Insurance Law-Claims

8. Losses and claims Who has the burden of proof? -

The party who seeks to make the claim has the burden of proof.

What is a loss? How to prove? -

Cannot be that direct evidence is required What if it is Theft? How to get evidence that it was stolen?

Moore v. Evans [1918] A.C. 185. -

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House of Lords: A policy insuring against the loss of goods was intended to cover the physical loss of the goods. It did not cover an economic loss or the loss of business opportunity. Jewellers in London insured their stock of jewellery against "loss of and/or damage or misfortune ... arising from any cause whatsoever" except loss by theft or dishonesty.  Goods were sent to Germany and Belgium on a sale or return basis.  Owing to the outbreak of war between Britain and Germany in 1914, the dealers in Germany and Belgium could not return the jewellery to the insured. Insured: The term “loss” was to be construed in a commercial sense to include the loss of opportunity to deal with the insured goods. Held: No

Holmes v. Payne [1930] 2 K.B. 301. -

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Roche J.: Under a policy insuring goods against the risk of “loss”, a loss took place when recovery of the goods was uncertain. A pearl necklace was insured against "all loss wheresoever which the assured may sustain by the loss of or damage to the property herein specified".  Insured could not find her necklace and she informed the underwriters’ representatives of the loss.  Insurer settled the claim after requiring a thorough search.  Necklace later re-appeared when it fell out of an evening cloak. Insurers: The term “loss” meant a permanent deprivation of the insured item.

Webster v. General Accident Fire & Life Assurance Corpn. Ltd. [1953] 1 All E.R. 663. -

Parker J.: A “loss” could take place even though an insured voluntarily parted with the insured chattel. A loss occurred when an agent to whom the chattel was entrusted converted the chattel to his own use.

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 Plaintiff engaged auctioneers to sell his car but it was not sold as the reserve price was not reached.  Mr. Taylor, a director of the auctioneers, told the plaintiff that he had a private bid for £335 and he persuaded the plaintiff to leave the car with him.  Taylor sold the car to a third-party and kept the money. Insurers: There was a mere impairment of title and no physical or de facto loss of the car. Held:

Eisinger v. General Accident Fire & Life Assurance Corpn. Ltd. [1955] 2 All E.R. 897. -

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Lord Goddard C.J.: When a car owner was not paid by a purchaser, he lost the proceeds of sale. There was no loss of the car. The loss of proceeds was not a risk insured by a policy covering the “loss” of the car. The plaintiff sold his car to one Henson who gave the plaintiff a cheque as payment. The cheque was dishonoured and Henson resold the car and disappeared. The plaintiff was insured against the risk of loss or damage to the car. Insurers: The plaintiff did not lose the car but the proceeds of sale.

Preventive action Is a loss resulting from action taken to avert an insured risk contractually covered by the policy? -

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Note Stanley is land-based insurance. Symington and Knights cases are marine.  Is this material?  For marine insurance, why do Courts have such little problem? PCC says it is because wording of coverage in MI policies are generally wider  But he notes that MI cases always have cited the dicta in Stanley’s case. Maybe it matters little. PCC says public policy dictates that recovery should be allowed even when damage has not been caused yet.

Symington & Co. v. Union Insurance Society of Canton [1928] 97 L.J.K.B. 646. -

English Court of Appeal: Damage arising from actions taken to prevent the spread of fire, was recoverable as a loss due to fire or a risk ejusdem generis with fire. Goods belonging to the insured were at a jetty awaiting shipment when a fire broke out. The goods were insured against the risk of fire. To prevent the fire from spreading, the authorities jettisoned part of the goods and threw sea-water on the remainder. A large part of the goods i.e. cork was damaged as a result of actions taken to prevent the spread of the fire. Insurers: The loss was not caused by fire but by water, the enemy of fire.

