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The National Farmers Union Mutual Insurance Society Limited v HSBC Insurance (UK) Limited [2010] EWHC 773 (Comm)

This case concerned a property sold for £1.81m. A clause of the contract provided that the risk of damage to or destruction of the property passed to…

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:

  1. Did the HSBC policy provide cover to the buyer for damage due to fire?
  2. Did the NFU policy contain only a general pro rata clause where there is other insurance covering the same damage?  
  3. 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.