ENGLISH INSURANCE LAW
Endurance Corporate Capital Ltd v Sartex Quilts & Textiles Ltd
Property insurance—reinstatement—basis of assessment
The issue on appeal in this case was the correct test for assessing the sum payable under a policy of insurance on land and buildings where the policy made no express provision. More specifically, the question was whether the insured needs to show a genuine, fixed and settled intention to reinstate in order to be able to recover indemnity assessed on a reinstatement basis.
: The dispute arose in the context of insured industrial premises which had been substantially damaged by fire. The policy of insurance covered buildings, machinery, plant and business interruption losses. Following the fire, the insurer had met the business interruption losses but disputed the insured’s basis of recovery on the buildings head of cover. The insured brought a claim which succeeded at first instance;2
the insured having been awarded damages assessed on the reinstatement basis. That was so notwithstanding the fact that some eight years after the fire the insured had not taken any tangible steps to reinstate. At trial the insured proved that it had an intention to reinstate immediately after the fire. Other options had been subsequently canvassed but by the time of the trial the insured’s intentions had settled back to reinstatement of the facility.
The conclusion at trial was that after the fire the insured did not have a fixed or settled intention to reinstate but did have a fixed intention either to carry on business by reinstating the premises or by establishing a facility elsewhere. The insured’s claim succeeded and a subsidiary defence as to betterment was also defeated.
On appeal the insurer contended that the reinstatement basis was not the appropriate test because the insured did not have a genuine, fixed or settled intention to reinstate; and, further, that some deduction ought to be made for betterment. The policy wording contained an express term as to indemnity being calculated by reference to the cost of reinstatement, which was itself made subject to a cap. The cap was expressed to be the amount which would have been payable in the absence of the express conditions: accordingly, the cap fell to be assessed by applying general principles of law appropriate to policies of this kind.