Distinguishing joint and composite policies

Insurance policies mostly insure one person in respect of a single subject matter, one insured with one insurer, against a multitude of risks or perils.

Modern policies have for a long time allowed insurance of multiple interests with multiple insurers. 

Hobhouse J, in The Zephyr [1984] 1 Lloyds Rep 58, 69–72, 8,  referred to the separate contracts entered into between each of the parties in such circumstances as “a composite bundle of contracts between each of the insured (or reinsured) on the one side and each of the insurers (or reinsurers) on the other side,” embodied in a single contractual document. 

There are two main ways to insure multiple interests. First, a policy can cover more than one subject matter, such as several different properties. In these cases, it is a matter of interpreting the policy to decide if each property is insured under a separate contract. Second, a policy can cover the interests of more than one insured person. The insureds may be named, identified as part of a group, or represented when the policy is taken out.

“Joint policies” are policies of insurance which insure two or more insureds whose interests are “joint”, that is, whose interests are “inseparably connected so that a loss or gain necessarily affects” all of the co-insureds in the same way and to the same extent held in General Accident Fire and Life Insurance Corp Ltd v Midland Bank Ltd [1940] 2 KB 388, 404–406. An example would be joint owners of properties. In such cases, the persons are jointly insured, and their interests are inseparably connected so that a loss or gain necessarily affects them both.

“Composite policies”, on the other hand, insure a number of insureds for their separate or several interests, which means that, unlike joint insureds, the composite insureds’ interests may be distinct, even if an insured loss may result in a like measure of indemnity available to each insured.

For these reasons it is always important to establish whether the policy is composite or joint and whether there is one or several insurance contracts in existence, see the paper by Peter MacDonald Eggers QC: “For one or for all: joint and composite insurance policies, Bila 2002”. 

The issue of joint and composite policies has been considered in South Africa by the Supreme Court of Appeal in AIG South Africa Ltd v 43 Air School Holdings (Pty) Ltd and Others 2024 (6) SA 28 (SCA)).

The matter concerned the interpretation of a policy providing cover for loss from interruption of business due to notifiable diseases. There were multiple insureds, and the question was whether the cover was joint or composite.

The SCA reiterated the principles relevant to the interpretation of insurance policies as set out in Centriq Insurance Company Ltd v Oosthuizen and Another 2019 (3) SA 387 (SCA)), to the following effect:

“[17] …insurance contracts are contracts like any other and must be construed by having regard to their language, context and purpose in what is a unitary exercise. A commercially sensible meaning is to be adopted instead of one that is insensible or at odds with the purpose of the contract. The analysis is objective and is aimed at establishing what the parties must be taken to have intended, having regard to the words they used in the light of the document as a whole and of the factual matrix within which they concluded the contract.

[18] But because insurance contracts have a risk-transferring purpose containing particular provisions, regard must be had to how the courts approach their interpretation specifically. Thus, any provision that places a limitation upon an obligation to indemnify is usually restrictively interpreted, for it is the insurer’s duty to spell out clearly the specific risks it wishes to exclude. In the event of real ambiguity the doctrine of interpretation, contra proferentem, applies and the policy is also generally construed against the insurer who frames the policy and inserts the exclusion…”

The SCA then considered whether the policy in respect of business interruption was joint or composite, with reference to the various entities making up the “43 Air School Group”.

The SCA performed its analysis according to the following principle:

“[24] Determining whether a policy is joint, or composite is a matter of its interpretation and of the nature of the interest(s) of the insured. The definition of ‘insured’ in the policy may indicate whether it is one or the other, but not necessarily so. It may be necessary to consider other clauses or provisions in the policy that could indicate its nature. It is accepted that where a policy covers more than one insured, it may either be joint (which effectively means that there is only one policy), or composite (which means that there is in fact a bundle of policies contained in one document).”

The court went on to cite the difference between joint and composite policies as articulated in Arnould (Gilman et al, Arnould: Law of Marine Insurance and Average 20th ed (2021), at para 11-31), and also MacGillivray on Insurance Law, 15th ed (2014), at para 1-202), to the effect that “there cannot be a joint insurance policy unless the interests of the several persons who are interested in the subject matter are joint interests, so that they are exposed to the same risks and will suffer a joint loss by the occurrence of an insured peril”.

The SCA made the following further observations:

1. The mere fact that there are several entities insured under one policy does not make that policy one of joint insurance – whether it is a joint policy depends on the interests of those entities. If their interest in the subject matter of the insurance is joint, in the sense that they are exposed to the same risk and will suffer the same loss on occurrence of the peril insured against, that may be indicative of the policy being joint. However, where their interests are different, even though it is in respect of the same subject matter, the policy would not be a joint one, but composite, which is intended to insure each of the insureds separately in respect of its own interest. 

2. The fact that parties may share facilities or have interrelationships at operational level or that the premium is payable in a single globular amount, does not necessarily mean that the policy is a joint one. The nature of the interest in the subject matter is the decisive determinant. 

3. Having considered the terms of the policy in light of these principles, the SCA found that the policy before it fell to be classified as composite.

The English Court of Appeal in Liberty Mutual Insurance Europe SC and Others v Bath Racecourse Company Limited [2025] EWC CIV 153 (Bath Racecourse) contains a comprehensive analysis and review of the English case law on what constitutes a composite policy as opposed to a joint policy and quotes with approval from Corbin & King Limited v Axa Insurance UK PLC [2023] 1 ALL ER (COMM) 429:

“A policy which insures the interests of a number of different insured persons under one policy of insurance is a “composite policy” and takes effect legally by way of separate contracts of insurance between Axa and each of the individual insured companies.”

A composite policy comprises a series of contracts of insurance insuring each policyholder separately, with the strong presumption that by identifying the policy as composite, the parties intend the risk to be siloed and not affected by the conduct of others.

In Technip Saudi Arabia Limited v The Mediterranean & Golf Insurance and Reinsurance Co [2024] EWCA CIV 48 the court said:

“[that the policy is a composite policy] is important, because – in accordance with the various authorities, including those discussed in Arab Bank plc v Zurich Insurance Co and more recently Corbin & King Ltd v AXA Insurance UK plc [2022] EWHC 409 (Comm) – no conduct or knowledge on the part of one Insured can be attributed to another Insured for the following purposes:

1. Avoidance of the Policy by reason of a non-disclosure or misrepresentation by another insured will not prejudice the claimant insured.
2. The application of an exclusion based on wilful misconduct is limited to the guilty insured.
3. The application of other types of exclusion based on the conduct of an insured other than the claimant insured.
4. The application of a breach of warranty by one insured will not ordinarily affect another Insured.
5. The application of policy limits.”

And where there is a composite policy, the question arises whether the policy insures each insured separately for their own loss, and whether the policy wording means the insurer must pay more than the sum insured if each co-insured has separate claims.

Bath Racecourse considered whether, on the facts and policy wording, the limits under the policy (if it was composite) were shared aggregate limits for all claims by the insureds as a group, or individual limits for each insured. The court found that, based on the facts and wording, the limits applied to each insured separately, so each had their own limit of indemnity.

A composite policy can have significant effects on issues such as policy limits, how deductibles are applied and calculated, what happens if one insured breaches policy terms, the effect of non-disclosure or misrepresentation by one insured on another insured's claim and subrogation. All these points must be carefully considered by the parties to the insurance contract, and the effects and consequences should be clearly set out in the policy wording.