A policy of insurance was granted, ‘subject to the conditions on the back hereof, which are to be taken as part of this policy.’ These provided that when the company did not claim to avoid its liability on the ground of fraud or unfulfilment of the conditions of the policy, any difference arising as to the amount payable in respect of any alleged loss or damage by fire should be referred to the arbitration either of one person chosen by both parties, or by two persons-one appointed by the insured and the other by the company. The conditions further declared that ‘the party insured shall not be entitled to commence or maintain any action at law or suit in equity on this policy till the amount due to the insured shall have been awarded as hereinbefore provided, and then only for the sum so awarded, and the obtaining of such award shall be a condition-precedent to the commencement of any action or suit upon the policy.’
A difference arose between the parties to the policy as to the amount of damage done by a fire to the property insured, and the insured raised this action in order to have the damage ascertained. The insurers defended, on the ground that until the pursuer obtained an award settling its amount the terms of the policy excluded action, but the Court of Session rejected this defence, on the ground that a reference to unnamed arbiters to value subjects, as to the identity or original condition of which there is no dispute, formed the only exception from the rule of Scots law, that a general agreement to refer future differences to arbiters who are not named is not binding on either of the parties.
Held (rev. the judgment of the Court of Session) that the ascertainment of the amount of damage by arbitration was made a condition-precedent to the obligation to pay, and that a court of law could not enforce the obligation until so ascertained.
Judges:
Lord Chancellor (Herschell), and Lords Watson, Ashbourne, and Field
Citations:
[1892] UKHL 172, 30 SLR 172
Links:
Jurisdiction:
Scotland
Insurance
Updated: 11 May 2022; Ref: scu.634564