurance”. For this reason, this article of the draft first of all laid down what multiple insurance is. Furthermore, since in multiple insurance the loss will be indemnified among the insurers differently from a contract concluded with a single insurer, the policyholder has been placed under an obligation to provide information when the risk materialises.⁶

In the relevant legislative reasoning, while stating that there is no single definition of “multiple insurance”, the legislator set out the circumstances in which cases of multiple insurance exist. Co-insurance, double insurance and under-insurance are regulated in the text as types of multiple insurance.

The most distinctive feature distinguishing co-insurance and under-insurance, which are types of multiple insurance, from double insurance is that they have characteristics that do not give rise to unjust enrichment. Indeed, both in co-insurance and in under-insurance, the sums insured payable do not exceed the value of the insured interest. In double insurance, by contrast, the sum insured payable exceeds the value of the interest, and the insured is unjustly enriched.

A. Difference between double insurance and under-insurance

Article 1468 of the Turkish Commercial Code, entitled “under-insurance”, contains the provision (1) “If the value of the insured interest has not been fully covered by the earlier contract, that interest may be insured once or several more times up to its remaining value. In that case, the insurers that subsequently insure that interest shall be liable for the balance in the order of the dates on which the contracts were concluded. Contracts concluded on the same day shall be deemed to have been concluded at the same time.”

Under-insurance is a type of insurance relationship referred to in legal scholarship as side-by-side insurance. Here, in relation to an asset element (asset), insurance below the value of the interest (insurance below value) is taken out at the first stage. The shortfall in cover that has arisen with this first insurance is subsequently closed by insurances taken out by (other) insurers. Side-by-side insurances are brought to a state of securing the full value by means of contracts concluded at different times.⁷ In this sense, in under-insurance, unlike in double insurance, the prohibition of enrichment does not come into play. Since the insurance policies in which under-insurance is involved are valid, the responsibilities that the insured must fulfil, such as the notification duty, continue. For double insurance to become valid, however, the exceptional cases have been expressly set out by the legislator.

B. Difference between double insurance and co-insurance

The case where an interest is insured by more than one insurer at the same time and for the same periods is called co-insurance.⁸

In legal doctrine, co-insurance is divided into two, namely open and concealed co-insurance.⁹ In “open co-insurance”, the fact that more than one insurer participates in insuring the same risk is known to the policyholder. In other words, in this type of insurance, more than one insurer openly assumes the risk vis-à-vis the policyholder. Whether double insurance can arise in open co-insurance is disputed. In such insurances, it is undisputed that there are as many individual claims (obligational relationship in the narrow sense) as there are insured parties. The disputed issue is whether there are as many legal relationships, that is, insurance contracts (obligational relationship in the broad sense), as there are insurers. ¹⁰ According to Möller, in open co-insurance there is a single obligational relationship. In this view, the author proceeds from the idea that partial obligational relationships arise from a single obligational relationship (in the broad sense). The typical consequence of the author's view is that, in open co-insurance, where the individual claims relating to the insurance performance exceed the insurable value, what may arise is not double insurance but over-insurance. By contrast, the prevailing view answers this question in the affirmative. In other words, according to the prevailing view, in open co-insurance one speaks of the existence of as many legal relationships (obligational relationship in the broad sense) as there are insurers.¹¹

Whereas in the case of co-insurance under Article 1466 of the Turkish Commercial Code an interest is insured by more than one insurer at the same time, for the same periods and against the same risks, the insurers being aware, at the time the contract is drawn up, that the insurance policy has been prepared, in the case of double insurance under Article 1467 of the Turkish Commercial Code an interest whose entire value has been insured is subsequently insured by the same or other persons against the same risks and for the same periods. In this case, in double insurance, the other insurance contracts are not known to the insurers.

In double insurance, it is not necessary for the insurances to have been taken out at the same time. On the contrary, they must be taken out at different times. This conclusion follows from the content of the provision. For co-insurance, however, the insurances are required to be taken out on the same day.¹²

In addition, there is also “concealed co-insurance”. In this type of co-insurance, the policyholder takes out the insurance with a single insurer. However, the insurer, which externally appears to be solely liable, enters into contractual relationships with the other insurers, transfers part of the risk to these insurers and distributes it among them. Since, in terms of the premium paid, there is only a single insurance relationship (obligational relationship in the broad sense) between the insurer and the policyholder, double insurance cannot be spoken of in this type of insurance.¹³

II. Difference between double insurance and over-insurance

Article 1463 of the Turkish Commercial Code, entitled “Over-insurance”,”

1- If the sum insured exceeds the value of the insured interest, the excess part is invalid. For this reason, the sum insured and the part of the insurance premium corresponding to it shall be reduced, and the excess premium collected shall be refunded.

