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8 Cards in this Set
- Front
- Back
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Indemnity Principle
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A central principle applicable to all but life and some accident insurance policies is the principle of indemnity. As well as underlying the requirement of insurable interest, this determines the amount of the payment that an insured can claim following a loss and has other important consequences examined under the next topic.
This area has been widely criticised and the LC is going to recommend statutory reversal. |
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Sprung v Royal Insurance (UK) Ltd [1997]
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Mr Sprung bought insurance to protect his factory against sudden and unforeseen damage. Vandals broke into the factory and caused considerable damage. The insurers rejected the claim. This eventually renders Mr Sprung out of business. Four years after litigation, the insurers abandoned their defence and Mr Sprung was awarded indemnity and simple interest and costs. Judge found that claim should have been paid 4 years earlier; however CA said that Mr Sprung was not entitled to claim for further loss of opportunity to sell business.
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Measure of Loss principle
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The basic measure of loss is determined by the value of property at the time of loss, but in certain situations, notably insurances of land/buildings, the appropriate measure may be the cost of repair. In insurances of goods it is common to contract on this basis.
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Richard Aubrey Film Productions Ltd v Graham [1960]
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A film producer insured against the loss of negatives and films. When a film that was soon completed was stolen, the policyholder was entitled to recover only the market value of the film less the cost of competing it. Though the film was described as the chid of his artistic creation, and the policyholder was not permitted to recover anything on the grounds that his work reflects his personal value and feelings.
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Leppard v Excess Insurance Co [1979]
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The subject matter here was a cottage. As a result of a conflict with the famer owning all the surrounding land, Mr Leppard could not sell the cottage as no one could access it. He had to drop the price of the cottage excluding land from 9k to 3k. A loss occurred just then, and the indemnity amount paid was 3k which was the value just before the fire.
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Reynolds v Phoenix Assurance Co Ltd [1978]
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The claimants bough an old malting. The sum insured on professional advice was increased to cover the likely cost of reinstatement in the event of total loss. A fire destroyed about 70% of the building, which was a partial loss. It was held that the claimants were entitled to the full cost of reinstatement, on the basis that they had a genuine intention to reinstate and that this would be the only way to give them a genuine indemnity.
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Reinstatement
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An insurer may reserve the right to repair or replace property rather than pay money. In addition, in insurances of real property, a “person interested” may have a statutory right to require that insurance money is used to reinstate the property instead of being paid to the insured, e.g. housing.
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Lonsdale & Thompson Ltd v Black Arrow Group plc [1993]
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Confirms that insurance contracts are contracts of indemnity but parties to the contract may make specific provision for assessing the loss on an agreed basis. Aside from this the measure of indemnity is the diminution in valued of the property insured. There may be deductions for wear and tear to be made.
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