Insurance law

Question 1

Scottish Amicable Heritable Securities Association v Northern Assurance Company

Answer 1

1. “It is a contract … by which the Insurer undertakes in consideration of the payment of an estimated equivalent beforehand, to make up to the assured any loss he may sustain by the occurrence of an uncertain contingency” (per Lord Moncreiff)

Question 2

Prudential Insurance Co v Inland Revenue Commissioners

Answer 2

1. If you died before the age of 65, the company would pay 60 pence
2. The question was whether this was an insurance contract or not
3. “It must be a contract whereby for some consideration, usually but not necessarily for periodical payments called premiums, you secure to yourself some benefit, usually but not necessarily the payment of a sum of money, upon the happening of some event. Then the next thing that is necessary is that the event should be one which involves some amount of uncertainty. There must be uncertainty whether the event will ever happen or not, or if the event is one which must happen at some time there must be uncertainty as to the time at which it will happen. The remaining essential is that which was referred to by the Attorney-General when he said the insurance must be against something. A contract which would otherwise be a mere wager may become an insurance by reason of the assured having an interest in the subject-matter, that is to say, the uncertain even which is necessary to make the contract amount to an insurance must be an event which is prima facie adverse to the interest of the assured” (per Channel J)

Question 3

The Medical Defence Union Limited v Department of Trade

Answer 3

1. “It appears that a contract is a contract of insurance if three elements are present … First, the contract must provide that the assured will become entitled to something on the occurrence of some event … Secondly, the event must be one that involves some element of uncertainty … Thirdly, the assured must have an insurable interest in the subject-matter of the contract” (per Sir Robert Megarry VC)

Question 4

Three-limb test for the existence of an insurance contract

Answer 4

1. The insured pays for the right to receive a benefit upon the happening of some event
2. There is an element of uncertainty about the event; and
3. The insured has an interest in the subject-matter of the insurance

Question 5

Department of Trade and Industry v St Christopher’s Motorists Association

Answer 5

1. The “benefit” must be a sum of money or an equivalent service measurable in financial terms
2. “There seems to me to be no difference between the defendant company paying a chauffeur on the one hand and on the other hand agreeing to pay to the individual member a sum of money which would represent the cost to him of providing himself with a chauffeur in the event of his being disabled from driving himself”

Question 6

Medical Defence Union v Department of Trade

Answer 6

1. The right to the benefit must be certain (the insurer must have a contractual obligation to pay upon the happening of the insured event)

Question 7

Prudential Insurance Co v Inland Revenue Commissioners

Answer 7

1. “There must be either uncertainty whether the event will ever happen or not, or if the event is one which must happen at some time there must be uncertainty as to the time at which it will happen”

Question 8

Crucial elements of an insurance contract

Answer 8

1. There must be offer and acceptance of the material terms
   i. Premium
   ii. Risks
   iii. Subject matter
   iv. Duration
2. There must be an insurable interest
   i. The insured must benefit from the preservation of the subject matter of suffer a disadvantage should it be lost
3. There must be adequate disclosure by the parties

Question 9

Wright v Brown

Answer 9

1. Interest is presumed in one’s own life and the life of spouses or civil partners
2. It was held that the husband did have a financial interest in the life of his wife
3. There was some doubt as to whether a wife would have a financial interest in the life of her husband

Question 10

Harse v Pearl Life Assurance Co

Answer 10

1. An adult son wanted to take out life insurance on the life of his mother
2. The mother was financially dependent on the son
3. The son was the sole provider of the family
4. Over time, he paid more than he would get back
5. He sued the company arguing that he did not have financial interest and, therefore, the contract was void and they should pay him back
6. Unfortunately for the son, the contract was illegal and should have never been entered into, so he could not get his money back

Question 11

Turnbull & Co v Scottish Provident Institution

Answer 11

1. The pursuers employed an agent for their business in Scotland
2. It was very profitable for the company
3. They decided to insure the agent’s life
4. There was a dispute when the agent died
5. The insurance company claimed that the company had no financial interest in the life of the agent
6. The court disagreed and held that they had a clear financial interest in the life of the agent as he was making significant amounts of money for them
7. The interest must be present when the policy was taken out, but does not need to be present when the claim is made
8. In Turnbull, the agent was not the agent anymore when the claim was made
9. They no longer had a financial interest as he was not an agent anymore, but this did not matter as there was a financial interest at the time the policy was taken out

