Receivers claimed against shipowners under a bill of lading for loss of a cargo. The shipowners argued on a preliminary issue that the insurance proceeds paid to receivers fell to be taken into account so as to wipe out the damages claimed. They sought to distinguish Bradburn on the particular facts by reason of the insurance having been one which the shipowners were bound to effect in favour of receivers under the terms of the charterparty with the receivers’ cif sellers, terms which were incorporated into the bill of lading.
Held: The insurance proceeds did not fall to be deducted from damages.
Lloyd J said: ‘The alternative way in which the first point is put by Mr. Phillips is that Bradburn’s case is simply an illustration of a more general rule that, in assessing damages, one disregards what is collateral. Here it is said the benefit of the insurance is not collateral, for it is specifically provided for by the parties in the contract itself; since the source of the loss and the source of the gain are the same-namely, the contract between the parties-the plaintiffs cannot prove that they have suffered any loss resulting from the way in which the contract has been performed.
In my judgment, the answer to that argument is also to be found in Parry v. Cleaver, and in particular in the speech of Lord Reid. There are always two questions, namely, (1) what is the loss which the plaintiff has suffered as a result of the accident (in this case by the total loss of the vessel), and (2) what are the sums which he has received which he would not have received but for the accident. Then comes the question whether sums under (2) can be set off against losses under (1). That depends not on the source of those sums but on their nature.’
‘Applying that reasoning to the present case, the question is whether the insurance proceeds are to be regarded as different in kind from the loss which the plaintiffs have suffered by reason of the defendants’ breach of contract. It seems to me that the answer to that question must be ‘Yes’. The insurance is payable on an event and does not depend in any way on proof of breach. The receipt is different in kind from the loss; and, if that is right, then, applying Lord Reid’s test, the benefit of the insurance is to be left out of account in assessing damages and it makes no difference that the benefit comes from the same source as the loss, in the sense that they both arise out of or are provided for in the same contract.’
Lloyd J said: ‘I should, however, mentioned the remaining stages of the argument in case I should be wrong so far; but I can do so very briefly. It is said to be a fundamental rule in the case of joint insurance that the insurer cannot exercise a right of subrogation against one of the co-assured in the name of the other. I am not satisfied that there is any such fundamental principle. In my judgment, the reason why an insurer cannot normally exercise a right of subrogation against a co-assured rests not on any fundamental principle relating to insurance, but on ordinary rules about circuity. In the present case, a claim in the name of the plaintiffs might well have been defeated by circuity if the insurance had purported to protect the defendants against third party liability. . . So far as there is any authority on this point, it does not support the view that there can never be a right of subrogation against a co-assured.’
Judges:
Lloyd J
Citations:
[1979] 2 Lloyd’s Rep 45
Jurisdiction:
England and Wales
Citing:
Cited – P Samuel and Co v Dumas HL 1924
Viscount Cave said: ”… My Lords, there is force in this argument, but I am not prepared to say that in the present case it should prevail. It may well be that, when two persons are jointly insured and their interests are inseparably connected so . .
Cited by:
Cited – Fulton Shipping Inc of Panama v Globalia Business Travel SAU (Formerly Travelplan SAU) of Spain ComC 21-May-2014
The former owners of the ‘New Flameno’ appealed from an arbitration award. A charter of the vessel had been repudiated with two years left to run. The owners chose to sell. They made a substantial profit over the price they would have received after . .
Cited – Fulton Shipping Inc of Panama v Globalia Business Travel Sau CA 21-Dec-2015
The charter of the ship ‘New Flameno’ was repudiated two years early. The owners sold it, making rather more profit than they would have if sold after the end of the term. The court was now asked how the profit should affect the loss claim on the . .
Cited – Globalia Business Travel Sau of Spain v Fulton Shipping Inc of Panama SC 28-Jun-2017
The court was asked how to assess damages arising out of the repudiation of a charterparty by charterers of a cruise ship, the ‘New Flameno’. The charter ending two years early, the owners chose to sell, and in the result got a much better price . .
Lists of cited by and citing cases may be incomplete.
Insurance
Updated: 16 August 2022; Ref: scu.642152