French courts had held the claimant liable to remedy the deficiency of an insolvent company’s assets under a French law. The insured now sought repayment by its insurers, who denied that this was a payment of damages.
Held: The payment was covered under the professional indemnity insurance policy which indemnified the insured: ‘in respect of the Assured’s legal liability to third parties for any third party claim . . for compensatory damages’. Longmore discussed the Lancashire case and said: ‘The first question was whether the phrase ‘all sums which the insured shall become legally liable to pay as compensation’ applied on its true construction to cases where exemplary or punitive damages were awarded. The Court of Appeal held that it did, since all damages in tort, whether compensatory or punitive, go to the plaintiff by way of compensation. The primary consideration was that the policy expressly included cover for torts, which by their nature, attracted claims for exemplary damages and that, if insurers were correct, cover would be excluded for all claims where exemplary damages were sought, even though the claim for such damages might be roundly rejected. A secondary consideration was the difficulty of handling claims if insurers’ construction were correct, because it would be difficult, if not impossible, to separate out the punitive element as opposed to the ordinary compensatory element even after award, let alone before award, when the insured would want insurers to take over their defence.
It is of course true that the policy with which I am concerned does not expressly cover torts which, by their nature, attract awards for exemplary or punitive damages. Nevertheless, both the above considerations have some bearing on the present case. I cannot differentiate sensibly between the phrases ‘compensation’ and ‘compensatory damages’. ‘Compensatory damages’ is equally a phrase which cannot be accepted as being ‘wholly clear and unambiguous’
. . In these circumstances it seems to me that the phrase ‘compensatory damage’ must be given a broad meaning, viz that the damages, if they are to be recoverable, must be claimed by or on behalf of a person in respect of loss which that person has suffered, rather than a sum claimed by an entity, such as the State, (or perhaps the court, to use the wording of Article 180 itself), which has suffered no personal loss.
Judges:
Longmore J
Citations:
(1998) 7 Lloyds Rep IR 266
Cited by:
Cited – Bedfordshire Police Authority v Constable and others ComC 20-Jun-2008
The authority insured its primary liability for compensation under the 1886 Act through the claimants and the excess of liability through re-insurers. The parties sought clarification from the court of the respective liabilities of the insurance . .
Cited – Bedfordshire Police Authority v Constable CA 12-Feb-2009
The police had responded to a riot at Yarlswood detention centre. They had insurance to cover their liability under the 1886 Act, but the re-insurers said that the insurance did not cover the event, saying that the liability was for statutory . .
Lists of cited by and citing cases may be incomplete.
Insurance
Updated: 10 May 2022; Ref: scu.270263