Question 12

Dalby v India & London Life Assurance Co

Answer 12

1. An original contract between the Duke of Cambridge (the insured) and the insurance company (the insurer/re-insured) was created
2. The insurance company was afraid they were unable to bear the risk in case of his death
3. They went to another insurance company (the reinsurer) to insure his death
4. They had a financial interest in the life of the Duke of Cambridge at the time the policy was taken out
5. The original insurance contract had been terminated before his death
6. The insurance company had no payment to make but still claimed against the reinsurers
7. The reinsurers argued that they had no financial interest anymore as the contract had been terminated
8. The court held that the financial interest was present at the time the policy was taken out, so the claim could be made

Question 13

Lucena v Crauford

Answer 13

1. “A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstance which may attend it … And whom it importeth, that its condition as to safety or other quality should continue … To be interested in the preservation of a thing, is to be so circumstances with respect to it as to have benefit from its existence, prejudice from its destruction”
2. “A right in the property, or a right derivable out of some contract about the property, which in either case may be lost upon some contingency affecting the possession or enjoyment of the party”

Question 14

Macaura v Northern Assurance Co Limited

Answer 14

1. The sole shareholder and creditor of a company had a quantity of timber, and he transferred this timber to his company
2. He took out an insurance policy insuring the timber against all risks, including fire
3. The timber was destroyed by a fire and he tried to claim under the policy
4. The insurance company refused to pay out on the policy because they argued he had no insurable interest in the goods that were insured as he had neither equitable nor legal title
5. The court agreed with the insurance company
6. The company alone owns its assets, and the shareholders have no legal or equitable proprietary rights to those assets
7. The company should have insured the timber

Question 15

Fehilly v General Accident Fire & Life Assurance Corporation Ltd

Answer 15

1. A tenant has no interest in the full value of the building (unless a reinstatement obligation is imposed under the lease)
2. There was a lease agreement for the ballroom of a building
3. The ballroom was destroyed by a fire
4. The pursuer wanted compensation for the value of the whole building
5. The court held that they had an insurable interest in the ballroom, but not in the full value of the building

Question 16

Arif v Excess Insurance Group Limited

Answer 16

1. Two brothers owned a hotel business (partnership)
2. One brother decided to insure a hotel
3. The brother who decided to insure was not the owner, the other brother was
4. The insurance company held that there was no insurable interest
5. The court agreed
6. There would be a sufficiently close relationship if the other brother or the partnership had insured the hotel

Question 17

Cowan v Jeffrey Associates

Answer 17

1. A prospective purchaser of premises had no insurable interest because he had neither acquired ownership nor entered into an enforceable contract to acquire ownership
2. Before he managed to buy the property, the property was destroyed
3. He was neither the owner and he did not sign a preliminary contract that he would buy the property in the future (missives)
4. He claimed that he did have an insurable interest
5. The court held that there was no close and direct legal relationship between the insured and the property

Question 18

Comtex Ltd v Allianz Insurance Plc

Answer 18

1. The licensee of a pub had an insurable interest because she had a binding contract with the owner in terms of which she had the right to use the property and the obligation to insure
2. The court held that this was enough to establish a close and direct legal relationship between the insured and the property

Question 19

Feasey v Sun Life Assurance Co of Canada

Answer 19

1. In indemnity insurance, the insurable interest must exist at the time of the loss (as well as at the time of the creation of the contract)

Question 20

Carter v Boehm

Answer 20

1. “Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only; the under-writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the under-writer into a belief that the circumstance does not exist, and to induce him to estimate the risque, as if it did not exist”

Question 21

Pan Atlantic v Pine Top Industries Co. Limited

Answer 21

1. ““Influence the judgment” is not the same as “change the mind”. Furthermore, if the argument is pursued via a purely verbal analysis, it should be observed that the expression used is “influence the judgment of a prudent insurer in … determining whether he will take the risk”. To my mind, this expression clearly denotes an effect on the thought process of the insurer in weighing up the risk, quite different from words which might have been used but were not, such as “influencing the insurer to take the risk””
2. Pan Atlantic were reinsuring liabilities with another company
3. They underdisclosed the amount of claims they received every year
4. Pine Top did not have sufficient knowledge of the number of claims and, therefore, of the amount of compensation
5. The test applied here was the more lenient “possible influence”

