Queensland – A cargo of wool was insured ‘at and from Townsville to London’. The lighter carrying the cargo to the ship capsized in the harbour. The insurers paid out and, taking an assignment of the action sued the defendant Government. The latter now replied that the insurer had arguably had no obligation to settle the claim, and the assignment of the action had been invalid. The appellant argued, in part, that the loss sued upon was not within the terms of the insurance policy; that the respondent insurers stood in the position of mere strangers making a voluntary payment to the insured and that they had no title which a court, either of law or equity, would have recognised.
Held: ‘Legal’ choses in action includes both legal and equitable interests in choses in action. The distinction between assignment of an action and subrogation must be kept clear. By subrogation, the insurer stands in the shoes of the insured and enforces its rights in the name of the insured. Subrogation is available if payment has been made honestly and in good faith under a valid policy if intended to be in satisfaction of the obligation to indemnify, notwithstanding that it may subsequently be shown that no such obligation had in fact arisen.
The Board rejected the argument presented. Lord Hobhouse said: ‘it is claimed as a matter of positive law that, in order to sue for damage done to insured goods, insurers must shew that if they had disputed their liability the claim of the insured must have been made good against them. If that be good law, the consequence would be that insurers could never admit a claim on which dispute might be raised except at the risk of finding themselves involved in the very dispute they have tried to avoid, by persons who have no interest in that dispute, but who are sued as being the authors of the loss. The proposition is, as their Lordships believe, as novel as it is startling; . . As regards the question whether the loss was or was not within the terms of the policy, their Lordships will make no observation but this, that whatever might have been the result of a dispute between the parties to it, there is nothing to suggest that the claim was not one which the insured might not honestly and reasonably make, or to which the insurers might not honestly and reasonably accede. They will assume, as the Court below has assumed, that the bank could not by the terms of the policy have compelled the insurers to indemnify them. Still if, on a claim being made, the insurers treat it as within the contract, by what right can a stranger say that it is not so? The payment would not be made if no policy existed; and it seems to their Lordships an extravagant thing to say that a payment made under such circumstances is a voluntary payment made by a stranger, and that it would be at least an excess of refinement to hold that it is not a payment on the policy, carrying with it the legal incidents of such a payment. . honestly made by insurers in consequence of a policy granted by them and in satisfaction of a claim by the insured, is a claim made under the policy, which entitles the insurers to the remedies available to the insured.’
Judges:
Watson, Hobhouse, Davey LL, Sir Richard Couch
Citations:
[1896] UKPC 16, [1896] AC 250, 74 LT 206, 44 WR 592, 65 LJPC 38, 12 TLR 285
Links:
Cited by:
Cited – Alliance Bank Jsc v Aquanta Corporation and Others CA 12-Dec-2012
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Cited – Law v Liverpool City Council SCCO 10-May-2005
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Cited – W v Veolia Environmental Services (UK) Plc QBD 27-Jul-2011
The claimant’s car had been damaged by a lorry operated by the defendant. The claimant hired a replacement car under a credit hire agreement with AE, which he signed at his home when the replacement vehicle was delivered to him. The defendant’s . .
Lists of cited by and citing cases may be incomplete.
Commonwealth, Insurance
Updated: 19 August 2022; Ref: scu.417351