2- An over-insurance contract concluded by the policyholder in bad faith for the purpose of obtaining financial gain is invalid. The insurer that did not know of the invalidity when the contract was concluded is entitled to the premium until the end of the insurance period in which it learned of the situation.” is how it is regulated.

According to Article 1283¹⁴ of the Turkish Commercial Code, over-insurances are insurances in which the sum insured exceeds the insurable value. According to this definition, the existence or non-existence of over-insurance, unlike in double insurance, that is, whether the sum insured exceeds the value of the insured interest, is determined on the basis of a single insurance relationship, by taking into account the sum insured agreed in that contract.¹⁵

In the legislative reasoning of Article 1463 of the Turkish Commercial Code, the legislator gives the following explanation: “The article regulating over-insurance is of the same nature as Article 1283 of Law No. 6762. However, the second paragraph of the article is a new provision and regulates the intentional making of over-insurance. First of all, intentional over-insurance has been linked to the intention of obtaining financial gain. Furthermore, it was not considered appropriate to subject intentionally made over-insurance and unintentionally arising over-insurance to the same rules. Indeed, under the current situation, if the insured interest is totally damaged and the excess is not established, the insured receives compensation greater than the insurable value; and if the excess is discovered, only the excess part is deemed invalid. At this point, the provision in question is of a nature that would push everyone to take out over-insurance. Whereas deeming intentional over-insurance invalid will create a deterrent effect on the person.”

Although over-insurance shows similarities with double insurance, as can also be understood from the legislative reasoning of Article 1463 of the Turkish Commercial Code, the legislator has focused on whether the over-insurance was made intentionally; over-insurance made intentionally will be deemed invalid in its entirety, whereas in over-insurances not made intentionally the excess part has been deemed invalid. In the presence of double insurance, however, the double insurance taken out has been deemed wholly invalid and, by way of exception, certain situations that do not give rise to unjust enrichment have been listed one by one, and it has been stated that double insurance may become valid in those circumstances and conditions. The presence of the element of intent on the part of the person in taking out the insurance policy, as in over-insurance, is not important in double insurance.

The other condition that must necessarily be fulfilled for double insurance to arise is that there is a possibility of the policyholder being enriched by means of multiple insurance contracts. The possibility of the policyholder being enriched is essentially spoken of where the total of the sums insured agreed in the multiple insurance contracts exceeds the insurable value. At this point, double insurance resembles over-insurance. The difference between them is that, whereas in over-insurance the sum insured agreed by a single insurance contract exceeds the value of the insured interest, in double insurance the total of the sums insured agreed not by a single but by more than one insurance contract exceeds the value of the insured interest.¹⁶

§ 3 INSURANCES TO WHICH THE PROHIBITION OF DOUBLE INSURANCE APPLIES

Article 1286¹⁷ of the Turkish Commercial Code is regulated in the second chapter of the Code, which governs property insurances. Accordingly, double insurance is applicable to property insurances. According to another classification adopted particularly in German legal doctrine, insurance is subjected, according to the form of the insurance performance, to a twofold classification as indemnity insurance and sum insurance.¹⁸

The fact that the fundamental purpose of the prohibition of double insurance is to prevent unjust enrichment results in the prohibition of double insurance finding its field of application in property insurances. In sum (life) insurances, which do not give rise to unjust enrichment, the prohibition of double insurance does not apply. Indeed, in life insurances there is no interest whose value is determinate.

PART TWO

§ 6 CONDITIONS FOR THE EXISTENCE OF DOUBLE INSURANCE

Article 1467 of the Turkish Commercial Code, entitled “Double insurance”, contains the provision “ an interest whose entire value has been insured may not subsequently be insured by the same or different persons, against the same risks, for the same periods.” The legislator has expressly explained in the text of the law, in a manner leaving no room for dispute, the conditions required for double insurance to arise.

