Ramco (UK) Ltd v International Insurance Company of Hannover Ltd
| Jurisdiction | England & Wales |
| Judge | Andrew Smith J,Waller,Jonathan Parker,Longmore L JJ |
| Judgment Date | 27 May 2004 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 May 2004 |
Court of Appeal (Civil Division).
Andrew Smith J; Waller, Jonathan Parker and Longmore L JJ.
James Goudie QC and Pierre Janusz (instructed by Roythorne & Co) for the claimant/appellant.
Nigel Tozzi QC and Alexander Gunning (instructed by Barlow Lyde & Gilbert) for the defendant/respondent.
The following cases were referred to in the judgment:
Engel v Lancashire & General Assurance Co LtdUNK(1925) 21 Ll L Rep 327; (1925) 30 Com Cas 202.
London and North Western Railway Co v GlynENR(1859) 1 E & E 652; 120 ER 1054.
Maurice v Goldsbrough Mort and Co LtdELR[1939] AC 452.
North British and Mercantile Insurance Co v London, Liverpool & Globe Insurance CoELR(1876) 5 Ch D 569, 35 LT 231, 45 LJ Ch (NS) 548.
North British and Mercantile Insurance Co v MoffattELR(1871) LR 7 CP 25.
Petrofina (UK) Ltd v Magnaload LtdELR[1984] QB 127.
Sunport Shipping Ltd v Tryg Baltica International (UK) Ltd (The Kleovoulos of Rhodes)UNK[2003] EWCA Civ 12; [2003] 1 CLC 772.
Tomlinson v HepburnUNK[1964] 1 Ll Rep 416; [1966] 1 QB 2 (CA); [1966] AC 451 (HL).
Waters v Monarch Fire and Life Assurance CoENR(1856) 5 E & B 870; 119 ER 705.
Insurance — All-risks insurance policy — Bailment — Policy expressed to cover goods “held by the insured in trust for which the insured is responsible”–Whether addition of words “for which he is responsible” restricted insurers” liability to goods damaged in a way which imposed liability on bailee but not otherwise — Whether court should depart from previous authority on meaning of words.
This was an appeal from a decision of Andrew Smith J raising a question of construction under an all-risks insurance policy and in particular whether, when a bailee took out such a policy covering goods in his possession and the policy expressed the cover to be on goods “held by the insured in trust for which the insured is responsible”, the addition of the words “for which he is responsible” restricted the insurers” liability to those goods damaged in a way which imposed liability on the bailee, but not otherwise.
The claim was brought by insureds under a combined “all risks” policy of insurance issued by the defendant insurers in 2001. The insurance covered the loss, destruction or damage to property insured as a result of fire. In May 2001 there was a fire at industrial premises occupied by the first claimant (“Ramco”) and the second claimant (“RIL”). It was common ground that the fire occurred without fault on either of their parts. Stock and other goods were destroyed or damaged in the fire. The insurers did not dispute their liability in respect of property owned by the claimants. However, some of the goods that were damaged or destroyed were bailed to the claimants, in particular goods owned by the Ministry of Defence (“Mod”) were bailed to Ramco and goods had been entrusted to RIL by a businessman (“M”). The dispute between the parties was whether the insurers were liable in respect of those goods, and if so on what basis.
The judge trying preliminary issues held that, on the first issue, in order to recover under the policy the bailee had to show that there was a liability for the damage to the goods, since the addition of the words “for which he is responsible” restricted the insurers” liability to those goods damaged in a way which imposed liability on the bailee; on the second issue as to the amount that the bailee could recover if the goods were covered, he did not limit recovery to the amount of any liability, but found that it was the value of the goods which should be recovered, the bailee holding that value in trust for the owner of the goods. The insureds appealed.
Held, dismissing the appeal:
1. There has been clear authority from at least 1925 and very probably a common understanding in the insurance world before that the addition of words such as “for which he is responsible” restricted liability for damage to goods held by a bailee for third parties to circumstances when the insured bailee was liable for the damage. As a matter of language it was difficult to conclude that what was meant by the policy was that goods would only be covered if legal liability was established, but it would not be right to overrule cases which had indicated the meaning of a particular form of words for some 80 years.
2. The fact that the form of words was the subject-matter of a previous Court of Appeal decision was a compelling reason why the courts should not depart from that settled meaning.
