SIG Perspective
by the CILA Claimant SIG
Opened by:
Jonathan Clark, CILA President
Speaker:
Roger Franklin, Partner, Edwin Coe LLP
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Ownership
Tenants
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Ownership
Western Trading Ltd “let” Mr Singh’s properties from him (for which it paid a
“rent”), and “managed” them (i.e, was responsible for maintenance and
upkeep, arranging insurance - in its own name - and letting the properties)
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The Policy
The Policy included material damage, loss of rent and liability cover. The
sum insured for buildings was £2,121,800.
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The insuring clause of the Material Damage section of the Policy provided
as follow:
“Subject to the General Conditions and Exclusions of this Certificate… we the
Underwriters agree to… to indemnify the Assured against loss of or damage to
the property specified in the Schedule (hereinafter referred to as ‘the Property’)
caused by or arising from the Perils shown as operative in the Schedule, occurring
during the period of this insurance.
“Underwriters shall not be liable for more than the Sum Insured stated in the
Specification or in the Certificate in respect of each loss or series of losses arising
out of one event at each location as stated in the Schedule.”
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
5)
a) The work of reinstatement (which may be carried out upon another site and
in any matter suitable to the requirements of the Assured subject to the
liability of the Underwriters not being thereby increased)…
c) No payment beyond the amount which would have been payable under the
Policy if this memorandum had not been incorporated therein shall be made
until the cost of reinstatement shall have been actually incurred.”
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Thus the material damage cover in the Policy included two significant
benefits to the Claimant:
˗ First, the cover was written on a reinstatement basis. The policy defined
“reinstatement” as “the rebuilding of the property… in a condition equal to but not
better or more extensive than its condition when new.”
˗ Second, the Policy provided that the work of reinstatement “may be carried out
upon another site and in any manner suitable to the requirements of the Assured
subject to the liability of the Underwriters not being thereby increased.”
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The Claim
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The Defence
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The Defence
Misrepresentation as to occupancy;
˗ No diminution in value
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The Defence
The issue of Value and Loss:
˗ (Construction costs)
˗ (Professional fees)
˗ (Marketing fees)
˗ (Finance)
˗ (Developers Profit)
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The Defence
The issue of Value and Loss:
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
But…
Proposed development keystone for larger development
GDV ignores fact that site already owned and doing nothing
˗ On another site
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Furthermore…
Where, as here, the insured is a tenant who is obliged to replace lost property,
then the amount of the insured’s loss is the cost of reinstating the lost property
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
2. To reinstate the property, but, at the same time, to take advantage of its
destruction to make certain minor changes so as to improve what was therefore
before
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
No misrepresentation
No non disclosure
No breach of warranty
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The prima facia rule is that the assured’s loss in the event of damage to
buildings is the cost of reinstatement (Colinvaux (2013 supplement)
The facts of this case do not require a departure from the prima facia
rule
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
The Appeal
1. The Judge failed to decide whether Insurers were in breach of indemnity, and if they were, in
respect of what damage.
2. The Judge was wrong to hold that where an Insurer has repudiated the Policy, the Insurer
cannot rely on the proviso to the reinstatement clause, that the costs of reinstatement will
only be paid once they have been incurred.
3. The Judge was wrong to grant a declaration that the Claimant is entitled to be indemnified
under the terms of the Policy in respect of losses it has suffered, because the Claimant has
not suffered any loss and there is no realistic prospect that such a breach will occur in future.
4. To the extent that the Judge decided that the Claimant intended to reinstate the insured
property, he was wrong to do so, and/or misdirected himself in law as to the meaning of
reinstatement in the context of the policy.
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
b) The interest of the insured in, or its obligations in respect of, the property
insured; and
c) The facts of the case including, in particular, the intention of the insured at the
time of the loss
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Following loss, insurers argued (i) loss was only £5,000 (i.e, DV); alternatively (ii) loss
should be measured on market value or cost or modern replacement (iii) no
commercial person would spend £250,000 rebuilding an obsolete building if modern
equivalent was faction of the price
Court said, no, insured had genuine intention to reinstate which was not eccentric
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Policy provided indemnity for full value of loss with reinstatement at insurer’s option.
Court held that it was evident that insured never intended to live in the cottage, which
had a sale price of £4,500 at the time of loss
Therefore, market value was correct basis of indemnity, which was the advertised
price less the site value of £1500
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Fire occurred, insurers repudiated on grounds of fraud and disputed the basis of
indemnity
Court said not proved that insured would have reinstated if insurers had paid
promptly; the insured had sold the property, and had not done so as a result of the
fire.
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Insurers argued that disposal of interest and payment of full completion price meant
Landlord was fully indemnified
Court said Landlord had a liability to the tenant to reinstate, and therefore could
recover the full indemnity calculated as the cost of reinstatement
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
There was no failure to reinstate with reasonable dispatch while liability not admitted
and the measure of indemnity in dispute
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Western Trading Ltd v Great Lakes Reinsurance UK Plc
Conclusions
In particular circumstances, the court will recognise informal commercial relations
The measure of indemnity depends on (i) the policy, (ii) the insured’s interest in, and
obligations in respect of, the property, and (iii) the facts of each case including the
intention of the insured
Intention is assessed at the time of the loss, and on the assumption that the
insurance proceeds are paid promptly
Time for reasonable dispatch does not run until insurers confirm (i) liability, and (ii)
that the measure of indemnity is the cost of reinstatement
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Questions
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Contact
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Reinstatement: A Claimant
SIG Perspective
by the CILA Claimant SIG
Opened by:
Jonathan Clark, CILA President
Speaker:
Roger Franklin, Partner, Edwin Coe LLP