The conditions that must be sought and the methods that must be applied in order to speak of double insurance have also been stated repeatedly in the decisions of the high court.¹⁹

I. Insurance of the same interest

TTK 1467, which regulates double insurance, (just as in TTK 1465 (1), entitled “rule”, which the law states contains the general definition of multiple insurance and is a common provision, in TTK 1466 (1) on co-insurance and in TTK 1468 on under-insurance) has laid down the condition that the insurance must have been taken out for “the same interest”.²⁰

For example, where a vehicle is covered by insurance company (A) under theft insurance and by insurance company (B) under breach of trust insurance, double insurance cannot be spoken of. Indeed, the same interest has not been covered by the insurance companies.

For instance, a main contractor has taken out insurance covering, in addition to its own liability, the liability of the subcontractors who take work from it; but some of the subcontractors also have liability insurances which they have taken out separately. When the conditions of liability of such a subcontractor are fulfilled, both insurances will secure the same interest (the subcontractor's interest in being protected against the consequences of liability claims).²¹ In this case, we can speak of the existence of double insurance.

II. Insurance of the interest by the same or different persons

When listing the characteristics required for the existence of double insurance, Article 1467 of the Turkish Commercial Code also expressly lists the case of insurance being taken out by the same and by different persons. In this sense, who the policyholder is does not matter. Whether the same person takes out the insurance or different persons insure the same interest, it will be of no significance.

IV. Insurance of the entire value of the interest

When Article 1467 of the Turkish Commercial Code lists the characteristics required for the existence of double insurance, the insurance of the entire value is another element. If the entire value is not insured, the existence of double insurance cannot be spoken of.

V. Insurance against the same risks

Together with the other conditions, the condition of insurance against the same risks is also required for the existence of double insurance. For example, where protection has been provided for an interest against the risk of theft, and protection has been provided by another insurance company against the risk of breach of trust, the existence of double insurance is not spoken of. Indeed, in this case there is no single insurance policy. There are two separate insurance policies.

VI. Insurance for the same periods

The first and subsequent insurances must necessarily overlap in time. The risk must have materialised within this period of overlap. The insurances need not have been concluded at the same time and for the same period.²² It is sufficient that they overlap for a certain period.²³

In determining which insurance is the first (earlier) and which is the subsequent insurance, the decisive factor is the moment at which the contracts were concluded. A contract concluded later will be deemed invalid (if the conditions of double insurance are present) even if it has been made with retroactive effect and contains a commencement date earlier than the commencement date of cover under the contract concluded earlier.²⁴

VII. Existence of more than one insurance contract

The other condition for the application of Articles 1286²⁵ and 1346²⁶ of the Turkish Commercial Code is the existence of at least two insurance contracts. For this reason, if, despite the existence of more than one insurer, one can speak of the existence of a single insurance contract, double insurance does not come into question. The existence of more than one independent insurance contract does not always require the conclusion that double insurance exists. Indeed, in situations where more than one insurance contract is involved, one may sometimes speak of co-insurance (TTK mad 1285²⁷) and sometimes of under-insurance (insurance in parts). However, it is worth mentioning once again that, in co-insurance and in under-insurance, double insurance may be spoken of where the total of the sums insured in more than one insurance contract exceeds the insurable value. ²⁸

The Turkish Commercial Code contains no provision as to whether the principles of double insurance may be applied where one of the insurers is a social insurance institution. According to certain views in legal doctrine²⁹, the provisions on double insurance do not apply in such a case. Nevertheless, payments made by the social insurer must be set off, pursuant to Article 1283 of the Turkish Commercial Code, against the payments to be made by the private insurance. In our view, although this view is partly valid, it is not entirely correct. Indeed, out of the payments made by the social insurer, the payments recoverable by recourse against the private insurer may be set off. For example, a set-off may be made against the compensation for loss of support claimed by the relatives of a person who died in a traffic work accident. Indeed, in this case, the social insurer will be able to claim the compensation it has paid from the private insurers in proportion to their fault. However, the death pension granted to the relatives of the deceased insured person on account of the death cannot be set off. Because this pension is not of a nature that allows recourse against the private insurers.

VIII. Possibility of enrichment of the insured

The fundamental purpose of the prohibition of double insurance is to prevent the possibility of unjust enrichment of the insured. For that reason, a number of provisions relating to double insurance have been introduced.

