Feasey v Sun Life Assurance Company of Canada
| Jurisdiction | England & Wales |
| Judge | Ward,Waller,Dyson L JJ |
| Judgment Date | 26 June 2003 |
| Date | 26 June 2003 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Ward, Waller and Dyson L JJ.
Julian Flaux QC and David Lord (instructed by Lovells) for the syndicate.
Dominic Kendrick QC and Simon Kerr (instructed by Clifford Chance) for Sun Life and Phoenix.
Anthony Boswood QC and Richard Handyside (instructed by Richards Butler) for Steamship.
The following cases were referred to in the judgments:
Anderson v Morice (1875) 10 CP 609; (1876) 1 App Cas 713.
Baker v Black Sea and Baltic General Insurance Co Ltd [1996] LRLR 353 (CA).
Carlill v Carbolic Smoke Ball CoELR [1892] 2 QB 484 (QBD).
Cepheus Shipping Corp v Guardian Royal Exchange Assurance plc (The Capricorn)UNK [1995] 1 Ll Rep 622.
Commonwealth Construction Co Ltd v Imperial Oil Ltd (1976) 69 DLR (3rd) 558.
Constitution Insurance Co of Canada v Kosmopoulos (1987) 34 DLR (4th) 208.
Co-operative Retail Services Ltd v Taylor Young PartnershipUNK (2000) 74 Con LR 12 (CA); [2002] UKHL 17; [2003] 1 CLC 75.
Dalby v India and London Life Assurance CoENR (1854) 15 CB 365; 139 ER 465.
Deepak Fertilisers and Petrochemicals Corp Ltd v ICI Chemicals and Polymers Ltd [1999] l Ll Rep 387.
Glengate-KG Properties Ltd v Norwich Union Fire Insurance Society Ltd [1996] CLC 676.
Godsall v BolderoENR (1807) 9 East 72; 103 ER 500.
Good v ElliottENR (1790) 3 TR 693; 100 ER 808.
Griffiths v FlemingELR [1909] 1 KB 805.
Halford v KymerENR (1830) 10 B & C 724; 109 ER 619.
Hambro v BurnandELR [1904] 2 KB 10.
Harse v Pearl Life Assurance CoELR [1903] 2 KB 92 (KBD).
Hebdon v WestENR (1863) 3 B & S 579; 122 ER 218.
Hopewell Project Management Ltd v Ewbank Preece LtdUNK [1998] 1 Ll Rep 448.
Law v London Indisputable Life Policy CoENR (1855) 1 K & J 223; 69 ER 439.
Lowry v BourdieuENR (1780) 2 Dougl 468; 99 ER 299.
Lucena v CraufurdENR (1806) 2 Bos & Pul (NR) 269; 127 ER 630.
Macaura v Northern Assurance Co LtdELR [1925] AC 619.
Mark Rowlands Ltd v Berni Inns LtdELR [1986] 1 QB 211.
National Oilwell (UK) Ltd v Davy Offshore LtdUNK [1993] 2 Ll Rep 582.
Paterson v PowellENR (1832) 9 Bing 320; 131 ER 635.
Petrofina (UK) Ltd v Magnaload LtdUNK [1983] 2 Ll Rep 91; [1984] QB 127.
Sharp v Sphere Drake Insurance (The Moonacre)UNK [1992] 2 Ll Rep 501.
Simcock v Scottish Imperial Insurance Co (1902) 10 SLT 286.
Stock v InglisELR (1884) 12 QBD 564.
Stone Vickers Ltd v Appledore Ferguson Shipbuilders LtdUNK [1991] 2 Ll Rep 288 (QBD).
Wilson v JonesELR (1867) LR 2 Ex 139.
Insurance — Reinsurance — Personal accident business — Liabilities of P & I club members for personal injury or death of person on or in relation to vessels entered with the club -Personal accident and illness master lineslip policy paying fixed benefits in respect of death and permanent and temporary total disability of persons engaged on board vessels entered with club — Whether P & I club had insurable interest to protect by master lineslip — Whether fixed benefits payable under master lineslip over-compensated club — Whether termination of authority to commit one reinsurer meant that other was committed for whole risk-Life Assurance Act 1774, s. 1, 3.
This was an appeal from the judgment of Langley J ([2002] EWHC 868 (Comm); [2003] 2 CLC 936) deciding that Steamship Mutual Underwriting Association (Bermuda) Ltd (“Steamship”) had an insurable interest in relation to a contract of insurance made between it and syndicate 957, that in relation to the reinsurance of syndicate 957 by Sun Life Assurance Co of Canada (“Sun Life”) and Phoenix Home Life Mutual Insurance Co (“Phoenix”) there was no nondisclosure or misrepresentation entitling Sun Life and Phoenix to avoid the reinsurance policy and that in relation to one period of the reinsurance Centaur Underwriting Management Ltd (“Centaur”) had purported to write the same for Sun Life and Phoenix 50:50 when it had no authority to write for Phoenix. Syndicate 957 argued that Centaur had written the same 100 per cent for Sun Life but the judge ruled against syndicate 957 on that issue.