Question 22

Economides v Commercial Union Assurance Co Plc

Answer 22

1. A student from Cyprus decided to insure his possessions
2. He estimated their value at £13,000
3. His parents joined him in the house, so he reinsured his parents’ possessions as well
4. He had to reestimate
5. The father thought their possessions would be worth £3,000 (so £16,000 in total)
6. The insurance contract was made
7. The goods were stolen
8. The goods were actually worth £27,000
9. They underestimated the value of the goods
10. The company argued that the duty of disclosure was made in bad faith
11. The court held that the son had no reason not to believe his dad regarding what the goods were worth, and he was not acting in bad faith
12. Honesty is the measure of good faith
13. “I would hold, therefore, that the sole obligation upon the plaintiff when he represented to the defendants on renewal that he believed the full contents value to be £16,000 was that of honesty”

Question 23

Hair v Prudential Assurance Co Ltd

Answer 23

1. “Whether or not such waiver is present depends on a true construction of the proposal form, the test being: would a reasonable man reading a proposal form be justified in thinking that the insurer had restricted his right to receive all material information and consented to the omission of the particular information in issue?” (per Lord Wolff)

Question 24

Young v Royal and Sun Alliance Insurance plc

Answer 24

1. Young wanted to insure a property
2. One of the conditions was that he did not go bankrupt or insolvent in the last 5 years
3. The property was destroyed
4. Young was a director of 4 companies that went bankrupt
5. He argued that this was slightly different than the condition: he did not go bankrupt himself, he was the director of companies that did
6. The insurers argued that he did not disclose this properly
7. The court agreed with the insurance company
8. “For the pursuer to succeed with his plea of waiver he has to establish that the defender, which had an entitlement to disclosure of information which included the pursuer’s more general experience of insolvency, is to be held to have (inadvertently, because the no inducement line of argument has been abandoned by the pursuer) waived that entitlement by confirming that there would be no cover in the event that the policyholders had a direct experience of insolvency”

Question 25

St. Paul Fire & Marine Insurance Co (UK) Ltd v McDonnell Dowell Constructors Ltd

Answer 25

1. There is a rebuttable presumption that the insurer has been induced to enter into the insurance contract as a result of the insured’s non-disclosure of material facts

Question 26

Banque Financiere de la Cite SA v Westgate Insurance Co Ltd

Answer 26

1. The duty of disclosure is mutual 2. An insurer is bound, before the contract is entered into, to disclose to the proposer anything he knows that goes to reduce the risk from the level at which the proposer wrongly believes it stands

Question 27

Carter v Boehm

Answer 27

1. Lord Mansfield gave the example of someone wishing to insure a ship that was known to the insurer already to have safely arrived at its destination

Question 28

Banque Financiere de la Cite SA v Westgate Insurance Co Ltd

Answer 28

1. A group of companies owned by an individual wanted to take a loan from a bank 2. The bank granted that loan, but it wanted some sort of security right 3. The bank took a pledge on some gemstones 4. It did not think this was enough to secure its right, so it decided to take out an insurance policy (a credit default insurance) 5. If the group of companies failed to pay, liability would be on the insurer 6. The problem was that the brokers of the bank committed fraud 7. They had told the bank the insurance policy had been taken out, when in reality this was not the case 8. Several weeks later, the insurance was nevertheless granted, but there was this period in which the liability was not insured 9. The borrower also committed fraud and failed to pay the money back, and the pledged gemstones turned out to be worthless 10. The bank wanted to make use of its credit default insurance policy 11. The insurer, who knew that there was no insurance for some time, said that the policy did not cover loss which was caused by the fraud 12. The bank argued that the insurers did not tell the bank that they knew that for a few weeks, liability was not insured 13. They did not disclose the facts, thereby breaching the duty of disclosure 14. The court agreed with this argument, but in this case, disclosure would not have reduced the risk 15. Even though the duty of disclosure is mutual and the insurers did have this duty, they did not have to disclose this particular fact 16. “In our judgment, however, there is no doubt that the obligation to disclose material facts is a mutual one imposing reciprocal duties on insurer and insured” 17. “In adapting the well established principles relating to the duty of disclosure falling upon the insured to the observe case of the insurer himself, due account must be taken of the rather different reasons for which the insured and the insurer require the protection of full disclosure. In our judgment, the duty falling upon the insurer must at least extend to disclosing all facts known to him which are material either to the nature of the risk sought to be covered or the recoverability of a claim under the policy which a prudent insured would take into account in deciding whether or not to place the risk for which he seeks cover with that insurer” (per Steyn LJ)

