Saville v Central Capital Ltd [2014] EWCA Civ 337

Under r 4 of the Insurance Conduct of Business Rules (then in force), an insurance intermediary is required to take reasonable steps to discover its customer’s demands and needs.

The Plaintiff (S) had contacted a broker (C) and ultimately entered into a loan agreement through that broker to borrow money over 25 years. S also entered into a five year payment protection insurance (PPI). S alleged that they did not want the PPI for a mere 5 year term and would either not have purchased it or purchased it for the full duration of the loan. S also alleged that C had implied that the PPI was compulsory in order to take out the loan. At first instance, it was held that although C had been in breach of its duty, causation was not established because S had purchased the policy in full knowledge of its terms and the only rational explanation was that they had wanted to do so.

The English Court of Appeal overturned the first instance decision and ruled that an insurance intermediary seeking to offer a PPI contract should elicit the genuine demands of its customers by means of open and fair questions. The fact that S had knowingly purchased a five year policy in the face of assurances as to lower costs did not establish that five years would have been their answer to a fairly posed enquiry regarding the length of policy that they wanted.

The decision can be accessed here.

San Evans Maritime Inc v Aigaion Insurance Co SA [2014] EWHC 163 (Comm)

The claimants (S) made an insurance claim after the insured vessel became grounded. The vessel was insured under two insurance policies: (1) 50% was insured by three Lloyd’s syndicates (Lead Underwriters); and (2) 30% was insured by the defendant (A). The remaining 20% was uninsured.

A’s policy contained a clause stating that A “agreed to follow [the Lead Underwriters] in claims excluding ex-gratia payments” (Follow Clause). The Lead Underwriters settled the claim against them subject to an express term that the settlement did “not bind any other insurer providing hull and machinery cover” in respect of the vessel.

The Court interpreted the Follow Clause to mean that A had agreed to follow any settlement made by the Lead Underwriters. It rejected the argument that the Lead Underwriters were the agent of A when settling the claim. However, it concluded that the Follow Clause had been triggered by the settlement agreement, despite the fact that the Lead Underwriters purported to have acted on their own behalf and without binding other insurers. The Court also held that A was not entitled to rely on the Contracts (Rights of Third Parties) Act 1999 to enforce the settlement agreement (ie the term that the settlement “did not bind any other insurer”), as it did not confer any benefit on A.

The decision can be accessed here.

AstraZeneca Insurance Co Ltd v XL Insurance (Bermuda) Ltd [2013] EWCA Civ 1660

The claimant insurer (AI) provided liability cover for a pharmaceutical group (AZ) under a liability insurance policy. AZ faced a number of personal injury actions regarding its anti-psychotic drug. AI reimbursed AZ for half of the settlements and the defence costs of a claim which went to a full trial where judgment was awarded to AZ. AI claimed that it was entitled to be indemnified by the respondent reinsurers (R) for the money paid under the settlements and for its defence costs. However, R argued that the reinsurance policy provided for indemnity coverage only where AZ was under an actual legal liability for the claim.

On the issue of whether AI was entitled to be indemnified, the English Court of Appeal upheld the trial judge’s ruling that it was not necessarily sufficient for AZ to show that it had been held liable to a claimant by a judgment or that it had agreed to a settlement. In the absence of wording to the contrary, such a judgment or settlement would only establish the existence of a loss, rather than actual liability, which must be proved by the insured in order to recover from the reinsurer.

As to whether R was liable to indemnify AI in respect of the defence costs, the Court agreed with the trial judge that absent any express provision in the policy, an entitlement to recover defence costs cannot be implied. As such, defence costs could only be treated as an addition to, or as an element of damages, recoverable only if AZ could establish that it was or would have been liable for damages in respect of the claim in question. In other words, AZ would not have been able to recover defence costs if it had successfully defended the claim.

The decision can be accessed here.

Possehl Electronics Hong Kong Ltd v China Taiping Insurance (HK) Co Ltd [2013] HKCFI 2187

The Plaintiff’s (P’s) property was covered by an accidental damage (property) insurance policy underwritten by the defendant insurer (C). The policy contained a limitation clause stating that C would not be liable for any loss claimed by P if court or arbitration proceedings were not commenced within 12 months from the occurrence of the loss or damage. Upon the occurrence of a fire at the property, P notified the insurer and made a claim under the policy. C issued a letter to P rejecting the claim two days before the expiry of the contractual limitation period. P objected to C’s position around one month later and served an arbitration notice on D within three months of C’s rejection letter.

The High Court of Hong Kong struck out P’s claim that C had not acted in good faith by leaving P with a short period of time to commence proceedings. The Court confirmed that parties to a contract are free to agree a shorter limitation period than provided for in the Limitation Ordinance (Cap 347). As the contractual limitation clause was enforceable, the timing of C’s rejection letter was held to be irrelevant and did not impact upon or affect the limitation period in the policy. Importantly, the Court noted that P could have issued a protective writ at any time.

In addition, the Court concluded that P’s arbitration notice was invalid, as the policy provided that arbitration could only be commenced in relation to a dispute as to the amount to be paid under the policy. Since C rejected the entirety of P’s claim, the dispute between the parties did not relate to the amount to be paid under the policy.

The decision can be accessed here.

European Risk Insurance Company HF v McManus [2013] EWCA Civ 1545

The appellant insurance company (E) rejected a notification letter given by a law firm (M), which purported to make a blanket notification of circumstances which could give rise to a claim under their professional indemnity insurance policy.

At first instance, the English High Court ruled that M’s blanket notification of circumstances was acceptable and should not have been rejected by E. See our previous article on this case for more details.

More recently, the English Court of Appeal considered the trial judge’s decision not to grant declaratory relief to M and to award costs to M. The Court of Appeal upheld the decision and refused to overturn the judge’s orders in respect of the declaration and costs. In particular, the Court agreed with the conclusion at first instance that it would be premature to make a declaration regarding M’s rights and should only do so if and when a claim arises under the policy.

The decision can be accessed here.