Steamship insured the liabilities of its members for personal injury or death. In about June 1995, rather than entering into a conventional reinsurance with syndicate 957, Steamship and the syndicate entered into a personal accident and illness master lineslip policy. The aim was to cover the liability of Steamship to its members. Under the master lineslip the syndicate agreed to pay fixed benefits to Steamship in respect of bodily injury and/or illness sustained by a person (“an original person”) who was engaged in any capacity on board a vessel or offshore rig entered by a member with Steamship. That master lineslip was renewed from time to time. In particular, in about May 1998, it was renewed in respect of losses occurring on declarations attaching during three consecutive periods of 12 months from 20 February 1997 and, later, in respect of losses occurring on declarations attaching during the period 20 February 2000 to 20 February 2001.
Syndicate 957 reinsured its liability under the master lineslip. That reinsurance for the years February 1998 to February 2000 was 50 per cent with Sun Life and 50 per cent with Phoenix. That reinsurance was negotiated by brokers acting for syndicate 957 and Centaur who were authorised at that stage to write for those two companies in the above proportions. On 1 October 1998 Centaur's authority to write new business for Phoenix ceased. The brokers negotiated an extension of reinsurance with Centaur for a further year on 29 October 1998. It was that negotiation which gave rise to the authority point and the question whether Centaur was agreeing to take 100 per cent for Sun Life.
The reinsurers sought to avoid the reinsurance for alleged non-disclosure and misrepresentation and Sun Life took the point that Steamship had no “insurable interest” in the lives and wellbeing of the original persons, when entering into the master lineslip for the three years from February 1997 and after, so that the insurance was illegal by virtue of s. 1 of the Life Assurance Act 1774. Alternatively Sun Life asserted that Steamship was seeking to claim more than the value of any insurable interest it had and was not permitted to do so by reason of s. 3 of the 1774 Act.
The judge dismissed the misrepresentation and non-disclosure claims. Steamship and the syndicate honestly believed when the relevant covers were agreed that the level of benefits had been set so as to eliminate any possibility of over-compensation for Steamship. Sun Life and Phoenix failed to establish the representations on which they relied, to the effect that the fixed benefits in the master lineslip constituted “a realistic estimate” made by the syndicate of the average sums likely to be properly paid out by Steamship under the club's rules for the 1998 and following years, and that Steamship's risk “had been carefully and professionally appraised” by the underwriter. It also had not been shown that that even if either representation relied upon was made it or they induced the reinsurers to write the business. The master lineslip was not in breach of s.1 of the 1774 Act since Steamship had a real and significant contingent economic interest in the lives and well being of persons on vessels entered by members with it. There was no principle or reason why the law should strike down the master lineslip as unlawful when it was accepted that in no sense did it amount to gaming or wagering, was not suggested to be contrary to any other policy consideration and was not commercially objectionable. Since there was no gaming or wagering s. 3 of the 1774 Act had no application. The reinsurers appealed on the insurable interest issue and the syndicate appealed on the authority issue.
Held, dismissing the appeal on both issues:
1. (Per Waller LJ) A sufficient interest was not demonstrated by showing that the policy was not a wagering contract. The question whether the contract of insurance could be correctly described as “gaming or wagering” was a material factor. But the starting point was the question whether there was an interest not whether the contract was one of gaming or wagering and the critical question was not whether the policy was a wagering contract but whether the disputed policy was an insurance made “on the life or lives of any person or persons or on any other event or events whatsoever” wherein Steamship had no interest. (Dalby v India and London Life Assurance CoENR(1854) 15 CB 365 considered.)
2. (Per Waller LJ) Following the amendment to s. 2 of the 1774 Act by s. 50 of the Insurance Companies Amendment Act 1973, Parliament must be taken not to have intended that s. 1 of the 1774 Act would make null and void an insurance on lives of persons unidentified as at the date of the policy, but within a description such as that given for “original persons”.
3. (Per Waller LJ) In a life policy the date at which the insurable interest must exist was the date of the taking out of the policy. Furthermore, that was the date for valuing the insurable interest. The value of an interest at the time of taking out the policy was assessed on the maximum pecuniary loss that the assured could suffer on the death of the life assured. (Dalby v India and London Life Assurance CoENR(1854) 15 CB 365 and Hebdon v WestENR(1863) 3 B & S 579 considered.)
4. (Per Waller LJ) The following principles could be derived from the authorities: (i) It was from the terms of the policy that the subject of the insurance must be ascertained. (ii) It was from all the surrounding circumstances that the nature of an insured's insurable interest must discovered. (iii) There was no hard and fast rule that because the nature of an insurable interest related to a liability to compensate for loss, that insurable interest could only be covered by a liability policy rather than a policy insuring property or life. (iv) The question whether a policy embraced the insurable...
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