Question 29

Banque Financiere HL

Answer 29

1. “The duty extends to the insurer as well as to the insured: Carter v Boehm (1766) 3 Burr 1905. The duty is, however, limited to facts which are material to the risk insured, that is to say, facts which would influence a prudent insurer in deciding whether to accept the risk and, if so, upon what terms and a prudent insured in entering into the contract on the terms proposed by the insurer. Thus any facts which would increase the risk should be disclosed by the insured and any facts known to the insurer but not to the insured, which would reduce the risk, should be disclosed by the insurer”

Question 30

Manifest Shipping Co Ltd v Uni Polaris Shipping Co Ltd (“The Star Sea”)

Answer 30

1. A shipping company decided to insure its fleet 2. Two ships burned down 3. The cause of the fires was negligence 4. The insurance company paid the compensation 5. After some time, a third ship burned down 6. The insurance company refused to pay because the shipping company failed to disclose what the cause of the first two ships burning down was 7. If they had known the cause, they would have been able to assess the risk of further fires more accurately 8. The court disagreed with this argument 9. Generally, the duty to disclose does not continue during the contract 10. “It is not necessary to disclose facts occurring, or discovered, since the original risk was accepted material to the acceptance and rating of that risk. Logic would suggest that such new information might be valuable to the underwriter … but it need not be disclosed” (per Lord Hobhouse)

Question 31

Hussain v Brown

Answer 31

1. The insured made a warranty that there was a fire alarm at his property 2. If there is a fire alarm, the risk decreases 3. At some point, the fire alarm was turned off 4. The insurance company refused to pay because the property burned down in breach of warranty 5. They argued this was a warranty regarding continuing facts 6. The court held that the warranty was formulated in the present tense 7. The insured made a promise that a fire alarm was in place at the time of making the contract 8. It could not be interpreted as saying that a fire alarm would be present during the whole duration of the contract 9. Contra proferentem rule: we interpret warranties in favour of the insured

Question 32

Ansari v New India Assurance Ltd

Answer 32

1. There was a contractual warranty saying that the property was protected by an automatic sprinkler system against fire 2. At some point, the sprinkler system was dismantled 3. The insurance company tried to argue that this was a warranty regarding facts of the future (that the sprinkler system would be operational during the whole duration of the contract) 4. In this case, the court agreed with this argument and sided with the insurance company 5. It interpreted the word protected as meaning the property would always be protected by the sprinkler system

Question 33

Kennedy v Smith

Answer 33

1. Mr Kennedy entered into an insurance contract with a car insurance company 2. He had to warrant that he did not drink because this car insurance policy was only for abstainers (because that obviously reduces the risk of drinking and driving) 3. Mr Kennedy went to a pub with his friends who encouraged him to drink a pint of lager for the first time in his life 4. He crashed his car and the two friends died 5. He was held liable for their deaths and had to pay their families, so he claimed the sum back from his insurance company 6. The insurance company refused to pay as there was a breach of warranty 7. The insurance company tried to argue that the warranty of abstention was a warranty about continuing facts 8. The court disagreed with this argument and held that in order to interpret a warranty as a warranty to the future facts, it has to be made very explicit in the contract, which was not the case here

Question 34

Forfar Weavers Ltd v MSF Pritchard Syndicate

Answer 34

1. If it is not clear from the contract that the warranty is about the facts of the future, then it has to be presumed that it is about the present facts

Question 35

Provincial Insurance Co v Morgan

Answer 35

1. The Courts will try to mitigate the severity of the law in relation to breach of warranty by interpreting any ambiguity in the warranty contra proferentem

Question 36

De Han v Hartley

Answer 36

1. A ship started its journey to the Atlantic in Liverpool 2. There was a warranty in the contract that stated that there would be no more than 50 passengers on the ship 3. When the journey started, there were 46 passengers on the ship 4. The ship then proceeded to pick up another 6 people (making the passengers 52 in total) 5. The ship sunk in the Atlantic 6. There was no connection whatsoever between the fact there were 52 passengers and the reason why the ship sank 7. Nevertheless, the insurance company refused to pay as the warranty had been breached 8. This was a perfectly legitimate reason to refuse payment at common law 9. The insurer did not need to show that the breach contributed to the loss

Question 37

Ionides v The Universal Marine Insurance Co

Answer 37

1. “You are not to trouble yourself with distant causes, or to go into a metaphysical distinction between causes efficient and material and causes final; but you are to look exclusively to the proximate and immediate cause of the loss” (per Willes J)

