CONSTRUCTION Starfire Diamond Rings v. Angel [1962] 2 Lloyd’s Rep. 217, CA. Grundy (Teddington) Lid v. Fulton [1983] 1 Lloye’s Rep. 16, CA ‘Athens Maritime y, Hellenic Mutual (1983] 1 AITE.R. 590. Longford v, Legal & General [1986] 2 Lloyd’s Rep. 103. Dino Services Lid v, Pradential Asrurance Co, Ld [1984] 1 All ER. 422, CA. Kelly v. Norwich Union [1 ‘Ackman v. Policyholders Protection Board [1993] 2 Lioyd's Rep. 533 Deutsche Genossenschaftsbank v. Burnhope Middleton v. Wiggin (1996] 2 Lloyd’s Rep 129 Lancashire County Council v. Municipal Mutual (1996] 3 493. Proudfoot v. Federated Insurance [1997] LR.LR. 659 4081 [NEXT PAGE 4083], Insurance R29: December 1997 PARA. 4181 4182 4183 4184 4185 £186 4.187 4188 4189 4190 4491Construction Starfire Diamond Rings v. Angel [1962] 2 Lloyd’s Rep. 217 Court of Appeal Policyholder dealt in precious stones and had a policy covering inser alia, theft of stones from his car while in transit. The policy contained an exclusion if stones were stolen from a car which had been “left unat- tended”. A theft occurred while the policyholder was some 37 yards away, though he claimed that he had the car in view at all material times. Held, that the car was left unattended for the purposes of the exclusion. The purpose of this clause was to ensure that there would at all times be someone close enough to the car to give effective protection against the risk of theft, and that requirement was not satisfied here Grundy (Teddington) Ltd v. Fulton [1983] 1 Lioyd’s Reports 16 Court of Appeal The policy covered “theft of goods in enclosed yards”. Goods disap- peared while in transit between two depots belonging to the policyholder. Held: That where a policy uses a word which has a technical legal meaning that meaning is normally to be ascribed to the word. Thus, “theft” must be construed in accordance with section 1 of the Theft Act 1968. On the facts the dishonest appropriation of the goods had taken place when the driver of the lorry carrying them deviated from his proper Toute. Accordingly, this was not a case of theft in an enclosed yard, and the claim failed. Athens Maritime v. Hellenic Mutual [1983] 1 AN E.R. 590 Staughton J. This case concerned a marine policy which covered, inter alia, “pi and riot”. The insured vessel was raided while anchored in territorial ters, and property was stolen. However, violence and/or threats of violence were used only when the raiders were discovered in the course of making their getaway. Held: (1) that piracy can take place within territorial waters, but involves some element of force in the commission of the theft. This was lacking in the present case, since the theft was complete before any element of force intruded. (2) That riot also involves force, and the loss was not caused by riot for the reasons given in the previous paragraph. 4083 Insurance R21: Janusey 1994 4481 4182 4183 41834184 418s 4.186 4187 4-184 Parr 4: Cases Langford v. Legal & General [1986] 2 Lloyd’s Rep. 103 Judge Hawser Q.C. sitting as a High Court Judge In a traders’ theft policy there was an exclusion for theft from an unattended vehicle. Theft occurred when the policyholder had left the vehicle for a period of about five seconds. ‘Held: That the vehicle was not “unattended” within the meaning of the exclusion clause. Whether a vehicle has been left unattended is always question of fact for the judge to determine. Dino Services Ltd. v. Prudential Assurance Co. Ltd. [1989] 1 ANE.R. 422 Court of Appeal A business policy provided cover against theft, but only where entry to the premises had been achieved by “forcible and violent means” Policyholder left the keys to his business premises in his car, from where they were taken and used to gain entry. Insurers contended that entry gained by using the keys was not by forcible and violent means. Held: That the entry was by forcible means, namely the opening of the doors, but was not by violent means, since this implied a greater element of force than was implicit in forcible entry. The requirement would have been satisfied if, for example, the door had been broken down. ‘Accordingly, the claim failed Kelly v. Norwich Union [1999] 1 WLR. 139 Court of Appeal Household buildings policy providing cover against loss arising from “events occurring during the period of insurance”. Burst water m: were an insured peril. In 1977, before the policy came into force, a pipe burst, causing 2 prolonged discharge of water. The resultant damage to the policyholder’s home occurred during the period of insurance Held: That the insurers were not liable for the loss. The “events” referred to in the policy were the happening of any of the specified perils, not the loss to the policyholder resulting from the operation of those perils ‘Ackman ¥. Policyholders’ Protection Board [1993] 2 Lloyd's Rep. 533 House of Lords ‘The plaintiffs were doctors, accountants and lawyers practising outside the U.K. bat who has professional indemnity policies with insurers authorised under the Insurance Companies Act 1982. They had been sued 4084 Insurance R21: January 1994Coxsrauction for professional negligence but their insurers were insolvent, and the issue ‘on appeal was whether they were entitled to be assisted under the Policyholders’ Protection Act 1975, which depended on the meaning of the definition of a U.K. policy in section 4(2).. Held, dismissing the appeal, in considering the true meaning of the definition of U.K. policy in section 4(2) of the 1975 Act it had to be tested as, applicable not only at the beginning of the liquidation but also at the time of the recording of net premium income. Section 