National Farmers Union Mutual Insurance Society Ltd v HSBC Insurance (Uk) Ltd
| Jurisdiction | England & Wales |
| Judge | Gavin Kealey |
| Judgment Date | 19 April 2010 |
| Neutral Citation | [2010] EWHC 773 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2009 Folio 658 |
| Date | 19 April 2010 |
[2010] EWHC 773 (Comm)
IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT
Before: Gavin Kealey Q.c. Sitting as a Deputy High Court Judge
Case No: 2009 Folio 658
Mr. Mark Simpson Q. C. (instructed by Kennedys) for the Claimant
Mr. James Thom Q.C. and Ms. Mary Gibbons (instructed by Lloyd Rehman & Co.) for the Defendant
Hearing dates: 2, 3 & 4 February 2010
Introduction
This case concerns a dispute between two insurance companies about double insurance. The Claimant is The National Farmers Union Mutual Insurance Society Limited (the “NFU”), insurers of Mr. Spaull and Ms. Armstrong, while the Defendant is HSBC Insurance (UK) Limited (“HSBC”), insurers of Mr. Abel Smith.
The source of the dispute is a fire which broke out on 27 th October 2007 and caused extensive damage to the main building of a property known as The Old Hall, Langham, Rutland. The property was the subject matter of a trust, The Old Hall Settlement. The fire occurred only 17 days after Mr. Abel Smith and others (the “Sellers”), trustees of The Old Hall Settlement, had exchanged contracts for the sale of The Old Hall to Mr. Spaull and Ms. Armstrong (the “Buyers”) for a price of £1.81 million, and before completion.
The Sellers were insured by HSBC in respect of The Old Hall under a renewed policy issued on 16 th November 2006 for the period 11 th December 2006 to 10 th December 2007. The buildings cover under that policy provided for a sum insured of £2, 365, 455.
On 10 th October 2007, the Sellers exchanged written contracts with the Buyers for the sale of The Old Hall. Completion was scheduled for 7 th November 2007. The sale contract provided, by clause 2.3, that the risk of damage to or destruction of The Old Hall passed to the Buyers upon exchange.
Shortly before sale contracts were exchanged, on 5 th October 2007, the Buyers took out their own buildings insurance with the NFU in respect of The Old Hall for the period 4 th October 2007 to 4 th October 2008. The cover under that policy provided for a sum insured of £2 million.
Thus the fire on 27 th October 2007 occurred between the dates of exchange of contracts for sale and completion, at a time when The Old Hall was at the risk of the Buyers and was the subject matter of buildings insurance taken out independently by each of the Sellers and the Buyers in respect of their respective interests with different insurers.
After the fire, the Buyers were initially unwilling to complete the sale and purchase of The Old Hall. However, following service upon them on 10 th March 2008 of a notice to complete within 10 working days, the sale was completed on 21 st March 2008 at the full purchase price.
Having been paid the full purchase price, the Sellers ultimately suffered no loss as a result of the fire and made no claim under their policy with HSBC. For their part, the Buyers made a claim on their buildings cover with the NFU in respect of the damage caused to The Old Hall by the fire and, I understand, have been paid £1, 850, 000 by the NFU in settlement of their insurance claim.
