The court was asked whether the insurers, having settled the owners’ claim for a constructive total loss at 66 per cent. of the sum insured could recover 100 per cent. from their re-insurers. Bailhache J. held that they could, with the result that the insurers would have made a profit out of the re-insurance.
Held: The appeal succeeded. The contract of re-insurance is a contract of indemnity. Accordingly the insurers could not recover more than they had lost. In English law a contract of reinsurance in relation to property is a contract under which the reinsurers insure the property that is the subject of the primary insurance; it is not simply a contract under which the reinsurers agree to indemnify the insurers in relation to any liability that they may incur under the primary insurance.
Buckley L.J said: ‘A contract of insurance and a contract of reinsurance, are independent of each other. But a contract of reinsurance is a contract which insures the thing originally insured, namely, the ship. The reinsurer has an insurable interest in the ship by virtue of his original contract of insurance. The thing insured, however, is the ship, and not the interest of the reinsurer in the ship by reason of his contract of insurance upon the ship.’ and ‘The plaintiffs are, however, entitled to indemnity, and this is not necessarily confined to the 66 per cent. They are entitled to such further sum, if any, as is required to give them an indemnity. The costs, for instance, of obtaining the compromise at 66 per cent. should be added to the 66 per cent.’
Judges:
Buckley LJ
Citations:
[1915] 2 KB 394
Cited by:
Cited – Lexington Insurance Co v AGF Insurance Ltd HL 30-Jul-2009
The respondent insurers had been held liable in Washington, and had been granted indemnity against the appellants by the Court of Appeal. The insurance contract had been under the law of Pennsylvania, but that of the re-insurance under the law of . .
Lists of cited by and citing cases may be incomplete.
Insurance
Updated: 15 May 2022; Ref: scu.372597