4 was introduced by “Protection confined to [U.K.] policies” presumably because it was not enough merely to establish that the insurer in question was an authorised insurance company; it was also necessary to show that, at the material time, the policy in question was a U.K. policy. It was clear that the definition was, directed not to the effecting of the relevant policy, but to carrying it out since, under it, it was necessary to enquire whether, at the material time, performance under the policy would constitute the carrying on by the insurer of insurance business of any class in the U.K. ‘A policy was a U.K. policy if, had any of the obligations under the contract evidenced by the policy been performed at the relevant time, such performance would have formed part of an insurance business which the insurer was authorised to carry on in the U.K., whether or not such obligations would have been performed in the UK. Deutsche Genossenschaftsbank v. Burnhope [1996] 1 Lloya’s Rep. 113; [1995] 4 AIIE.R. 717 House of Lords ‘The plaintiff bank was insured under a policy issued by the insurers against direct financial losses incurred by theft, larceny or false pretences committed by persons present on the bank's premises. The bank was the victim of a fraud perpetrated by the chairman of a financial company, a customer, which had deposited with it treasury bills and certificates of deposit to a value of approximately £9 million as security for a credit line Joan up to that amount. He had persuaded the bank to release the security documents in exchange for acceptable alternative security documents to be delivered by the close of business on the same day. A junior employee of the company took physical delivery of the security documents but the-alterna- tive security documents were not delivered to the bank. Three days later the company was suspended by the Bank of England and its chairman arrested and charged with fraudulent trading. The bank was unable to obtain repayment of the credit line loan and made a claim for its amount on its bankers’ policy. The insurers refused to pay on the grounds that the theft was not a risk covered by the policy because it had not been committed by persons present on the bank's premises. It was held in the trial of the preliminary issue that, although it was not disputed that the bank's securities had been the subject of a theft, it was not entitled to recover because the only person connected with the theft who was, on the bank’s premises at the time was the innocent employee of the company who had collected the documents, andthe was not alleged to have been dishonest or to have committed any criminal offence, the theft having ‘been committed by the chairman and through him the company. The bank’s 4085 Insurance R28: April 1997 4.487 4188Construction ‘The word “disposal” did not bear any special meaning and would be taken, consistently with the dictionary definition and with the context, to ‘mean “putting away, getting rid of ... or definitely dealing with”. Whether the defendants’ method of disposal involved merely burying the waste or extended to allowing it to decompose was a question of fact. On the factsand. the evidence the waste, the decomposition of which caused the accident, was disposed of by them when they buried and left it, and there was no accident in the method of disposal. The appeal would be allowed. Lancashire County Council v. Municipal Mutual [1996] 3 WLR. 493 Court of Appeal ‘The Council obtained a declaration that the insurer was liable to indemnify it and its chief constable under a public liability policy in respect of an award of exemplary damages. The insurer appealed, arguing that the judge had failed to give effect to the ‘ordinary meaning of the word “compensation”; and in holding it included ‘exemplary damages, the object of which was to punish and deter rather than, ‘compensate. Held: Although the natural and ordinary meaning of “compensation” in the context of a legal liability to pay damages would exclude exemplary damages, its meaning was not wholly clear and unambiguous. Given that the ‘word was capable of including or excluding exemplary damages, it was to be construed so as to include the payment of exemplary damages in the context ‘of this policy. ‘The important consideration was that whereasin the original printed form any compensation payable had by definition to arise out of “injury, illness, loss or damage” which was “eccidental”, the policy issued here, with an endorsement, required the word to be construed in a strikingly different context, one which expressly encompassed claims against the police for assault (deemed accidental), wrongful arrest, malicious prosecution and. false imprisonment. Torts of this sort by their very nature attracted claims, for exemplary damages. Such claims were commonplace. ‘There was nothing in the cases or in logic to justify extending the public policy principle that a person could not insure himself against liability consequent on commission of a crime to those whose sole liability arose vicariously, There was no authority in English law that it was contrary to public policy for an insured to recover in respect of an award of exemplary damages, whether imposed in relation to his own conduct or conduct for which he was vicariously liable, Nor did it appear that there was uniformity of approach in foreign jurisdictions. The question was whether the Court should create and impose a rule of public policy in English law refusing to permit indemnity against such awards. That would be inappropriate. It was, true that allowing insurance reduced the deterrent and punitive effect of such damages, but there was a separate public interest in holding parties to their contracts, especially as it was open to the insurer to exchude liability for exemplary damages. Moreover, if the damages were held recoverable t insurers, the burden fell onto the general public by way of higher premiums. But if they were not, the burden fell onto the local body of ratepayers. 