The defendant agreed to indemnify the insured ‘in respect of all sums which the insured shall become legally liable to pay as compensation arising out of’ various matters including wrongful arrest, malicious prosecution and false imprisonment. The insurer contended that the use of the word ‘compensation’ excluded awards of exemplary damages.
Held: The contention was rejected. Insurance for local authorities and police authorities against vicarious liability including for criminal liability and for exemplary damages is not unlawful. The words of the clause ‘all sums which the insured shall become legally liable to pay as compensation’ was not clear as to its extent, and was not to be limited to any claim for compensation as such. Exemplary damages went beyond pure compensation but were included. Nor was there any public policy against insuring for liability for criminal conduct.
Simon Brown LJ discussed the use of public policy as an aid to construction: ‘The only way in which public policy can properly be invoked in the construction of a contract is under the rule ut res magis valeat quam pereat: if the words are susceptible of two meanings, one of which would validate the particular clause or contract and the other render it void or ineffective, then the former interpretation should be applied even though it might otherwise, looking merely at the words and their context, be less appropriate.’ and
‘Although I accept Mr. Glasgow’s submission that the natural and ordinary meaning of ‘compensation’ in the context of a legal liability to pay damages is one which excludes any element of exemplary damages, I cannot accept that this meaning is wholly clear and unambiguous. On the contrary it involves very much a literal, lawyer’s understanding of the term and is one which would not command universal acceptance. Many, including no doubt most recipients, would regard compensation to mean instead all damages (of whatever character and however calculated) payable to the victim of a tort.’
Judges:
Lord Justice Staughton, Lord Justice Simon Brown and Lord Justice Thorpe
Citations:
Gazette 05-Jun-1996, Times 08-Apr-1996, [1997] QB 897, [1996] EWCA Civ 1345, [1996] 3 All ER 545, [1996] 3 WLR 493, [1996] CLC 1459
Links:
Jurisdiction:
England and Wales
Citing:
Cited – AB v South West Water Services Ltd CA 1993
Exemplary and aggravated damages were claimed in an action for nuisance arising out of the contamination of water by the defendant utility.
Held: Sir Thomas Bingham MR said: ‘A defendant accused of crime may ordinarily be ordered (if . .
Cited – Riches v News Group Newspapers Ltd CA 20-Feb-1985
The defendant published serious defamatory allegations against several plaintiff police officers. The defendant newspaper appealed against an award of andpound;250,000 exemplary damages for their defamation of the respondent police officers.
Cited by:
Cited – Barrett v Universal-Island Records Ltd and others ChD 15-May-2006
The claimant was entitled to share in the copyright royalties of Bob Marley and the Wailers, and claimed payment from the defendants. The defendants said that the matters had already been settled and that the claim was an abuse of process, and also . .
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 – Mulcaire v News Group Newspapers Ltd ChD 21-Dec-2011
The claimant, a private investigator had contracted with the News of the World owned by the defendant but since closed. He had committed criminal offences in providing information for the paper, had been convicted and had served his sentence. He . .
Cited – Jetivia Sa and Another v Bilta (UK) Ltd and Others SC 22-Apr-2015
The liquidators of Bilta had brought proceedings against former directors and the appellant alleging that they were party to an unlawful means conspiracy which had damaged the company by engaging in a carousel fraud with carbon credits. On the . .
Lists of cited by and citing cases may be incomplete.
Insurance, Torts – Other, Local Government, Police
Updated: 31 October 2022; Ref: scu.82914