London Market - August 2010
Double Insurance, Damage to Property Between Exchange and
Completion
The National Farmers Union Mutual
Insurance Society Limited v HSBC Insurance (UK) Limited
[2010] EWHC 773 (Comm)
This case concerned a property (the “Old
Hall”), which was sold for £1.81 million. The seller and the buyer
exchanged written contracts on 10 October 2007 and completion was
scheduled for 7 November 2007. A clause of the sale contract
provided that the risk of damage to or destruction of the Old Hall
passed to the buyer on exchange.
The seller had an insurance policy with HSBC
Insurance (UK) Limited (“HSBC”) and before exchange the buyer took
out a policy with the National Farmers Union Mutual Insurance
Society Limited (“NFU”).
There was a fire at the Old Hall on 27 October
2007, between the dates of exchange and completion, where under the
terms of the sale contract the Old Hall was at the risk of the
buyer.
The sale was finally completed on 21 March
2008. The buyer made a claim under its policy with NFU. NFU sought
a contribution from HSBC on the basis that at the time of the fire
the buyer was covered by both the NFU and HSBC policies and
therefore there was an issue of double insurance. HSBC denied
liability on the basis that on the proper construction of their
policy the buyer was not covered by HSBC at all.
The terms of the HSBC policy stated:
“WHAT IS COVERED
The buildings for physical loss or
physical damage… the insurance also covers … anyone buying your
home…until the sale is completed.”
“WHAT IS NOT COVERED
We will not pay… if the buildings
are insured under any other insurance.”
The NFU policy contained the following
clause:
“Other insurance
If when you claim there is other
insurance covering the same accident… we will only pay our
share.”
The trial focused on three preliminary issues,
namely:
- Did the HSBC policy provide cover to the
buyer for damage due to fire?
- Did the NFU policy contain only a general pro
rata clause where there is other insurance covering the same
damage?
- Was the cover for buyers in the HSBC policy
limited to assisting in the event that the buyer did not
complete?
Mr Gavin Kealey QC, sitting as a deputy High
Court Judge, held that on the proper construction of the two
policies the HSBC policy did not extend to cover the buyer pending
completion of the sale.
The Old Hall was only covered by the NFU
policy and therefore no question of double insurance arose.
HSBC were not liable to make a
contribution.