In this case, the insured (W) sought to recover from the insurer (G) losses arising from a fire at its premises. Amongst other arguments, G sought to avoid liability for the claim on the basis that W had no insurable interest in the insured property.
W was a company established to manage the property portfolio of its owner, S. The ostensible business structure was that property owned by S was let to W, which then sub-let that property to various tenants. W’s position was that this arrangement applied to the insured property and that W accordingly had an insurable interest in the property as tenant. G argued that in fact the arrangement was “fiscally driven” and that the sums paid by W to S were not rent in a strict sense but were contractual consideration for the right to receive the rent roll from the tenants of S’s properties. G argued that the insured property was outside this arrangement, because no rent from sub-letting was in fact generated in respect of it during the relevant period and that W therefore had no insurable interest in the property.
The Court accepted W’s account of the arrangements, remarking that it was “extraordinary that insurers should require [W] to satisfy some examination of its “business model” or show that its arrangements are not “fiscally driven””. The Court, in holding that W did have an insurable interest in the insured property by virtue of the arrangements in question, noted that the purpose of the requirement that an insured have an insurable interest is to preclude the possibility of gambling, which rationale had no application in this case. The Court also noted that in the past insurers have generally only raised the question of insurable interest in questions of fraud and that insurable interest was not an issue in which G had taken any interest (or to which G had drawn S’s attention) until the claim was presented. The Court observed that there was nothing in the proposal forms or other correspondence to alert a potential customer or broker that it should consider this issue closely and perhaps take legal and accountancy advice before entering into a policy with G.
The case is also of interest for a discussion of the appropriate remedy in a case such as this. In this case, the Court held that on the basis that (somewhat unusually) the policy conferred upon W an express right to reinstatement, W was entitled to a declaration to that effect.
Finally, the case is of interest in its consideration of the “Wisniewski principle”, which states that although cases are decided on the evidence, the Court is entitled to draw adverse inference from the unexplained absence of evidence from witnesses, or in the form of documents, which it would be reasonable to expect might be before the Court. The Court was invited to apply this principle by both sides and confirmed that it had borne the relevant factors in mind in reaching its decision.
A copy of the full judgment can be found here: http://www.bailii.org/ew/cases/EWHC/QB/2015/103.html