Stanley v. Western Insurance Co. (1868) L.R. 3 Ex. 71. -

Kelly C.B.: Damage arising from actions taken to prevent the spread of an insured peril was recoverable as a loss due to the insured peril.

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Fire insurance policy excluded: "loss or damage by explosion, except for such loss or damage as shall arise from explosion by gas". Plaintiff extracted oil from shoddy.  An escape of inflammable vapour ignited. It caused an explosion blowing off the roof and part of the walls of the insured premises. This was followed by a fire. Insured: The damage arose from an explosion by gas. Held: “Any loss resulting from an apparently necessary and bona fide effort to put out a fire, whether it be by spoiling the goods by water, or throwing articles furniture out of the window, …in a word every loss that clearly and proximately results, whether directly or indirectly from the fire is within the policy.” ASK: How do we reconcile this with the basic principle that an insurer is only liable for damage caused by an insured risk?  Is this a departure?  Public policy?

The Knight of St. Michael [1898] P. 30. -

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Gorell Barnes J.: When goods were in imminent danger of being destroyed by fire, damage resulting from actions taken to prevent the spread of fire was recoverable as a loss ejusdem generis with fire. A vessel carrying a cargo of coal from Newcastle, New South Wales, to Valparaiso was insured against the risk of fire and "all other perils, losses, and misfortunes” in respect of a loss of freight . A few days after leaving Newcastle, the ship was forced to put into Sydney where part of her cargo had to be discharged owing to the heating of the coal. Insurers: The loss was not due to an insured peril as there was no fire on board the vessel.

MBf Insurans Sdn. Bhd. v. Penang Garden Sdn. Bhd. [2005] 2 C.L.J. 928. -

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Malaysian Court of Appeal: An insurer could expressly impose a duty on an insured to take action at his own expense to prevent the occurrence of an insured peril. Policy: “Insured shall at his own expense take all reasonable precautions … to prevent loss, damage or liability … ” Construction work in Penang was carried out in two phases.  Phase II construction affected the Phase I buildings causing them to tilt.  To save 2 Phase I buildings, a curtain-wall was constructed. It succeeded in arresting the settlement and tilt of the buildings. Insured claimed a sum of RM1,968,646.90 for the  remedial work.  Insurer submitted that policy dictated that duty was on insured to do that. Hence not covered. ASK: Any public interest involved?

Becker, Gray & Co. v. London Assurance [1918] A.C. 101. -

House of Lords: Damage arising from actions taken out of fear for an insured peril was not recoverable as it was not a loss due to the insured peril.

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Goods on board a German vessel were insured against "men of war ... enemies ... takings at sea, arrests, restraints and detainments of all kings, princes and people".  While on a voyage from Calcutta to Hamburg, war broke out between Britain and Germany.  The master, a German national, on receiving news of the war, decided to put into a neutral port to avoid the risk of capture by hostile cruisers. Insurers: The master’s action was the result of fear rather than an imminent peril of capture.

The proximate cause Difficulty arises when there are disputes as to cause -

Many Causes - Is an insurer liable for a loss caused by two or more causes if only one cause is insured? Competing Causes - Would an insured be able to recover if a loss is brought about by two or more competing causes acting together? What would happen if one of the causes is not an insured risk or a risk expressly excluded under the policy? In issues involving causation, where lies the real difficulty, finding the applicable principle or the application of the rule to different factual situations?

Assuming they can show proximate cause, would insurer’s liability be locked in at this point in time? -

What more can the insurer require you to do? Must inform?

Exclusion - If a loss falls within an insured risk and also within an exclusion provision, which provision takes precedence? -

Exclusion - When an insurer relies on exclusion provision, who has the burden of establishing that the loss comes within the exclusion provision? It is the insurer!

One Cause - Would an approach of finding only one single or dominant cause for a given event be better or worse for an insured? -

Many Causes - Similarly, would an approach of accepting more than one dominant or effective cause of an event benefit an insured?.

