Knock-for-Knock Agreement
Encyclopedia
A knock-for-knock agreement is an agreement between two insurance
companies whereby, when both companies' policy-holders incur losses in the same insured event (usually a motor accident), each insurer pays the losses sustained by its own policy-holder regardless of who was responsible.
However, knock-for-knock agreements between insurers have been criticised as unfair on the party not responsible for an accident. If, for the sake of administrative ease, an insurer pays out to repair damage done to its policy-holder's own car instead of pursuing the party responsible for the accident for all relevant costs, an effective claim is recorded against that policy-holder's insurance record. In this way, knock-for-knock agreements can result in policy-holders finding unexpectedly, when they come to renew their insurance, that they face higher premiums regardless of responsibility for an accident they were involved in.
", from the US Army website http://www.army.mil:
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
companies whereby, when both companies' policy-holders incur losses in the same insured event (usually a motor accident), each insurer pays the losses sustained by its own policy-holder regardless of who was responsible.
Rationale
The rationale is economic and administrative efficiency: While an insurer may be able to pursue a recovery from the party responsible for an accident or from its policy-holder, this is a costly administrative procedure. The knock-for-knock agreement simplifies recovery claims among insurers and, over time, attributes costs fairly among insurers.However, knock-for-knock agreements between insurers have been criticised as unfair on the party not responsible for an accident. If, for the sake of administrative ease, an insurer pays out to repair damage done to its policy-holder's own car instead of pursuing the party responsible for the accident for all relevant costs, an effective claim is recorded against that policy-holder's insurance record. In this way, knock-for-knock agreements can result in policy-holders finding unexpectedly, when they come to renew their insurance, that they face higher premiums regardless of responsibility for an accident they were involved in.
Other contexts
'Knock for knock' is also used in a specific, analogous sense, for example, the following, cited in the "Law at WarLaws of war
The law of war is a body of law concerning acceptable justifications to engage in war and the limits to acceptable wartime conduct...
", from the US Army website http://www.army.mil:
- In addition to handling these routine matters, the chief of the Claims Section participated in the negotiations with the KoreaKoreaKorea ) is an East Asian geographic region that is currently divided into two separate sovereign states — North Korea and South Korea. Located on the Korean Peninsula, Korea is bordered by the People's Republic of China to the northwest, Russia to the northeast, and is separated from Japan to the...
n government concerning the payment of foreign claims generated by troops of the Army of the Republic of Korea who were active in South VietnamSouth VietnamSouth Vietnam was a state which governed southern Vietnam until 1975. It received international recognition in 1950 as the "State of Vietnam" and later as the "Republic of Vietnam" . Its capital was Saigon...
. In fact, the MACV Staff judge Advocate's office was to play a vital role in the negotiation and implementation of certain claims agreements with the VietnamVietnamVietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...
ese government and the Free WorldFree WorldThe Free World is a Cold War-era term often used to describe states not under the rule of the Soviet Union, its Eastern European allies, China, Vietnam, Cuba, and other communist nations. The term often referred to states such as the United States, Canada, and Western European states such as the...
allies which came to be known as "knock-for-knock" agreements. These compacts contained provisions whereby the government of one nation waived the claims against the government of the second nation for damage to government property. The agreements did not, however, waive the personal right of an individual to claim damages in the case of negligence of a member of the force of another allied nation. The arrangements nevertheless removed a potential irritant to the relationships among the Free World forces.