Legal Definitions - Lamb-Weston rule

The Lamb-Weston rule is a principle in insurance law that resolves conflicts when two or more insurance policies provide coverage for the same loss, and each policy tries to shift responsibility to the other.

Specifically, this rule applies when:

• Two or more insurance policies cover the exact same loss or liability.
• Each of these policies contains an "other-insurance clause" – a provision that attempts to define how the policy will respond if other insurance also covers the loss (e.g., stating it will be "excess," "primary," or "pro-rata").
• These "other-insurance clauses" conflict with each other, creating a stalemate where each policy tries to make the other pay first or more.

Under the Lamb-Weston rule, when such a conflict arises, both of the conflicting "other-insurance clauses" are disregarded. Instead, the liability for the loss is prorated, or shared proportionally, between the insurers. This proration is typically based on the amount of coverage each policy provides relative to the total available coverage.

Examples:

• Scenario 1: Borrowed Car Accident

  Imagine Sarah borrows her friend Tom's car for a weekend trip. While driving, Sarah is involved in an accident that causes $15,000 in damage to another vehicle. Sarah has her own personal auto insurance policy with a liability limit of $100,000. Tom also has an auto insurance policy for his car with a liability limit of $200,000. Both policies contain "other-insurance clauses" stating that if another policy covers the same loss, their coverage will be "excess" (meaning it only pays after the other policy's limits are exhausted).

  How the Lamb-Weston rule applies: Without this rule, Sarah's and Tom's insurers would likely argue, each claiming their policy is "excess" and the other should pay first. The Lamb-Weston rule steps in to resolve this stalemate. It dictates that both conflicting "excess" clauses are ignored. Instead, the $15,000 loss is prorated between the two insurers based on their respective coverage limits. Sarah's policy (with $100,000 coverage) would pay one-third of the loss ($5,000), and Tom's policy (with $200,000 coverage) would pay two-thirds ($10,000), as the total combined coverage is $300,000.

• Scenario 2: Contractor Liability on Client Property

  A plumbing company, "AquaFlow Services," is hired by "Grandview Apartments" to perform extensive repairs. During the work, an AquaFlow employee accidentally causes a significant water leak that damages several units, resulting in $50,000 in repair costs. AquaFlow Services has a general liability insurance policy with a $1 million limit. Grandview Apartments also has its own general liability policy with a $2 million limit, which extends coverage to contractors working on its property. Both policies include "other-insurance clauses" that attempt to make their coverage secondary or pro-rata if other insurance is available.

  How the Lamb-Weston rule applies: Here, both insurers might try to use their "other-insurance clauses" to avoid being the primary payer or to limit their contribution. The Lamb-Weston rule would prevent this conflict. It would require both conflicting clauses to be disregarded. The $50,000 in damages would then be prorated between the two insurers. AquaFlow's insurer would be responsible for one-third of the cost ($16,666.67), and Grandview's insurer would cover two-thirds ($33,333.33), reflecting their respective shares of the total $3 million in available coverage.