3. Further the principle which established that as a matter of commercial convenience bailees were able to effect insurance regardless of whether or not they were liable, or potentially liable, in respect of the goods was itself an exception to the equally ancient common law principle that normally a claimant could not sue for a loss which he had not himself suffered. That anomaly was much less striking after the enactment of the Contracts (Rights of Third Parties) Act 1999 but the exception should not itself be extended beyond its proper limits without good reason and no such reason existed in the present case.
(15 October 2003)
Andrew Smith J:
1. This is a claim brought by insureds under a Combined “All Risks” Policy of insurance issued by the defendant insurers and dated 12 April 2001. The insurance covered the loss, destruction or damage to property insured as a result of fire. On about 16 May 2001 there was a fire in Skegness, Lincolnshire at industrial premises occupied by the first claimant, Ramco (UK) Limited (“Ramco”) and the second claimant, Resource Industries Limited (“RIL”). It is common ground that the fire occurred without fault on the part of any claimant.
2. Stock and other goods were destroyed or damaged in the fire. The insurers do not dispute their liability in respect of property owned by the claimants. However, some of the goods that were damaged or destroyed were bailed to the claimants, in particular goods owned by the Ministry of Defence were bailed to Ramco and goods had been entrusted to RIL by a businessman called Mr Neville Murray. There is a dispute between the parties as to whether the insurers are liable in respect of those goods, and if so on what basis.
3. The insurance policy comprises seven sections and also general conditions, general exclusions and a schedule. The period of insurance is from 1 February 2001 to 31 January 2002. The insured include Ramco and RIL. The relevant section of the policy is section 1, which is headed “Material Damage-” All Risks”” It provides as follows:
“IN THE EVENT OF the Property Insured described in the Schedule being accidentally lost, destroyed or damaged during the Period of Insurance the Insurers will pay to the Insured the value of the property at the time of its loss or destruction or the amount of the damage or at the Insurers” option reinstate or replace such property or any part of it…”
There is a definition of Property Insured:
“a) Buildings…
b) Contents
Contents therein and thereon the property of the Insured or held by the Insured in trust for which the Insured is responsible including
i) tenants” improvements alterations and decorations
ii) so far as not otherwise insured employees” directors” and visitors” personal effects of every description…
c) Stock
Stock and Materials in Trade therein or thereon the property of the Insured or held by the Insured in trust for which the Insured is responsible.”
Provisions described as “Supplementary Conditions — applicable to section 1” include a “Condition of Average (Underinsurance)”, which reads as follows:
“The sum insured by each item of this Section…is declared to be separately subject to Average. Whenever a sum insured is declared to be subject to Average, if such sum shall at the commencement of any DAMAGE be less than the value of the property covered within such sum insured, the amount payable by the Insurers in respect of such DAMAGE shall be proportionately reduced”.
There is also a provision that as far as Buildings and Contents are concerned — and it will be noted that “Contents” include property held by the Insured in trust for which the Insured is responsible — the basis for calculating the amount payable be the reinstatement of the property lost destroyed or damaged.
4. On 11 April 2003 the court ordered the trial of preliminary issues, which at the invitation of the parties I have revised and limited. The issues that I determine are set out in the appendix to [the Court of Appeal] judgment. They concern the insurers” liability under the policy when goods belonging to third parties and bailed to an insured are damaged or destroyed: (i) whether the policy provides cover only if the insured has some legal liability to a third party in respect of the damage or destruction, or whether all goods bailed to the insured are covered; (ii) if the policy provides cover only if the insured has some legal liability to a third party, whether the insurers are to pay the value of goods lost or destroyed or the amount of damage, or only to indemnify the insured against his liability.
5. Undoubtedly bailees in the position of Ramco and RIL may insure goods in their possession for their full value and in the event of their loss or destruction recover their full value: see Tomlinson v HepburnELR[1966] AC 451. The courts have acknowledged since the middle of the nineteenth century the commercial convenience of bailees being able to effect such insurance regardless of whether or not they are liable, or potentially liable, in respect of the goods: Waters v Monarch Fire and Life Assurance Co(1856) 5 E & B 870. If a bailee insures goods bailed to him and recovers from insurers more than any loss that he suffers, he is required to account to the owners of the goods (or other persons bearing the loss) for the excess. The law does not...
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