Chapter-11 Indemnity Insurance

Leppard v Excess Insurance Co Ltd

A cottage was destroyed in a fire. Insured demand the cost of rebuilding Contrast decision with Reynolds As it was evident that insured never intended to live in the cottage and was a sale price of 4,500 p at the time of loss. In the view of sale insured intention to sell Held- Market value was correct basis indemnity which were advertised price less the site value 1500 p

Richard Alsbrey Film Production Ltd v Graham

A film producer insured loss of negative and film which later were stolen Held- Cover only market value of the completed films less cost of complete it. Not allowed to recover any thing reflecting personal value of work, feeling of lost effect

Sillem v Thornton

Held that average could not be implied into fire policy covering a house

Dominion Mosaics & Tile Co Ltd v Trafalgar Trucking Co Ltd

Held- in the case appropriate measure of loss was cost of acquiring new premises this mitigation the loss of income. The cost of acquiring new premises was less than the cost of re-constructing the old building

Brown v Royal Insurance

Policy usually embedded the clause giving right to the Insurer the right to elect to repair or reinstate. Once the election has been made, by express notice or by conduct, leading the Insurer cannot then withdraw. It was held by the deciding judge that the Insurer are bound by their election and if the performance has become impossible, or (which is all they have shown) more expensive than they had anticipated, still they must either perform their contract or pay damages for not performing it.

Kalten Bach v Mackenzie

This case raises the questions of abandonment and notice of abandonment on a policy of marine insurance

Re Write and Pole

Inn destroyed by fire Held Insured could not cover under his fire policy for loss of trade and cost of hiring other premium

1. Castellan v Preston 2. Judge Comments

1. Preston owned a property which he subsequently sold to the tenants Rayner. Subsequently a fire broke out. Preston made a claim against the Insurer, settlement payment was made. Insurer recover the settlement money from Preston as he suffer no loss as the house have been sold to Rayner. 2. Judge comments- contract of insurance contained in a marine or fire policy is a contract of indemnity, and an indemnity only, and that this contract means that the insured, in a case of loss against which the policy has been made, shall be fully indemnified but shall never be more than fully indemnified

Rayner v Preston

If there is no clause in the policy given the insured right in some other way, the insured legal right to insist on money payment

Elcock v Thomson

In case of partial loss undervalued polices Rule established in Elcock v Thomson A large house was insured under a fire policy for an agreed value of 106,850. Although its actual value was only 18,000 at the time when it was damaged by fire. Effect of fire reduce the value to 12,600 a reduction in 30%. Reduction of value/actual value x agreed value Held- Insured was entitled 30% of the agreed value, nearly 32,055

NON-INDEMNITY INSURANCE

In non-indemnity insurance the insurer agrees to pay an agreed amount or series of amounts to the insured on the happening of the insured event. Examples would be life insurance or accident insurance where an eye or a limb is insured for an agreed amount. The intention here is not to indemnify the insured for a loss of patrimony or estate but to pay an agreed amount when the loss occurs. Further, in non-indemnity insurance there is no right of subrogation in favour of the insurer to claim against the party causing the loss to the insured. There is also no right of contribution between insurers

INDEMNITY INSURANCE

Indemnity insurance is insurance where the actual loss of the insured is indemnified to the insured by the insurer. The purpose of an indemnity policy is to restore the insured to the position the insured was in prior to the loss. The insured is not entitled to make a profit out of the event. This principle is enunciated in the English case of Castellain v Preston

Smith v Colonial Mutual Fire Insurance Co Ltd

Insurer is own insurer during reinstatement- not allowed to deduct any amount resulting from...

Carreras Ltd v Cunard Steamship Co

It was suggested average could be implied into commercial polices

Rankin v Potter

Salvage and abandonment (fire ins)- ins. can keep any materials left after fire

Holmes v Payace

Salvage and abandonment (non-marine)- total loss on stolen jewelry; when found ins. can...

Reynolds and Anderson v Phoenix Assurance Co Ltd

Substantial fire loss at old malting In fire loss dispute arose as the appropriate basis of indemnity. The judge outline three alternative basis 1. Market Value 2. The cost of erection a modern replacement building 3. The cost of reinstatement i.e. rebuilding damaged part in its original form Market value of building would have been difficult to assess, but far less than the cost of building The cost of a modern replacement would also have been much lower than rebuilding cost Court held that appropriate basis of indemnity was the third alternative the cost of rebuilding in the original form This was because the insured had genuine and reasonable intention of rebuilding

Exchange Theater Ltd v Iron Trades Mutual Insurance Co Ltd

Victorian Hall was damaged by fire used as bingo hall club. Held- Correct basis of indemnity was cost of cheaper modern building suited the insured needs (2nd Alternative Reynolds Case)

Al Chorne v Favill

Where insurers were held liable for damages they were prevented by a Building Act from making a reinstated building project into the line of a street beyond the line of adjacent houses as it had previously done. It was decided by the court that the new building was inferior and therefore damages were payable.