The legislator provided for these provisions in order to prevent the policyholder from being enriched by obtaining insurance performance greater than the loss incurred and, where applicable, greater than the value of the insured interest. However, in cases where, although the total of the sums insured agreed in the multiple insurance contracts exceeds the value of the insured interest, there is a possibility of the policyholder being enriched by obtaining insurance indemnity greater than the total loss incurred, the application of the provisions of the Turkish Commercial Code on double insurance may consequently come into question.³⁰ Whether the provisions of the Turkish Commercial Code regulating double insurance in land insurances apply to double insurance caused intentionally for the purpose of obtaining an unjust benefit has given rise to doubt in legal doctrine.³¹

As has been mentioned before, since there is a prohibition of enrichment in property insurances, the determination of the loss in the value of the interest occurring in the insured property upon materialisation of the risk, in other words the actual loss, is of great importance with regard to the payment to be made by the insurer.³²

Again, pursuant to the provision of Article 1299/2 of the TTK, the amount of indemnity to be paid by the insurer is determined by taking into account the value of the interest in the insured property at the moment the risk materialised. If the value of the insured interest is stated in the insurance policy, that value will be taken into account; if no such value is stated in the policy, the value of the interest in the insured property must be proven by the policyholder, pursuant to the provision of Article 1300 of the TTK, on the basis of the date of the risk. If the insurer objects to the value of the interest stated in the insurance policy, then, pursuant to the provision of Article 1300/2 of the TTK, the burden of proving this matter must be placed on the insurer. Again, pursuant to the last paragraph of the same article, just as the value of the interest in the insurance policy may be proven by any kind of evidence, the judge may even, of his own motion, administer an oath to one of the parties in order further to strengthen the conclusion reached on the basis of the evidence gathered.³³

If, after the materialisation of the risk, no agreement is reached between the parties as to the amount of the damage, the policyholder and the insurer appoint arbitrator-experts (hakem bilirkişi). If the two arbitrator-experts cannot agree on the choice of the third arbitrator-expert, the court appoints the third arbitrator-expert. If the two arbitrator-experts cannot agree on the amount of the damage, the decision of the third arbitrator-expert prevails.³⁴ The nature of the institution of arbitrator-expert differs from the institutions of arbitration and expert examination. Decisions rendered by arbitrator-experts are, as a rule, final and are therefore not subject to review by the Court of Cassation (Yargıtay). Nevertheless, if the arbitrator-experts have rendered a decision manifestly contrary to the rules of good faith and to the facts, then, according to the general conditions and the case law of the Court of Cassation, the decisions of the arbitrator-experts may be challenged before the courts. By agreeing that the amount of the damage will be determined by arbitrator-experts, the parties have made an evidence agreement. Arbitrator-experts confine themselves to establishing the material facts; the legal aspect of the issue does not concern them.³⁵ As explained, the high court has also shown the way, in order to prevent unjust enrichment, so as to preclude the possibility of a calculation differing from the actual loss.

§ 7 CASES IN WHICH THE PROHIBITION OF DOUBLE INSURANCE DOES NOT APPLY

As can be seen, double insurance has been prohibited in principle. In the case of double insurance, taking as a basis the date on which the insurance contract was concluded, the contracts concluded subsequently have been rendered invalid. However, the legislator has given double insurance made in this way a chance of validity where the conditions listed in three sub-paragraphs in the same article are fulfilled.³⁶

I. If accepted by the earlier and subsequent insurers

In this case, all the insurance contracts are deemed to have been concluded at the same time, and the insurance indemnity is paid by all the insurers as follows. For example, the value of the interest in the insured property is 400.000 TL and this value has been insured twice. According to Article 1285 of the Turkish Commercial Code, each of the insurers is liable in proportion to the sum it has insured relative to the total of the sums insured. Accordingly, each insurer will pay 200.000 TL. (TTK md.1285/1)³⁷

II. If the policyholder has assigned to the second insurer, or waived, its rights arising from the earlier insurer

It is clear that insuring the same interest again against the same risks, while the protection afforded by the insurance previously taken out in respect of that interest continues, will create double insurance. What a policyholder who does not wish this situation to arise should normally do is, first of all, to terminate the contract relating to the earlier insurance.³⁸ By the provision in Article 1467 of the Turkish Commercial Code that the assignment and waiver must be written in the second policy, and that, if it is not written, the second insurance contract shall be deemed null and void, the invalidity that would arise in the case of double insurance will not occur. The writing of the intention of assignment and waiver in the second policy here is at the same time a means of proof. The legislator has made the conclusion of both contracts subject to a form. Otherwise, whether an intention of assignment and waiver exists could become a matter of dispute.

III. If the subsequent insurer's liability has been made conditional only on the indemnity not paid by the earlier insurer

In this case, the insurance previously taken out must be written in the second insurance policy; if it is not written, the second insurance contract is deemed invalid. On this matter too, the legislator requires a formal requirement.

