Insurance Update
OCTOBER 2016 INSURANCE UPDATE Property policies - The effect of reinstatement provisions On 10 October 2016, the English Court rebuild the premises, although no reinstatement work had of Appeal (Court) handed down an important at that stage been carried out. The judge dismissed the insurers’ defences and granted the declaration. The Court, decision on the measure of indemnity under a making a minor variation to the judge’s ruling, upheld his property policy and, in particular, the effect of general conclusions. reinstatement provisions. The Court laid down the following general principles: In Great Lakes Reinsurance v Western Trading,1 1. Where real property was destroyed, the measure of the insured company was the occupier and manager of indemnity to which the insured was entitled depended premises belonging to the company’s controller, Mr Singh. on: The insured was under an obligation to insure the premises i. the terms of the policy; and to reinstate them in the event of loss or damage. The premises, for which planning permission to convert into ii. the interest of the insured in, or its obligations in apartments had earlier been obtained, were unoccupied respect of, the property insured; and and used for storage. They were insured under a policy iii. the facts of the case, including, in particular, the for the sum of £2,121,800, representing the rebuilding intention of the insured at the time of the loss. If cost of the property. The market value was only £75,000. the insured had a limited interest in the property, it The policy provided that the insurers would indemnify the would be material to consider whether the subject insured against loss or damage, but reinstatement costs matter of the insurance was the whole interest in were payable only if the reinstatement work had been the property insured and not solely that of the commenced and carried out with reasonable despatch.
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