Aggravated, Exemplary and Restitutionary ... - Law Commission
Aggravated, Exemplary and Restitutionary ... - Law Commission
Aggravated, Exemplary and Restitutionary ... - Law Commission
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would be that to allow insurance would frustrate, or at least limit, any punitive or<br />
deterrent effect which such liability might have on the defendant. 537<br />
1.193 The leading case on this question, Lancashire County Council v Municipal Mutual<br />
Insurance Ltd, 538<br />
suggests that it is not. In that case a local authority was vicariously<br />
liable to pay awards of exemplary damages for torts committed by its employees.<br />
The authority had an insurance policy which covered it for “all sums which the<br />
insured shall become legally liable to pay as compensation”. The insurers were<br />
only prepared to pay the compensatory damages <strong>and</strong> disputed their liability in<br />
respect of the exemplary damages awarded. The local authority brought an action<br />
against the insurers.<br />
1.194 At first instance Judge Michael Kershaw held that it was not per se contrary to<br />
public policy for a person to be indemnified by insurance against their liability for<br />
exemplary damages. This was upheld by the Court of Appeal, but on slightly<br />
different grounds. 539<br />
Having held that the insurance policy did, on its proper<br />
construction, cover the awards of exemplary damages, the court decided that<br />
public policy did not require that the local authority should be prevented from<br />
insuring against the consequences of its vicarious liability. It was not necessary for<br />
Simon Brown LJ to go further to consider the position of a wrongdoer seeking<br />
indemnification against exemplary damages arising from his or her personal<br />
liability. However, the clear suggestion in Simon Brown LJ’s judgment is that the<br />
court’s approach would be the same: insurance would be permitted even in<br />
relation to a personal liability to pay an exemplary damages award. 540<br />
1.195 Simon Brown LJ considered the argument that category 1 exemplary damages<br />
cases would involve conduct which would “almost inevitably be criminal”, <strong>and</strong> that<br />
given the principle that a person “cannot insure ... against liability for committing<br />
a crime”, insurance against conduct falling within category 1 should be contrary to<br />
public policy. 541<br />
He responded:<br />
For my part I unhesitatingly accept the principle that a person cannot<br />
insure against a liability consequent on the commission of a crime,<br />
whether of deliberate violence or otherwise - save in certain<br />
circumstances where, for example, compulsory insurance is required<br />
<strong>and</strong> enforceable even by the insured. I further recognise that in many<br />
cases where the question of liability for exemplary damages is likely to<br />
arise for consideration under this policy the police officer concerned<br />
will have acted criminally. Conspicuously this will be so in cases of<br />
assault ... 542<br />
But there was:<br />
537 For a very clear <strong>and</strong> forceful expression of this argument, see Denning J in Askey v Golden<br />
Wine Co [1948] 2 All ER 35, 38C-E.<br />
538 [1996] 3 WLR 493.<br />
539 [1996] 3 WLR 493.<br />
540 See, in particular, Simon Brown LJ’s reasoning at [1996] 3 WLR 493, 503B-504D.<br />
541 [1996] 3 WLR 493, 501H-502F.<br />
542 [1996] 3 WLR 493, 502F-G.<br />
91