IV. Clause showing that the second insurance contract has been concluded against the possibility of “the first insurer being unable to pay”

In legal doctrine, there are views that double insurance will be eliminated where there is a clause showing that the contract was concluded against the possibility of the first insurer being unable to pay. Şenocak states that, although Article 1286 of the Turkish Commercial Code does not contain any express provision concerning such clauses, it is nevertheless possible to conclude, from sub-paragraph 3 of the same article, that the contractual terms in question have the double-insurance-preventing, double-insurance-preventing function.³⁹ According to Şenocak, the condition that the insurers may be liable at the same time for the same loss should be considered under the condition of “the existence of a possibility of enrichment of the policyholder”. By agreeing that liability will arise in the event that the second insurer becomes unable to pay”, the possibility of the policyholder being enriched on account of the same loss is also eliminated.⁴⁰

PART THREE

§ 8 EFFECTS AND CONSEQUENCES OF DOUBLE INSURANCE

The effects and consequences of double insurance are regulated differently in the provisions of the Turkish Commercial Code governing land and marine insurances. The reason for this difference is that different principles concerning double insurance were adopted in the sources from which the provisions in question derive.⁴¹

I. In land insurances

The system adopted by Articles 1286⁴² and 1287⁴³ of the Turkish Commercial Code, which regulate double insurance in land insurances, is essentially a system of liability by order of date. By contrast, where the insurers consent to the double insurance, the system to be applied is, as a rule, the system of proportional liability pursuant to sub-paragraph 1 of Article 1286 of the Turkish Commercial Code. However, the parties may request the application of the principle of joint and several liability. If they agree on joint and several liability, paragraph 2 of Article 1285 of the Turkish Commercial Code applies to the double insurance consented to.⁴⁴

According to Şenocak, where double insurance is caused in bad faith in land insurances, there is no need to rely on Article 1290 of the Turkish Commercial Code. Indeed, the duty to notify double insurance is regulated in Article 1292 of the Turkish Commercial Code; according to that article, in the event of an intentional breach of this duty, the insurers are released from the obligation to perform.(TTK mad.1292/III). Since an intentional breach of the notification of double insurance will also point to double insurance concluded in bad faith, according to this article (TTK mad.1292/III) the policyholder will in any event not obtain the insurance performance. Furthermore, again under the article in question, the insurer's release from its obligation to perform takes place without refunding the premium. Consequently, in view of this provision on double insurance, there is no need to resort once again to Article 1290. As a result, it may be said that Article 1286 of the Turkish Commercial Code is applicable both to double insurance caused in good faith and to double insurance caused in bad faith. In other words, the Code makes no distinction, as regards the application of Article 1286, between double insurance caused in good faith and double insurance caused in bad faith.⁴⁵

A. Invalidity of the insurance contract giving rise to double insurance

According to Article 1286 of the Turkish Commercial Code, the second insurance contract giving rise to double insurance is invalid. However, the invalidity extends only to the amount exceeding the double insurance. By Article 1286, the legislator has adopted the principle of liability by order of date. In this system, the dates on which the concluded insurance contracts were drawn up are taken into account, and all the insurance contracts concluded up to the insurable value have effect; those drawn up subsequently, however, are invalid.⁴⁶ According to Şenocak, the invalidity in question is suspended invalidity. Şenocak points out that, under the first sub-paragraph of Article 1286⁴⁷, where the insurance companies consent to the insurance contracts, each insurance contract becomes valid.⁴⁸

In our opinion, the suspended invalidity envisaged by the law will not apply to all double insurances that arise. Indeed, the law lists one by one the cases in which the prohibition of double insurance cannot apply. In double insurances outside these cases, the invalidity is not suspended. It must be accepted that the invalidity exists from the moment the double insurance arises. Whether the invalidity is accepted as suspended invalidity or it is accepted that the invalidity exists from the moment the double insurance arises, double insurance will not give rise to rights for the holder of the interest.

