Lloyd's Maritime and Commercial Law Quarterly
RESTITUTIONARY RECOVERY OF PREVENTION COSTS BY AN INSURED?
In a recent article in this Quarterly,1 Peter MacDonald Eggars argued that an insured owes his insurer a general contractual duty to mitigate his loss after the happening of an insured peril, and that it is consistent with the policy underlying the imposition of this duty that the insured should also be placed under a general contractual duty to avert insured perils before they occur, regardless of whether the policy contains a sue and labour clause placing him under an express contractual duty to do so. He also argued that, since the insured is permitted by law to recover from his insurer in respect of costs incurred in the performance of the first duty, he should in principle be allowed to recover costs incurred in the performance of the second duty as well. The purpose of this note is not to criticize this thesis, nor to take issue with the view that in principle an insured should be entitled to recover prevention costs from his insurer, notwithstanding recent decisions tending to the contrary, such as Yorkshire Water Services Ltd v. Sun Alliance & London Insurance Plc
2 and Commercial Union Assurance Co. Plc v. N.R.G. Victory Reinsurance Ltd.3 Rather, it is proposed to say something here about an alternative argument which might be made by an insured seeking to recover prevention costs, that an insured who saves his insurer from expense by preventing the occurrence of an insured peril should in principle be entitled to recover his costs from the insurer on restitutionary grounds. The point has been taken by other writers that in principle a restitutionary action might lie in this situation,4 although there is no English authority to support the view that such an action would be successful,5 and Eggars briefly touches on the idea before dismissing it with the very wide statement that “no matter what ingenious argument based on unjust enrichment may be developed, it is unlikely to evolve into a principle upon which an assured can base his right of recovery of sue and labour expenses in all cases”.6 The purpose of this note
1. “Sue and Labour and Beyond: The Assured’s Duty of Mitigation” [1998] LMCLQ 228.
3. [1998] 2 All E.R. 434.
4. J. W. Wade, “Restitution for Benefits Conferred Without Request” (1966) 19 Vanderbilt L.R. 1183, 1188–1190; Anon., “Allocation of the Costs of Preventing an Insured Loss” (1971) 71 Col. L.R. 1309, 1318 (although the author of this article confuses “quasi-contractual” recovery with recovery under an implied contractual term); G. Gilmore and C. L. Black, Jr., The Law of Admiralty, 2nd edn (Mineola, N.Y., 1975), 76, n. 93; G. E. Palmer, The Law of Restitution (Boston, Mass., 1978), Vol. II, 409–410; S. Levmore, “Explaining Restitution” (1985) 71 Va. L.R. 65, 117–120; F. D. Rose, “Aversion and Minimisation of Loss”, Chap. 7 of D. R. Thomas (ed.), The Modern Law of Marine Insurance (London, 1996), 225–227; M. A. Clarke, The Law of Insurance Contracts, 3rd edn (London, 1997), 784.
5. It was said in Aitchison v. Lohre (1879) 4 App. Cas. 755, 766, per Lord Cairns, L.C., that, “if any expenses were to be recoverable under the suing and labouring clause, they must be expenses assessed on the quantum meruit principle”. Clarke, supra, fn. 4, at p. 784, interprets this as authority for the proposition that recovery of mitigation and prevention costs “might … be based on restitution”. However, Rose, supra, fn. 4, at p. 226 correctly points out that the statement is in fact “equivocal, since it could be concerned with quantification as much as with the principle of liability”, and more recently, the Court of Appeal in Royal Boskalis Westminster N.V. v. Mountain [1997] 2 All E.R. 929 clearly regarded it as a statement concerned with quantification, and wrong in principle to boot (at 937–939, per Stuart-Smith, L.J.). In this connection, it should also be stressed that “a quantum meruit claim … straddles the boundaries of what we now call contract and restitution, so the mere framing of a claim as a quantum meruit claim, or a claim for a reasonable sum, does not assist in classifying the claim as contractual or quasi-contractual”: British Steel Corp. v. Cleveland Bridge & Engineering Co. [1984] 1 All E.R. 504, 509, per Robert Goff, J.
6. [1998] LMCLQ 228, 242.
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