REFORMING INSURANCE LAW: - Law Commission

unresolved issues as to whether the assured holds the balance as a trustee or as a mere debtor, 418
and it is not always easy to ascertain whether an assured in possession of property belonging to a
third party is insuring against his own liability for the goods or for their full value. 419 The English
courts do, however, seem to have reached the conclusion that if the third party has been guilty of
fraud leading to the loss the named assured will be held to recovering an amount equal to his
own interest and will not be entitled to the balance representing the third party’s interest. 420 The
policy question is whether the third party’s rights should be directly enforceable against the
insurers or whether the pervasive insurable interest rules suffice. The Australian approach has the
merit of relative simplicity and there have been no adverse comments as to the operation of s 49.
Late payment of policy proceeds
8.12 The English courts do not permit damages for late payment of policy moneys. The theory
here is that the insurers are under an immediate obligation, arising when the insured loss occurs,
to hold the assured harmless, so that the indemnity must be provided at that time. By failing to
provide an indemnity on the date of the loss the insurers render themselves liable in damages, but
as it is well established that English law does not permit the award of damages for late payment
of damages 421 it follows that in principle the assured’s only remedy is interest. That point is
statutory under the Marine Insurance Act 1906, which does not countenance any award other
than for loss as defined by the legislation, 422 and although it has been suggested that there is an
implied term in a policy requiring timely payment there is no case in which it has been found that
the insurers are in breach of that term. 423 It may be that insurers have not simply refused to pay,
but have repudiated the entire policy: in that situation they are plainly in breach of contract, 424
but the assumption has been that the damages for which they are liable are simply the sums due
under the policy. English law has thus adopted the position that an assured who is paid late, and
who in the meantime loses his business for want of funds to reinstate his premises, has no
additional remedy against the insurers. The assured is held to interest under the provisions of
section 35A of the Supreme Court Act 1981, which typically runs from the date of the loss
subject to possible rests to allow the insurers to consider the claim and to take account of the
extent to which the assured was himself liable for the delay, and also subject to possible
418 Re Dibbens & Sons Ltd [1990] BCLC 577.
419 Tomlinson (Hauliers) v Hepburn [1966] AC 451; Ramco (UK) Ltd v International Insurance Co of Hannover Ltd
[2004] Lloyd’s Rep IR 606.
420 State of Netherlands v Youell [1998] 1 Lloyd’s Rep 236.
421 President of India v Lips Maritime Corporation, The Lips [1988] AC 395.
422 Ventouris v Mountain, The Italia Express [1992] 2 Lloyd’s Rep 281; Bank of America v Christmas, The Kyriaki
[1993] 1 Lloyd’s Rep 137.
423 See: Insurance Corporation of the Channel Islands v McHugh (No 1) [1997] LRLR 94; Sprung v Royal
Insurance [1999] Lloyd’s Rep IR 111; Pride Valley Foods Ltd v Independent Insurance Co Ltd [1999] Lloyd’s Rep
IR 120; Normhurst v Dornoch [2005] Lloyd’s Rep IR 27; Tonkin v UK Insurance Ltd [2006] EWCH 1120 (TCC).
But see the comments of Rix LJ in Mandrake Holdings Ltd v Countrywide Assurance Group plc May 2005,
unreported.
424 Lefevre v White [1990] 1 Lloyd’s Rep 569; Transthene Packaging v Royal Insurance [1996] LRLR 32. Cf Diab v
Regent Insurance Co Ltd [2006] UKPC 29. However, a plea of fraud is not a repudiation: Super Chem Products Ltd
v Anerican Life & General Insurance Co Ltd [2004] Lloyd’s Rep IR 446.
81