The provision of TTK 1467 is mandatory. Contractual terms contrary to it (even if they are in favour of the policyholder) are invalid. However, this invalidity does not, as a rule, affect the other provisions of the contract.⁴⁹

B. Validity of the subsequent insurance giving rise to double insurance where double insurance exists, and liability of the insurers for the loss incurred

I. In property insurances

1. Double insurance giving rise to double insurance becoming valid with the consent of the insurers

According to Article 1467/a of the Turkish Commercial Code, if the subsequent and earlier insurers give their approval, then, the insurance contracts being deemed to have been concluded at the same time, the sum insured is paid by the insurers, when the risk materialises, in the proportion indicated in Article 1466. In this case, the provisions on co-insurance will apply, and both insurance companies will be liable in a proportion not exceeding the value of the insured interest, so as not to give rise to unjust enrichment. In cases where joint and several liability is involved, the insurance companies will be able to exercise their rights of recourse against one another, within the framework of the contract they have concluded between themselves, to the extent of the proportions for which they are not liable.

For the subsequent contract giving rise to double insurance to acquire validity, the consent of both the first insurer and the subsequent insurer and the subsequent insurer is required. The consent of only a single insurer is sufficient for the later-dated contract to produce its effects and consequences validly. ⁵⁰

2. Becoming valid where the policyholder assigns its rights arising from the earlier insurance to the second insurer or waives those rights

It is clear that insuring the same interest again against the same risks, while the protection afforded by the insurance previously taken out in respect of that interest continues, will create double insurance. What a policyholder who does not wish this situation to arise should normally do is, first of all, to terminate the contract relating to the earlier insurance. However, the legislator, in sub-paragraph 2 of Article 1286 of the Commercial Code, has granted the possibility of validly concluding the subsequent contract without the need to terminate the contract relating to the earlier insurance. This possibility may be exercised by way of “assignment of the rights arising from the earlier insurance to the subsequent insurer” as well as by way of “waiver of the rights arising from the earlier insurance”.⁵¹

If the subsequent and earlier insurers give their approval. According to the law, if both of them have given approval, “co-insurance” will be deemed to exist. If the policyholder has assigned its rights arising from the earlier insurance to the second insurer or has waived its rights arising from the earlier insurance, the assignment or waiver must have been completed at the time the second insurance was taken out. The law requires the assignment or waiver to be written on the second policy.⁵² Ünan is of the view that an assignment or waiver in the sense defined by the law is unlikely to be encountered in practice and that, for this reason, this provision will rather bear the character of a “dead provision”.⁵³

Giving validity to the contract relating to the subsequent insurance, on condition that it is agreed that the insurer concluding it will be liable for the indemnity not paid by the earlier insurer, has also been made subject to form. Indeed, pursuant to sub-paragraph No. (3) of Article 1286 of the Commercial Code, the earlier contract must be written in the second insurance policy. Otherwise, the subsequent insurance contract is null and void.⁵⁴ Can is of the opinion that it is not sufficient for the contract relating to the earlier insurance merely to be mentioned in writing in the policy to be issued by the second insurer. According to the author, if the contract concluded by the subsequent insurer is to be valid under this exception, the policy must contain either an explicit statement declaring that the insurer will be liable only for the indemnity not paid by the earlier insurer or, indicating this, an annotation stating that the entry relating to the first contract has been written pursuant to sub-paragraph No. (3) of Article 1286 of the Commercial Code, and, in addition, these must necessarily be signed underneath by the policyholder in order to attest that it has accepted them.⁵⁵ In our opinion, it is sufficient that the law expressly deems it sufficient for the contract relating to the earlier insurance merely to be mentioned in writing in the policy to be issued by the second insurer. This is also consistent with the purpose for which the text of the law was drafted. Indeed, the legislator has provided for an exceptional situation concerning the prohibition of double insurance. What matters is that the exceptional situation can be understood. Where the matters in the first policy have been written in the second policy, the consent of the insurers already becomes apparent when the two insurance policies are compared.

3. In liability insurances

In TTK’m.1453(1), the definition of liability insurance is as follows:” ) By liability insurance, unless otherwise provided in the contract, the insured's, unless otherwise provided in the contract, the insurer pays compensation to the injured party, up to the amount provided for in the insurance contract, on account of the insured's liability provided for in the contract and arising from an event that occurred during the insurance period, even if the loss arises later.” Deficiency and excess are seen in the definition in the Code. The “event that will give rise to liability” has been accepted as the risk and, as a result, it has been provided that it is immaterial that the loss arises later; however, its duration needs to be determined. This matter is of particular importance in the liability insurance of construction contractors.⁵⁶

