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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Watford Community Housing Trust v Arthur J Gallagher Insurance Brokers Ltd [2025] EWHC 743 (Comm) (08 April 2025) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2025/743.html Cite as: [2025] EWHC 743 (Comm) |
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BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
(sitting as a Deputy High Court Judge)
____________________
WATFORD COMMUNITY HOUSING TRUST |
Claimant |
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- and - |
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ARTHUR J. GALLAGHER INSURANCE BROKERS LIMITED |
Defendant |
____________________
MR SIMON HOWARTH K.C. (instructed by Beale & Co) for the Defendant
Hearing date: 17 December 2024
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Crown Copyright ©
David Bailey K.C. (sitting as a Deputy High Court Judge):
"Whether, on a proper construction, the double insurance provisions in the Claimant's insurance policies have the effect that the Claimant has suffered no loss by reason of the Defendant's breach because it has already received a greater indemnity than it would have done if all insurers had been properly notified but had stood on their strict rights pursuant to those double insurance clauses."
Factual Background
a. A "Cyber Policy", which was underwritten by PEN Underwriters on behalf of various Lloyd's Syndicates ("Cyber Insurers") and provided such cover subject to an aggregate limit of £1,000,000 (inclusive of defence costs) and an excess of £5,000 each and every claim;
b. A "Combined Policy", which was underwritten by QBE and provided such cover subject to an aggregate sub-limit of £5,000,000 (inclusive of defence costs) and an excess of £500 any one occurrence; and
c. A "PI Policy", which was underwritten by Hiscox and provided such cover subject to a limit of £5,000,000 any one claim (but with defence costs being in addition to that limit) and an excess of £5,000 each claim or loss.
The Other Insurance Clauses
"OTHER INSURANCE
This insurance shall apply in excess of any other valid and collectible insurance available to You, including any excess or deductible portion thereof, unless such other insurance is written only as specific excess insurance over the limit of liability of this Policy."
"Claim means
….
Multiple Claims arising from the same or a series of related or repeated acts, errors or omissions or continuing acts, errors, or omissions shall be considered a single Claim for the purposes of this policy, irrespective of the number of Claimants or You involved in the Claim. All such Claims shall be deemed to have been made at the time of the first such Claim was made or deemed made..."
"10.17 Non-Contribution
If at the time of any claim under this policy there is any other valid and collectible insurance available to the insured... other than insurance that is specifically stated to be in excess of this policy... then the insurance afforded by this policy will be in excess of and will not contribute with such other insurance."
"11.15 Limit of indemnity
Limit of Indemnity means:
11.15.1 the amount stated in the schedule which is the maximum amount of the insurer's liability for any one (1) occurrence regardless of the number of... (c) claims against the insured or series of claims against the insured, or claims or series of claims made by the insured..."
"Other insurance
We will not make any payment under this policy where you would be entitled to be paid under any other insurance if this policy did not exist except in respect of any amount in excess of the amount that would have been payable under such other insurance had this policy not been effected."
"All claims and losses which arise from the same original cause, a single source or a repeated or continuing shortcoming in your work will be regarded as one claim. This includes such claims and losses arising after, as well as during, the period of insurance."
The Rival Cases in Outline
The Issues
Discussion and Analysis
"In my judgment it is unreasonable to suppose that it was intended that clauses such as these should cancel each other (by neglecting in each case the proviso in the other policy) with the result that, on the ground in each case that the loss is covered elsewhere, it is covered nowhere. On the contrary the reasonable construction is to exclude from the category of co-existing cover any cover which is expressed to be itself cancelled by such co-existence, and to hold in such cases that both companies are liable, subject of course in both cases to any rateable proportion clause which there may be. In other words, it is true to say that the relative or friend is not 'entitled to indemnity under any other policy' within the meaning of the Road Transport policy, and not 'afforded' indemnity 'by any other insurance' within the meaning of the Cornhill policy, when the other policy negatives liability where there are two policies. At that point the process must cease. If one proceeds to apply the same argument to the other policy and lets that react upon the policy under construction, one would reach the absurd result that whichever policy one looks at it is always the other one which is effective."
<
"It was argued on behalf of the defenders and respondents that the presence of the words 'or would but for the existence of this policy be insured' in condition 4 of the defenders' policy took the present case outside the principle or rule of construction which, in my opinion, is derived from [Weddell]… It must, I think, be conceded that these words do create a difficulty, since on an absolutely literal construction, they might be read as catering for a situation such as that which has arisen in the present case. But, in my opinion, even with the addition of these words, the condition being considered in the present case falls within the principle or rule of construction which was applied by Rowlatt J in Weddell…"
"It is said by the defenders that the meaning of the words in condition 4 is clear, and that the phrase 'or would but for the existence of this policy be insured' specifically and directly cover the situation… I agree with your Lordship that this view should not be accepted, upon the principle set out in Weddell. If it is accepted that the exclusion condition in each policy excludes liability for the event which happened because of the existence of the other policy, this means that the relevant loss is not effectively covered by either policy. On that view the exclusion of the words 'or would but for the existence of this policy be insured' does not make any difference."