Question 38

Marsden v City and County Insurance

Answer 38

1. A shopkeeper insured the premises of his shop 2. The insurance excluded fire 3. A fire started in the neighbouring premises 4. This fire started riots in the neighbourhood 5. These riots caused damage to the shopkeepers’ premises 6. The question was what the proximate cause of the damage was 7. Was it the fire (because this is what caused the riots), or was it vandalism? 8. The insurance company argued that the fire was the proximate cause of the damage 9. The court disagreed and held that the proximate cause here was vandalism 10. The reasoning was that fire does not naturally lead to rioting and vandalism 11. Therefore, fire cannot be considered as a proximate cause of damage in this particular case

Question 39

Reischer v Borwick

Answer 39

1. Concerned a shipping insurance policy 2. The insurance contract stated that the insurance covered damage caused by perils of the sea 3. Damage caused by a collision was not covered by the insurance contract 4. The ship collided with a floating object 5. The hole was patched up and the ship got towed by another ship 6. Whilst this was happening, the patch was destroyed and the ship sunk 7. The question was what the proximate cause of the sinking of the ship was 8. The court held that the collision with the floating object was the proximate cause 9. The insurance company did not have to cover the costs

Question 40

Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd

Answer 40

1. Before this case, it was generally held by courts that the final cause is usually the proximate cause 2. The court in this case overruled this line of authority 3. The insurance contract insured against the perils of the sea, but not against war perils 4. The ship was torpedoed by a submarine 5. It did not sink immediately as they were able to patch up the hole and make it to a port 6. A storm started and the port authorities refused the ship (as they were afraid it would sink in the port and stop the flow of ships into the port) 7. The ship was forced to go back to sea and sunk during the storm 8. The question was what the proximate cause of the damage was 9. If the last cause were to be considered as the proximate cause, the storm would be considered the proximate cause 10. The court held that this should not be the case as it was quite obvious that the reason for the ship sinking was the torpedo (so a war peril) 11. The natural consequence of a torpedo is that a ship would sink

Question 41

J J Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The “Miss Jay Jay”)

Answer 41

1. A motorboat sailed from France to England 2. A storm started and three-metre-high waves occurred 3. In England, it was discovered that the boat was damaged 4. Experts said that the boat was defective from the very start 5. It had never been suited for sailing from France to England in the first place 6. But there was also a storm which may have caused damage to the boat 7. It was impossible to say what the proximate cause was 8. The court held that both of them should be seen as proximate causes of the damage 9. The insurance contract only covered perils of the sea 10. One of the causes was covered by the contract (a storm is a peril of the sea), but the other one was not mentioned 11. According to the court, the company was still liable

Question 42

Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corporation Ltd

Answer 42

1. Wayne Tank is a company providing equipment to other companies 2. They insured their liability against negligence 3. Damage occurred and the court said that it was impossible to determine what caused this damage 4. On the one hand, employees of Wayne Tank were negligent, but on the other hand, the equipment they were installing was defective 5. The policy covered negligence but explicitly excluded defective equipment 6. The court held that since one of the proximate causes was explicitly excluded from the contract, the insurance company did not have to pay

Question 43

Rhesa Shipping v Edmunds (the “Popi M”)

Answer 43

1. The company decided to insure their ship 2. The ship went into the Mediterranean and got lost 3. The policy excluded damage caused by unseaworthiness 4. The ship disappeared and no one knew what happened to it 5. The insurance company argued that the damage was probably caused by the unseaworthiness of the ship 6. The House of Lords held that because the cause of the damage was uncertain, and it is for the insured to prove what the proximate cause was, the insurance company was not liable to pay

Question 44

Beresford v Royal Insurance Company Limited

Answer 44

1. Concerned a person who was in a very bad financial situation 2. He insured himself against death (life assurance) for £50,000 3. He then killed himself so his family could pay off his debts 4. He deliberately caused the damage that was insured 5. The court held that as the damage was deliberately caused by the insured, the insurance company did not have to pay 6. In the 1930s suicide was illegal, so it is possible that this case would be decided differently today 7. Most life assurance contracts have so-called suicide clauses

Question 45

Dhak v Insurance Co, of North America (UK) Ltd

Answer 45

1. A woman consumed an excessive amount of alcohol and died in her sleep as a result of that 2. She had a life assurance policy for accidental damage to her life and health 3. The question was whether the fact that she drank excessively and that she died as a result of that was accidental or not 4. The insurance company argued that it was not accidental 5. The court agreed with this argument 6. A reasonable person should be aware that consuming an excessive amount of alcohol can cause death and that that is not considered as something accidental because it could be predicted