4087 Insurance R2% Deoomber 1997 41904191 Parr 4: Cases ‘The courts should be wary of minting new rules of public policy when the legislature had not done so, particularly where, as here, the future of ‘exemplary damages was in a state of uncertainty and subject to active and extensive consideration, The Law Commission's consultation paper, Aggra- vated Exemplary and Restitutionary Damages (1993, No. 132) canvassed @ wide range of possibilities as to the appropriate way forward. A sudden burst of common law creativity should not be one of them. ‘The insurer was liable to indemnify the Council and the chief constable against awards of exemplary damages. The appeal would be dismissed. Proudfoot v, Federated Insurance [1997] LRLR. 659 ‘Queen's Bench Division Subsidiaries ofthe plaintiff used Payroll Services Ltd (PSL) to administer its payroll. It transpired, on its liquidation, that PSL had misused funds, and the plaintiff tried to recover its losses under « crime insurance policy. It asserted that they arose from theft of either “money” or “other property” by PSL, which was a “trustee” under the employee definition in the policy. On the trial of a preliminary issue: ‘Held: As to whether PSL was holding the moneys “in trust” the accounts into which the subsidiaries made their payments were designated client accounts, a clear expression of an intention to create a separate fund of clients’ moneys, distinct from the general moneys of PSL. With the exception of the fees due to PSL, clients’ moneys were sent toitin advance of any onwards disbursements, for the express and specific purpose of being. spent in payment of identified payroll and revenue requirements. In the normal course of events, the moneys would or ought to have been expended in accordance with that direction and purpose so that nothing would return to the plaintiffs, but if that purpose failed the money would be returnable. ‘The authorities showed that the critical question was whether the person rho received the funds was bound to keep them separate, and that the most, significant single factor in determining that was whether the parties had agreed expressly or by imputation from their conduct as a whole that the funds be paid into a special account The plaintiff made payment into a special account, designated as a “clients’ account”, and the funds so paid, ‘save for the very small amount in respect of PSL's own fees, were designated for payment out to specified staff and the revenue; the moneys were trust ‘moneys and not mere items of credit and debit. Designation of an account as. a “clients’ account” to hold moneys not intended to be to the ultimate personal credit of a payee, especially where that payee was acting as the payer's agent, was a well known indicator that the moneys so paid would be kept separate from the agent’s own funds and would be held in trust. PSL. ‘was a trustee of the relevant funds, (On the issue of whether PSL was performing acts coming within the scope of the usual duties of an employee, a director or trustee was covered under the policy providing he was performing either the usual duties of the insured’s ordinary employees or his usual duties as such a director or trustee. The policy would cover theft or forgery by a director or trustee while performing acts coming within the scope of his usual duties as such. ‘Therefore the insurer could not rely on the fact that the plaintiff had not 4088 Tnsurance R.29: Desomber 1997Consravcrion conducted its own payroll in-house for more than 20 years. If PSL was a “trustee” for the purposes of the relevant clause of the policy, then the issue would be whether relevant loss was caused by its theft or forgery while performing acts coming within the scope of its usual duties as a trustee. ‘While administering the payrolls, PSL was performing acts coming within the scope of the usual duties of an employee as defined in the policy, provided PSL was a “trustee” for those purposes. If “trustee” was given the meaning for which the plaintiff contended, it would be the only example in the relevant section of “employee” extending to a non-individual. In such circumstances, and against the background fact thet an employer was a natural person, an intention to extend the definition to a non-natural person needed to be made clear, either expressly or in context. There was nothing which made that extension clear. Further, the expression “director or trustee of” suggested that a trustee, like a director, was some form of individual, officer or manager of the insured. PSL, apart from being a company, did not, have that status but was a trustee of the trust funds for the plaintiff. ‘The extensions to the meaning of “employee” were narrow and indicated no intention to include a corporate sub-contractor who happened to be a trustee of an insured’s property. Support for the insurer’s submission as to the meaning of “trustee” could be found in the fact that no cover was provided for loss caused by an independent contractor, or in the case of theft of other than tangible property. PSL was not an “employee” within the meaning of the relevant section. [THE NEXT PARAGRAPH IS 4-201] 4089 [NEXT PAGE 4091) Insurance R29: Devember 1997