Leyland Shipping Co. v. Norwich Union Fire Insurance Co. [1918] A.C. 35. -

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House of Lords: The proximate cause of a loss was not the cause which was the last in time to happen but the cause setting into motion a sequence of events leading naturally to the loss of the insured property. A ship was insured against perils of the sea.  Exclusion: “all consequences of hostilities or warlike operations.  Vessel was torpedoed by a German submarine 25 miles from Harve while on a voyage from South America.

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 The vessel was towed safely to Havre but the port authorities ordered her to a berth outside the breakwater.  She sank after two days as a result of taking the ground at each tide. Insured: Only the last cause should be taken into account for determining the cause of the loss. Held: ASK: Is this fair or right?  Is not the port’s order a novus actus?

Reischer v. Borwick [1894] 2 Q.B. 584. -

English Court of Appeal: The proximate cause of a loss was the cause which led naturally to the loss in the absence of any intervening cause to interrupt the flow of events. A paddle-wheel steam-tug was insured against the "risk of collision ... and damage received in collision with any object, including ice". Policy excluded: "perils of the sea”. Vessel ran into a snag causing a leak in the vessel. The leak was temporarily repaired and a tug was engaged to tow her to the nearest dock for repairs. Leak re-opened and the vessel had to be beached resulting in further damage. Insurer: Subsequent damage was caused by the towing of the vessel for repairs and not the collision.

Smith v. Cornhill Insurance Co. (1938) 54 T.L.R. 869. -

Atkinson J.: When an event led naturally and without interruption to a loss, the loss was attributable to the event even though it was hastened by other intervening factors. Motor insurance policy insured against death "the result solely of bodily injury caused by violent accidental external and visible means". Insured suffered severe head injuries resulting in serious damage to the brain when her car went off the road and fell down a ravine. After the accident, she wandered aimlessly through some brushwood before stepping into a cold stream. The shock of entering the cold water caused her heart to fail and she died immediately. Insurer: The shock of immersion in the cold water was the real cause of death.

Winspear v. Accident Insurance Co. (1880) 6 Q.B.D. 42. -

English Court of Appeal: A man who drowned after falling into a shallow stream following an epileptic fit died from an accident and not from the fit. Policy covered: "any personal injury caused by accidental, external, and visible means ... ". Exclusion: "injury caused by or arising from natural disease or weakness or exhaustion consequent upon disease". Insured suffered an epileptic fit while crossing and fording a shallow stream. Following the fit, he fell into the stream and drowned. Insurer: Fit was a natural disease or weakness causing the insured to drown.

Lawrence v. Accident Insurance (1881) 7 Q.B.D. 216.

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English Court of Appeal: An insured who fell onto a railway line after suffering a fit, died from an accident when he was run over by a train. Exclusion in Personal accident policy: "it does not insure in case of death or disability arising from fits or rheumatism, gout, hernia, erysipelas, or any disease whatsoever arising before or at the time, or following such accidental injury (whether consequent upon such accidental injury or not, and whether causing such death or disability directly or jointly with such accidental injury)". Insured was at a railway station when he had a fit causing him to fall off the platform onto the railway tracks. He was run over by a train. Insurer: The accident and the disease acted concurrently to cause death.

Wayne Tank v. Employer's Liability Assurance Corpn. [1973] 3 W.L.R. 483. -

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English Court of Appeal: When two or more dominant causes operated together to bring about a loss and one of these causes was expressly excluded under the terms of the policy, the insurer was not liable for the loss. Plaintiffs were engaged to design and install equipment for storing and conveying liquid wax at a factory. The installation was switched on and left unattended overnight before it had been tested. It caught fire and the factory was destroyed. Public liability policy covered damage to property due to accident but not damage caused by the nature and conditions of goods supplied. Insurer: Loss was caused proximately by the defective equipment supplied Per Lord Denning: “Since the Leyland case it has been settled in insurance law that the ‘cause’ of a loss is that which is the effective or dominant cause of the occurrence, or, as it is sometimes put, that which is in substance the cause, even though it is more remote in point of time, such cause to be determined by common sense.”