The Policies
In the HSBC policy, the terms on which buildings cover was provided in respect of The Old Hall were set out in Section One. The other sections of the policy covered a variety of other risks including contents, accidents to domestic staff, public liability, valuables and family legal protection. Helpfully written in plain English, “ Section One—Buildings” provided so far as relevant as follows:
| WHAT IS COVERED | WHAT IS NOT COVERED |
| This insurance covers the buildings for physical loss or physical damage | We will not pay… |
| …. |
|
| This section of the insurance also covers |
|
| …. |
|
| E. anyone buying your home who will have the benefit of section one until the sale is completed or the insurance ends, whichever is the sooner | f the buildings are insured under any other insurance |
The HSBC policy also set out a number of Claims Conditions which were said to be applicable to the whole of the insurance: in other words, applicable to all sections of the policy including but not limited to Section One. Claims Condition 2 was as follows:
“OTHER INSURANCE
We will not pay any claim if any loss, damage or liability covered under this insurance is also covered wholly or in part under any other insurance except in respect of any excess beyond the amount which would have been covered under such other insurance had this insurance not been effected. “
The NFU policy, which the Buyers had taken out, contained a number of standard sections of cover for a wide variety of risks ranging from buildings cover to pet insurance. The only section relevant in the context of this case was the Buildings section on page 10 of the policy, which provided: “ Buildings are insured against damage by the following… Fire”. At pages 72 to 74 of the policy were set out a number of “General Conditions”, said to be applicable to the whole of the policy (i.e. to all sections of cover). One of those General Conditions provided as follows:
“Other insurance
If when you claim there is other insurance covering the same accident, illness, damage or liability, we will only pay our share. This does not apply to an accident or illness insured under the Accidents to the family or Personal accident and illness sections of your policy, or under the Contents section—“Additional insurance” Fatal injury to you or your husband or wife. “
The Issues
Having paid an indemnity under its policy to the Buyers, the NFU now seeks a contribution from HSBC. It contends, on the basis of the terms recited above, that, at the time of the fire, the HSBC policy also provided buildings cover to the Buyers against the risk of damage to the buildings of The Old Hall, with the result that this is a case of double insurance. This is denied by HSBC which contends that, since the Buyers were insured in respect of the buildings of The Old Hall by another insurance than its own (i. e. by the NFU), on the proper construction of the HSBC policy, they were not covered by HSBC at all. Alternatively, HSBC contends that the effect of its policy is that, since the Buyers were insured by the NFU, HSBC's liability is limited to that of an excess insurer attaching in excess of the cover provided to the Buyers by the NFU policy.
By Order dated 25 th June 2009, Beatson J. ordered the trial of three preliminary issues, as follows:
(1) Whether on a true construction of the entirety of the HSBC policy it did not provide cover to [the Buyers] for damage due to the fire, because on a true construction of the entirety of the NFU Mutual policy it provided cover and there is no conflicting clause in that policy which cancels it;
(2) Whether on a true construction of the entirety of the NFU Mutual policy that policy, under General Conditions, only contains a general pro rata clause where there is other insurance covering the same damage;
(3) Whether the extended cover for buyers in the HSBC policy is limited to assisting its insured in the event that a buyer does not complete the purchase.
This is the trial of those issues. They have been formulated with a degree of sophistication which may possibly be refined to a simple question: upon a proper construction of the HSBC and NFU policies, does the former provide insurance cover to the Buyers in respect of the fire damage to The Old Hall which occurred on 27 th October 2007, in circumstances where the latter does likewise, with the result that there was double insurance by the two policies which entitles the NFU to a contribution from HSBC towards the indemnity it has paid the Buyers in respect of that damage?
Analysis
Double insurance arises where the same party is insured with two (or more) insurers in respect of the same interest on the same subject-matter against the same risks. If a loss by a peril insured against occurs, the general rule is that, subject to any particular modifying terms and to the limits of indemnity provided under each insurance contract, the insured may recover for the whole of the loss from either insurer. Upon such indemnity being paid to the insured by either one of the two insurers, that insurer is, in general, entitled to recover a contribution from the other. To quote from Lord Woolf in Eagle Star Insurance Co. Ltd. v Provincial Insurance PLC [1994] 1 A. C. 130, 138
“As was pointed out by Lloyd L. J. at the beginning of his judgment in the Legal and General case [1992] Q. B. 887, 891, in general ‘the principles on which one insurer is entitled to recover from another in a case of double insurance have been settled since Lord Mansfield’s day. ‘As Kitto J. stated in Albion Insurance Co. Ltd. v Government Insurance Office of New South WalesUNK (1969) 121 C. L. R. 342, 349-350, ‘a principle applicable at law no less than in equity, is that persons who are under co-ordinate liabilities to make good one loss (e. g. sureties liable to make good a failure to pay the one debt) must share the burden pro rata:’ the object being, as Hamilton J. stated in American Surety Co. of New York v WrightsonUNK(1910) 103 L. T. 663, 667:
‘to put people who have commonly guaranteed or commonly insured in the same position as if the principal creditor or the assured had pursued his remedies rateably among them instead of doing as he is entitled to do, exhausting them to suit himself against one or other of them. “'
Since, however, the right to a contribution between insurers depends in general on the existence of co-ordinate liabilities to make good one loss, it can be varied or excluded by contract: either by contract between the co-obligors or by contract between insured and insurer: Legal and General...
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