Question 46

Connelly v New Hampshire Insurance Co

Answer 46

1. A fireman was insured against accidental damage to his health and life 2. He developed PTSD as a result of tragic events that he witnessed as a fireman 3. The question was whether this was accidental damage or not 4. The insurance company argued that it was not accidental because he attended those tragic events voluntarily because he was a fireman (he chose this occupation) 5. The court disagreed with the insurance company and held that there is no difference between psychiatric and physical harm in those cases

Question 47

Chapman v Pole

Answer 47

1. “You must not run away with the notion that a policy of insurance entitles a man to recover according to the amount represented as insured … He can only recover the real and actual value of the goods” (per Cockburn CJ)

Question 48

Leppard v Excess Insurance Co Ltd

Answer 48

1. A person bought a cottage for £1,500 2. He never moved there, nor did he have an intention to move there 3. He bought it for investment purposes 4. At some point, he put it on the market for £4,500 (he wanted to make a profit of £3,000) 5. He insured the cottage against fire 6. The cottage burned down 7. He claimed that the reinstatement value of the house was £10,000 (this is how much it would have cost him to rebuild) 8. The insurance company argued that it was not his intention to rebuild the house when it burned down, so they would only pay £4,500 9. The court agreed with this argument and reasoning

Question 49

Scott Lithgow Ltd v Secretary of State for Defence

Answer 49

1. Where the insurer is liable to indemnify the insured, the payment of the insured’s claim made under the policy is classified as a contractual obligation to pay a sum of money equivalent to the insured’s loss, rather than an obligation to pay damages for breach of contract or otherwise

Question 50

Strachan v Scottish Boatowners’ Mutual Insurance Association

Answer 50

1. Damages for delayed payment can be claimed from the insurer

Question 51

Caledonia North Sea Limited v London Bridge Engineering Limited

Answer 51

1. An oil platform crashed and many people died 2. These people weren’t employed by the operator of the platform 3. They were contractors (they were employed by a third-party external contractor) 4. The operator of the platform had to pay compensation to the families of the people who died (which he claimed from his insurance company) 5. He also had a contract with the external contractor (the employer of the people who died) that the contractor would indemnify any loss to the operator caused by injury or death of the contractors 6. The operator of the platform had a claim against the contractor 7. The problem was that the operator of the platform did not pay the families, it was the insurance company of the operator who did 8. The insurance company then claimed against the contractor 9. The contractor argued that they could not claim because they had a contract with the operator, not the insurance company (doctrine of privity of contract) 10. The court disagreed and held that in this case, the insurance company subrogated to the contractual claim 11. They could step into the platform operator’s shoes and claim from the third-party contractor directly 12. The insurer has the right to stand in the shoes of the insured

Question 52

Napier v Hunter

Answer 52

1. Insurers, having indemnified the insured up to the limit of their policy, are entitled to their remedy out of funds received by the insured from a third party even though the insured’s loss might be greater than the sum insured 2. The damage was estimated to be £160,000 3. The limit under the insurance policy was £100,000 4. The resulting loss of the insured, therefore, was £60,000 5. The insurance company paid 6. The company also sued their agent, who caused the loss by negligence 7. They were able to get £130,000 from the agent 8. They decided to only claim £60,000 from the agent to be fully indemnified 9. The insurance company argued that because they already indemnified the insured (they stepped into their shoes), all claims against the agent should be assigned to them 10. The court agreed with this argument 11. When the insurance company fulfils its contractual obligation under the insurance policy, all claims of the insured should be assigned to them

Question 53

Castellain v Preston

Answer 53

1. A house was sold 2. The deeds were exchanged several months after 3. This meant that ownership changed only several months after 4. In the meantime, the house burned down 5. Since it was a valid contract, the purchaser of the house had paid already 6. The seller was able to get both payment for the house and a claim under the insurance policy 7. The insurance company argued they should get the profits from the sale because, otherwise, the seller would make a profit, which is illegal 8. The court agreed with this argument 9. The buyer probably had an unjustified enrichment claim against the seller 10. The insured cannot make a profit from the loss: the insured is accountable to the insurer for any profit

Question 54

Sickness and Accident Insurance Association Ltd v General Accident Assurance Corporation Ltd

Answer 54

1. If an insurer pays out more than his share of the loss, he has a right to recover the amount he paid out above his share from the other insurers

Question 55

McNealy v The Penine Insurance Co Ltd

Answer 55

1. If the agent falls below the standard expected, the principal can claim against the agent