"Apart from express condition, both double insurance and over-insurance are perfectly lawful; one may insure with as many insurers as one pleases and up to the full amount of one's interest with each one. If a loss occurs, the insured may, in the absence of a pro rata contribution clause, select any one or more insurers and recover from him or them the total amount of the loss. If he fails to recover his whole loss from those against whom he has proceeded in the first instance, he may recover the balance from any one or more of the others."
"The fact that there is double insurance does not necessarily mean that the assured can recover separately under each policy, for the common law principle of indemnity provides that an assured can recover in the aggregate at most only an amount representing his actual—or, in the case of a valued policy, his agreed—loss, so that in the case of over-insurance by way of double insurance, part of the total sum insured will not be recoverable. However, the common law allows the assured a free choice of the manner in which he makes up his indemnity, so that, subject to the indemnity cap, he is permitted to pursue the insurers in such order and for such proportions of his loss as he thinks fit. That rule was obviously essential to the original function of double insurance, the fear of underwriter insolvency."
In Newby v Reed, Lord Mansfield ruled that in a case of double insurance the insured was entitled to recover a full indemnity from either insurer leaving the paying insurer at liberty to seek a contribution from the other insurer if he thought fit to do so. In Bruce v Jones the insured had taken out four policies of insurance on a vessel each of which had a different agreed value. Having recovered an aggregate sum of £3126 under the first three policies, the court found that the insured could recover the balance of its loss under the fourth policy but only up to a maximum of £3200 (i.e. a further £74) being the agreed value of the vessel in that policy. More pertinently for present purposes, in Bousfield v Barnes the insured had the benefit of double insurance on a vessel worth in excess of £8000. The first policy provided cover up to £6000 and the second policy provided cover up to £600. Having recovered £6000 on the first policy the insured sued the underwriters on the second policy who refused to pay on the grounds that the insured had already received the maximum sum to which he was entitled. Lord Ellenborough disagreed ruling that the insured was entitled to exhaust the first policy and then claim the balance of his loss under the second policy. He said:
"I will likewise take care that the assured do not recover upon the whole more than the real value of the subject matter insured. But I think it is not enough for the underwriters on a particular policy to shew that the assured has received from another quarter the amount of the valuation in that policy, unless this amounts in point of fact to a complete indemnity. In the present case the ship insured is proved to have been worth above £8000. The plaintiff has received only £6000 from the London Assurance. He has therefore an interest of £2000 to which he may apply the policy on which the action is brought. That policy is only subscribed for £600. Therefore, when the whole of that sum has been paid, he will still be a loser to the amount of £1400 by the total loss of his vessel."
"The documents to be construed are policies, the parties to each of which are an assured and an insurer. It is not to be supposed that when either policy is issued the insurer knows that there is, or is going to be, another policy covering the same risk. Each limit of liability and each premium may be taken to be fixed without knowledge of the limit under any other policy that may have been, or is going to be, issued. It is difficult to suppose that when a limit of £10,000 was fixed by the defendant, it could have been intended that if there happened to be another policy with a limit of £100,000, the defendant should be liable for only one-eleventh of any claim, however small. The independent liability basis is much more realistic in its results. In the case of these two policies, any loss up to £10,000 would be shared equally, and it is only with larger losses that the proportion of the plaintiff's share to the defendant's share steadily increases until, with a loss of £110,000 or more, 10/11 of the liability falls on the plaintiffs. The obvious purpose of having a limit of liability under an insurance policy is to protect the insurer from the effect of exceptionally large claims: it seems to me artificial to use the limits under two policies to adjust liability in respect of claims which are within the limits of either policy." [Emphasis supplied].
"In the present case the plaintiff insurance company insured the claim which was made. They can only diminish liability if there is another policy under which the solicitors are entitled to indemnity. The defendant underwriters never did insure the claim which was made. They cannot be made liable wholly or partly for a risk which they did not insure. If the solicitors sued the plaintiff insurance company, the plaintiff insurance company could not argue that they were not liable. They must accept liability, but plead that the solicitors cannot recover more than 50 per cent because they are also insured by the defendant underwriters. If, however, the solicitors sued the defendant underwriters the defence would be that the Master Policy did not insure the claim at all and that the notice dated 11th August 1976 was ineffective against the underwriters and misconceived. In my judgment an action against the plaintiff insurance company would succeed for the whole claim and an action against the defendant underwriters would be dismissed. In short, the plaintiff insurance company can only limit their liability if there was double insurance – and there was no double insurance. I would allow the appeal accordingly."
"What damage they have suffered does not depend upon whether Eagle Star would have been entitled as a matter of law to repudiate liability under their standard policy, but whether as a matter of business they would have been likely to do so. What the employers have lost is the chance of recovering indemnity from the insurers. If Eagle Star would not have been entitled to repudiate liability in law, cadit quaestio; the damages recoverable would amount to a full indemnity. Even if they would have been entitled in law, however, to repudiate liability, it does not in my view follow that the employers would be entitled to no damages. The court must next consider in that event, what were the chances that an insurance company of the highest standing and reputation, such as Eagle Star, notwithstanding their strict legal rights, would, as a matter of business, have paid up under the policy."
Conclusion