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CILA SPECIAL INTEREST
GROUP CONFERENCE
Tuesday 23rd September 2008
“Recent legal developments affecting
the insurance industry”
Richard Evans
Partner
Beachcroft LLP
30 Eastcheap
London EC3M 1HD
RESERVATION OF RIGHTS
 Why?
- Waiver, affirmation, election
 Kosmar Villa Holidays v Syndicate 1243
- 1st instance (Mr Justice Gross – 2007)
- Court of Appeal [2008] WLR (D) 71
Per Rix L.J in Kosmar
“It would not be good practice for insurers to rush to
repudiate a claim for late notification, or even to
destabilise their relationship with their insured by
immediately reserving their position – at a time when they
were in any event asking pertinent questions about a
claim arising out of an occurrence about which they had
long been ignorant in absence of prompt notification”
AIRMIC INITIATIVE
 Survey June 2008 – 29% say experience of reservation
of rights having been used inappropriately.
 Voluntary agreement proposed whereby 90 day
moratorium between notification of claim and any
reservation of rights.
 Detailed wording of agreement expected by end of the
summer.
LAW COMMISSION REVIEW OF INSURANCE
CONTRACT LAW

Jan 2006
Scoping Paper

Sep 2006
1st Issues Paper on Non Disclosure and Misrepresentation

Nov 2006
2nd Issues Paper on Warranties

March 2007
3rd Issues Paper on Intermediaries and Pre Contract
Information

July 2007
1st Consultation Paper

Feb 2008
Issues Paper on Insurable Interest

May 2008
Summary of responses to Consultation Paper
Timetable Going Forward
 Autumn/Winter 2008
anticipated issues paper on post
contractual good faith, damages for
late payment.
 2009
Second Consultation Process
 Summer 2009
Bill for reforming consumers
insurance law
 2010/2011
? Bill to reform remaining areas
covered by Issues/Consultation
Papers
SUMMARY OF KEY LAW COMMISSION PROPOSALS
TO DATE
 Where Insured is consumer follow FOS approach
- non-disclosure replaced by need for insurer to ask
question
- for misrepresentation “reasonable insured” test to
replace “prudent insurer”
- basis of contract clauses to be outlawed
- remedy of “proportionality”
DAMAGES FOR LATE PAYMENT
 Law Commission likely to propose reform to bring
insurance contracts more in line with insurance
contracts.
 To what extent have Ventouris v Mountain (1993) and
Sprung v Royal Insurance been affected already by
the recent decision in Sempra Metal v IRC (2007).
ELECTRONIC DISCLOSURE
 36 billion emails are sent daily on a world wide basis (rising 20%
each year).
 93% information held in digital format (70% never printed).
 From March 2009 new FSA regulations regarding the recording
and storing of telephone conversations and electronic
communications relating to client orders come into effect.
 April 2009 – Proposed Technology Questionnaire in Litigation.
Civil Procedural Rules define “documents” to include
 “email and other electronic communications…”
 “stored on server and back up systems and electronic
documents that have been deleted”
 “metadata”
See Micro Design Group v Norwich Union (2005)
CAUSATION
 Policy cover
 Recovery prospects
 What evidence/standard of proof is required
Drake v Harbour [2008] EWCA Civ 28
(Court of Appeal)
 Sufficient even if cannot establish precise mechanism if
cause was of a kind attributable to the defendant’s
negligence.
Lexus Financial Services t/a Toyota Financial Services
v Sandra Russell [2008] EWCA Civ 424
 3 possible causes
- Arson
- Defect in wiring in Defendant’s garage
- Defect in car electrics
 Held by Court of Appeal that judge was entitled to
conclude on the evidence that the probable cause was
the defect in the electrics.
BAILMENT
WHAT IS BAILMENT?
 Voluntary taking into custody of goods which are the
property of another.
 With or without reward to the bailee.
 Bailee only takes possession of the property not
ownership of it.
 Bailor reclaims ownership.
NORTH BRITISH MERCANTILE INSURANCE CO V THE
LONDON LIVERPOOL & GLOBE INSURANCE CO (1877)
B&Co
Stored grain owned by
R&Co
“Wharfingers policy”
Merchant Policy
With LLG
(North British)

B&Co paid in full by LLG and they paid R&Co.

LLG wanted a contribution from North British but court held
otherwise “double insurance only where same property insured
AND interests are the same…contribution exists where the thing
is done by the same person against the same loss…B cannot say
to R somebody else has been insuring the goods you go and sue
that somebody else.”
Ramco Ltd & Resource Industries Ltd v Weller Russell &
Laws Insurance Brokers Ltd (2008) LTL 17/6/2008
RAMCO trade in army surplus stock
Holds stock for
MOD
(1) If R liable for loss then
market value
calculation
(2) If not liable then R
had to pay 2 % base
price for stock
Murray

R merely obliged to
insure for £2million
POLICY WORDING IN RAMCO COVERED:
“stock…the property of the Insured or held by the Insured in trust for
which the Insured is responsible”
 North British & Mercantile Insurance Co v Moffatt (1871)
- seller retained possession but no longer owner. As they were
not responsible for them no cover.
 Hepburn v Tomlinson (Hauliers) Ltd (1966)
- wording “property of the Insured or held by them in trust or on
commission” would have given cover.
But, beware the loophole provided by Lord Justice Waller In Ramco.
- does failure to arrange full cover create a “responsibility”?
BEACHCROFT LLP
Sponsorship of CILA Property Special Interest Group
Case law updates on CILA website at www.cila.co.uk