Double insurance may arise in liability insurances. For example, a dentist has taken out professional liability insurance in such a way as also to cover the liability of the assistant. If an assistant who is insured under insurance for the account of another also separately places his professional liability under insurance cover, double insurance will arise. However, in such cases certain difficulties arise with regard to the application of sub-paragraph 1 of Article 1286 of the Turkish Commercial Code. Indeed, liability insurance is a kind of first-loss insurance. Paragraph 1 of Article 1285, to which sub-paragraph 1 of Article 1286 of the Turkish Commercial Code refers for application, introduces an apportionment that takes into account the sum insured, which indicates the share of the risk assumed by the insurer. In first-loss insurances, however, the sum insured does not indicate the share of the risk assumed by the insurer. Here, the sum insured merely expresses what the upper limit of the insurer's liability is.⁵⁷

II. In marine insurances

In insurances against maritime risks, double insurance is dealt with in a more orderly manner, in such a way as also to cover its effects and consequences. In particular, the joint and several indebtedness of the insurers, which does not exist with respect to land insurances, applies to double insurance in this part. Likewise, the provisions on the refund of premiums where multiple insurances give rise to over-insurance, which are not regulated for land insurances, are regulated here.⁵⁸

The legislator, not wishing the sum insured to exceed the value of the insured interest with respect to insurances against marine insurances either, has designated the creation of an over-insurance situation by way of multiple insurance as double insurance, without drawing any distinction according to the moment at which the insurance contracts were concluded. (TK 1345,II,1346,I;1347,I). Accordingly, with respect to marine insurances, double insurance denotes the emergence of an over-insurance situation by means of more than one insurance contract, irrespective of when they were concluded.⁵⁹

A. Effects and consequences of causing double insurance in insurances against maritime risks

Where more than one insurance has been taken out and the total of the sums insured has exceeded the insurable value, the insurers are jointly and severally liable towards the insured. However, just as the insurer cannot claim an amount greater than the loss it has suffered, each of the insurers is also liable only up to the sum it has insured (TK.m.1346/I)⁶⁰. Within the scope of joint and several liability, each insurer is liable at most within the policy limits.

B. Effects and consequences of double insurance made in bad faith

The policyholder may also have concluded the contracts giving rise to double insurance in order to obtain an unjust benefit. In other words, the policyholder may have taken out the double insurance in order to secure an unjust gain by way of insurance. In such a case, all the contracts concluded by the policyholder with this intention are null and void. However, if the insurer did not know of the nullity at the time the contract was concluded, it may claim the entire premium (TK.m.1346/III). The Code's wording “if the insurer did not know of the nullity” must be understood as the insurer “not knowing the policyholder's intention”.⁶¹

In this way, the legislator, by deeming all double insurances made in bad faith null and void, seeks to prevent similar transactions from being made. In our opinion, the concept of obtaining an unjust benefit must be interpreted broadly. Indeed, an interpretation in this direction will be consistent with the aims of the legislator.

§ 9 DUTY TO NOTIFY DOUBLE INSURANCE

I. In general

According to paragraph 2 of Article 1292 of the Turkish Commercial Code, after the risk has materialised, the policyholder is obliged to notify each of the insurers, in addition to the fact of the damage, of the insurance contracts it has concluded in respect of the same interest. Likewise, Article 1348 of the Turkish Commercial Code also regulates the notification of double insurance in insurance against maritime risks. According to this article, a person who insures an interest against the same risk with more than one insurer is obliged to inform each insurer of the other insurers without delay. Article 1292 of the Turkish Commercial Code regulates the notification of multiple insurance; Article 1348, on the other hand, regulates the duty to notify multiple insurance, double insurance, specifically in respect of the double insurance type.⁶²

According to Article 1292 and Article 1348 of the Turkish Commercial Code, for the policyholder's duty of notification to arise, the existence of multiple insurance, that is, the insurance of the same interest with more than one insurer against the same risks and for the same period of cover, is required.⁶³

As with every duty of disclosure of information, in the duty to notify double insurance too, the policyholder must have knowledge of the matter that is the subject of the duty. The duty of notification does not arise merely because the policyholder has knowledge that any two insurance contracts have been concluded.⁶⁴ Whoever is aware of the existence of multiple insurance contracts but does not know that these contracts relate to the same interest and peril does not have knowledge of multiple insurance.⁶⁵

On the date on which the policyholder makes an offer to an insurer to conclude the second contract that would give rise to double insurance, the policyholder's duty of notification does not arise before this offer is accepted by the insurer. Because the legislator has imposed on it the duty to notify the insurance contracts it has concluded, not the offers it has made for the conclusion of insurance contracts.⁶⁶