Martini v. McGuin [2000] 2 Lloyd’s Rep. 313. -

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Timothy Walker J.: Damage caused by an insured peril taking place elsewhere was recoverable by the policyholder. A family holiday house in Montserrat was insured under a Lloyd’s Householder’s Insurance (Overseas) policy.  Policy covered: “loss or damage directly caused by … explosion.” House was damaged when volcanic activity on the island of Montserrat caused tephra, a term referring to all fragments ejected from a volcano irrespective of size, were deposited on the property. Insurers: Did not dispute that a volcanic explosion constituted an explosion under the policy but disputed the extent of the damage.

Bina Puri Sdn. Bhd. v. MUI Continental Insurance Bhd. [2010] 1 M.L.J. 347. -

Nallini Pathmanathan J.C.: It was an insured’s duty to establish that his loss was caused by a peril insured under the policy and that the event causing the loss was an unforeseen and sudden occurrence.

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All risks policy: covered damage to contract work and to third party property arising from “any unforeseen and sudden physical loss or damage from any cause”  Exclusion: “loss or damage due to faulty design”. Plaintiff was engaged to construct a ?ve and a half storey of?ce building which included two levels of basement. Ground heaving occurred and nearby buildings and shophouses experienced cracks.

Accident and disease Leong Luen Kiew v. New Zealand Insurance Co. Ltd. [1939] M.L.J. Rep. 136. -

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McElwaine C.J.: When a pre-existing disease was accelerated by an accident to a point where it caused death, the death was attributable to the disease and not the accident. A comprehensive motor policy covered against bodily injury: "caused by violent accidental external and visible means ... independently of any other cause ..." Insured was injured in a motor accident but later died.  In the accident, he suffered a laceration on his scalp, abrasions on his right leg and right hip and he also sustained a fracture.  The immediate cause of death was shock and haemorrhage from gastric ulcer from which he was suffering. Insurer: Death was caused by the gastric ulcer aggravated by diabetes and heart disease and not the accident

Jason v. Batten Ltd. [1969] 1 Lloyd's Rep. 281. -

Fisher J.: When a pre-existing disease was accelerated by an accident to a point where it caused injury, the injury was attributable to the disease and not the accident. Policy insured against: “Accidental bodily injury … independently of all other causes”. Insured was injured when the rear near-side wheel of his van came off. He suffered bruises on his chest when he was thrown against the steering wheel. 6 days after the accident, insured suffered a coronary thrombosis and could not work for a time. Insurers: The disablement arose from a physical defect or infirmity, namely, arterial disease.

Re Etherington & the Lancashire and Yorkshire Accident Insurance Co. [1909] 1 K.B. 591. -

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English Court of Appeal: An insured who died of pneumonia after falling onto wet ground while horse riding, died from an accident. Insured was out hunting when he fell from his horse onto wet ground. Having no change of clothes, he rode home in his wet clothes. He developed pneumonia and died. Policy insured against death from accidents provided the accident was "the direct or proximate cause thereof, but not where the direct or proximate cause thereof is disease or other intervening cause.” Insurers: Insured’s death was caused by pneumonia and not the accident.

Brintons Ltd v. Turvey [1905] A.C. 230. Fidelity & Casualty Co. of New York v. Mitchell [1917] A.C. 592. -

Privy Council: When a pre-existing latent infection was triggered off by an accident to cause injury, the injury was attributable to the accident and not the infection. Policy covered: "Bodily injury ... through accidental means ... and resulting directly, independently and exclusively of all other causes ..." A throat, ear and eye specialist was thrown out of a sleeping berth in a train and he suffered a sprained wrist. Owing the sprain, he could not perform operations as a specialist. The accident triggered off a latent infection preventing his recovery. Insurers: Disability did not arise solely from the accident.