Insurance Law Monthly

In the wake of the House of Lords’ decision in Stone & Rolls Ltd v Moore Stephens [2009] UKHL 39 on the question as to a defendant’s ability to raise illegality as a bar to recovery of damages or indemnity, two further recent decisions of the High Court shed additional light on this difficult question. In the Moore Stephens case the issue was whether a company in liquidation, which had been used as a vehicle for fraud by its sole director and beneficial owner, could claim against the company auditors for failure to detect the fraud. By majority, the Lords held that in the case of a ‘one man’ company who is also the owner the fraudulent conduct is to be treated as the company’s conduct, and the claim was therefore defeated by the illegality principle. The issue in Safeway Stores Ltd and Others v Twigger and Others [2010] EWHC 11 (Comm) and Griffin v UHY Hacker Young & Partners (A Firm) [2010] EWHC 146 (Ch) was as to the extent to which a company and/or an individual have the right to claim indemnification in respect of the fine or penalty from the person who caused the final penalty to be incurred in the first place. The cases are analysed by Francis Kean of Barlow Lyde & Gilbert LLP.

On 15 December 2009 the Law Commission produced the first fruits of the work on insurance contract law reform which began with the Scoping Paper in January 2006. The Consumer Insurance (Disclosure and Misrepresentations) Bill is accompanied by the joint Law Commissions’ Report No 319. The draft is discussed by Johanna Hjalmarsson of the University of Southampton.

In Global Process Systems Inc & Anr v Syarikat Takaful Malaysia Berhad [2009] EWHC 637 (Comm), the Court of Appeal has dealt a blow to insurers by narrowing the scope of the ‘inherent vice exclusion’ and in so doing cast doubt on the decision in Mayban General Insurance v Alstom Power Plants [2004] 2 Lloyd’s Rep 609 . The Court of Appeal, reversing the first instance decision of Blair J, discussed in the August 2009 issue of Insurance Law Monthly, has found that the crucial question is not what might be reasonably foreseeable as the ordinary incidents of a sea voyage but what would be bound to occur in the course of a voyage of the type being undertaken at the time that the loss eventuates. The case is discussed by David Turner QC and Clare Dixon of 4 New Square.