II. FORM OF NOTIFICATION

In the Code, the duty to notify double insurance has not been made subject to any form. Accordingly, notification may be made orally, by telephone, by fax, or even by e-mail sent to the insurer's e-mail address. Nevertheless, since it is possible to agree otherwise than the second paragraph of Article 1292 and Article 1348 of the Turkish Commercial Code regulating double insurance, the parties may agree on any form in the contract they conclude. The general conditions of insurance provide that the policyholder's notification may be made through a notary or by registered letter. Furthermore, according to the provisions in question, notifications made by letter or telegram delivered to the parties against signature also have the effect of a registered letter. Let us also point out that, where the general conditions to which an insurance contract refers contain no provision on form, if the parties have agreed that the notification be made in a certain form, the form so provided will be valid only between the parties to the contract. The agreed form is not binding vis-à-vis the insurer that is party to the other contract.⁶⁷ In our opinion, since the legislator has not provided for any formal requirement for notification, a form of notification that would put the parties in difficulty will not be binding between the parties to the contract. Indeed, by not providing for a formal requirement for notification, the legislator aimed for notification to be made easily. However, considering that notification is also a means of proof, the parties should use means that serve as proof.

III. TIME LIMIT FOR NOTIFICATION

According to Article 1348 of the Commercial Code, a person who insures an interest against the same risk with more than one insurer is obliged to inform each insurer of the other insurers without delay.⁶⁸ In legal doctrine⁶⁹ it is stated that, since notification of double insurance is not an obligation but a duty (külfet), there is no reason that would justify accepting a different result in insurance against marine insurances (TTK mad.1348). For that reason, there are also views that the last paragraph of Article 1292 of the Turkish Commercial Code should be applied by analogy to insurance against maritime risks as well. In land insurances, unlike in insurances against marine insurances, it is sufficient for the policyholder to notify the multiple insurance within 5 days after learning that the risk has materialised; there is no need to make any notification beforehand.⁷⁰

IV. Effects and consequences of breach of the duty of notification

Failure to make the said notification at all must, first of all, be regarded as a form of conduct indicating the existence of an intention on the part of the insured, where double insurance exists, to obtain an unjust benefit.⁷¹ What the sanction will be for failure to make the said notification at all or in time, where no over-insurance situation arises by reason of double insurance, has not been separately regulated in the Code with respect to insurances against maritime risks. Therefore, it must be accepted that the sanctions provided, according to the type of fault, for the breach of these duties in the last paragraph of Article 1292, which in its first two paragraphs imposes on the policyholder, with respect to indemnity insurances in the nature of land insurance, the duty to notify the materialisation of the risk and any other insurance contracts it has concluded within 5 days from the date on which the risk materialised, will apply.⁷²

§ 10 LIMITATION

In cases where the prohibition of double insurance does not apply, right holders must exercise their rights within the time limits provided for by law.

All claims arising from the insurance contract are time-barred on the expiry of two years from the date on which the receivable becomes due and, with the exception of liability insurances (TTK 1482), claims relating to the insurance indemnity and the sum insured are in any event time-barred on the expiry of six years from the date on which the risk materialised (TTK 1420). The provisions in other laws are reserved (TTK 1420/2)⁷³ In incidents that are the subject of criminal law, the provisions on criminal limitation must be applied. Whether or not there is a criminal investigation, or whether a criminal case has been brought and concluded, is of no importance. What matters is that the matter is one that could be the subject of criminal proceedings.

In liability insurances, compensation claims to be directed against the insurer are time-barred within ten years from the insured event (TTK 1482). The insured event is the event giving rise to the insured's liability. The ten-year limitation period will start from the occurrence of this event. In liability insurance, taking into account the injured third party's right to apply directly to the insurer, the compensation claim against the insurer has been made subject to the limitation period in the Code of Obligations. This provision regulating limitation also shows that, in liability insurances, the underlying principle is that the risk materialises not with the establishment of liability but with the occurrence of the event giving rise to liability.⁷⁴

§ 11 CONCLUSION

Although double insurance, which is accepted as one of the types of multiple insurance, is fundamentally not recognised as valid by the legislator, provisions have been made to the effect that it will acquire validity in certain exceptional cases. The aim here is to produce an equitable result by not causing the unjust enrichment of the insured while at the same time preventing the insurers from paying amounts of compensation for which they are not actually liable. Otherwise, had double insurance been accepted as valid in every case, the insured would receive more than its loss from the insurers, and the insurer would face a burden greater than its liability. This situation would, of course, be contrary to the aim pursued by the institution of insurance.

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