[Simon]

Yes, the .htaccess file in a directory takes precedence over other .htaccess files in directories above it or in other directories at the same level.

Unless you have a .htaccess above your "hlimages" directory that disallows hotlinking, you won't need another .htaccess file to allow it. However, if your "hlimages" directory is inside your "images" directory, then you'd need another .htaccess file inside the "hlimages" directory to turn off the hotlink protection inherited from being inside the protected "images" directory.

HTH



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