Chapter 9 Topic 11 - Causation

IC = Insurance Contact, PP = Public Policy, HoL = House of Lords, CoA =

Court of Appeal, SC = Supreme Court, PC = Proximate Cause

Proximate Cause Rule

Insured must show that it is more probable than not that the loss

was caused by a peril covered by IC (Clowrange v CGU Insurance

Plc (2001) – Colman J)

Only causes which are proximate – not remote – are covered

Two Q’s to ask:

1. What peril have insurers agreed to cover? – contract

2. Was loss caused by that peril?

Marsden v City and County Insurance Co (1865)

o mob damaged window due to fire in a nearby building

o riot = cause, not fire not covered

o same principle:

security reduced due to fire – thieves able to enter

and steal goods or goods placed outside to save

them and stolen – theft, not fire = proximate cause

Winicofsky v Army and Navy General Assurance Assocn Ltd

(1919)

o theft policy excluded loss ‘occasioned by hostilities’ – air

raid burgled – claim upheld cause = theft, air raid just

made job easier

Identify cause of loss:

Lawrence v The Accidental Insurance Co Ltd (1881) – Watkin

Williams J

o impracticable to go back cause upon cause – would lead

back to birth

Dudgeon v Pembrok (1874) – Blackburn J

o loss typically occurs as a result of a series of events

o ship left London in bad condition took on water in rolling

seas unmanageable = distress thick weather +

distress = going ashore

Parties can agree the test for causation in contract – if they don’t there

are judicial principles

*Iondides v The universal Marine Ins Co Ltd (1863)–Willes J

o look exclusively at the proximate and immediate cause of

the loss

MIA s 55(1) – incorporates proximate cause – unless otherwise

agreed by parties

o liable for loss proximately caused by a peril insured against

– not liable for loss not proximately caused by a peril

insured against

Lawrence v The Accidental Insurance Co Ltd (1881)

o L had an epileptic seizure – fell on platform at waterloo =

death by train accident covered by personal accident

policy

Winspear v The Accident Insurance Co Ltd (1880)

o insurer was liable when W had seizsure and drowned in

river Rea

Some US jurisdiction – last cause in time – not proximate cause

o Continental Insurance Co v Arkwright Mutual Insurance Co

(1996)

building damaged by 1992 NYC storms – flood

damaged – caused electrical arcing – led to explosion

which damaged circuit boards

looked at spatial and temporal remoteness – drew on

Bird (1918) – flood to electrical damage – negligible

distance

insurer tried to avoid – flood covered, electrical

damage

Court approved trial judge ruling – flood was the

cause, not the electrical arcing – looking at last in

time – flood viewed as being within timeframe as it

was rapid – not a drawn out timeframe had it been

months between flood and explosion conclusion may

have been different

reasonable business person test

Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society

Ltd [1918] – Lord Shaw

o wrong to treat proximate cause as proximate cause in time

look at proximate in efficiency

o HoL : rejected Escher’s distinction and approved Reischer

o Pink v Fleming (1890) – Lord Escher MR

distinguished marine (look at last cause) v non-

marine (prepared to look back further)

o Reischer v Borwick (1894) – Lindley LJ

agreed with Escher in Pink but didn’t apply distinction

in practice

o Syarikat Takaful Malaysia Berhad v Global Process Systems

Inc (The Cendor Mopu ) [2011]

recent approval of Leyland

Athel Line Ltd v Liverpool & London War Risks Insurance

Association Ltd [1946] – Lord Greene MR

o matter for the common sense and intelligence of the

ordinary man

Gray v Barr [1971] – Lord Denning

o effective or dominant cause of the occurrence is to be

determined by common sense – even if it is more remote in

time

o Yorkshire Dale SS Co Ltd v Minister of War Transport [1942]

– Lord Wright

must look at what the common man, not a scientist,

would understand it to be

o Tate Gallery (Trustees) v Duffy Construction Ltd [2007] –

Jackson J

causation tends to coincide with common sense

The Cendor Mopu [2011] – Lord Mance

o Facts: offshore oil-drilling platform – tow from US–Malaysia

– policy covered all risks except loss caused by inherent

vice or nature of the subject matter insured

o mid way through journey hit by wave – one leg broke – next

day two others too – perils or inherent vice?

o insurers knew of stress cracks in legs – required rig to be

checked mid-voyage – weather = normal for voyage

o SC : s55(1) – enquiry based on fact and common sense

principles reaffirmed proximate cause = proximate in

efficiency

o Insurer liable – proximate cause perils of sea – wave broke

first leg, caused others to break could only have avoided

if it was caused solely by defect in insured object without

any ‘fortuitous external accident or casualty’

o last cause in time could explain strict approach taken to

warranties in Victorian times – previous breaches would

have been irrelevant ∴ warranties needed to be strict

Reischer v Borwick (1894)

o Facts: marine policy – covered collision – didn’t cover perils

of the sea – collision – hole – repaired – towed – motion of

sea through towing caused hole to reopen sank

o CoA : proximate cause = collision, even though sea was last

in time

*Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society

Ltd [1918]

o Facts : The Ikaria – insured against loss of perils from sea

not war

o hit by torpedo – blew hole in side – damaged bulkheads –

toed to safe harbour – while anchored – gale blew up –

bumped against harbour wall – harbour autborities ordered

it into open sea (fear of sinking and blocking)

o after two days of buffeting, being grounded at low tide –

bulkheads failed – it sank probs safe in harbour

o HoL : proximate cause of loss = torpedo – damage meant it

was reasonably certain that sea-water would flow into ship

– extent of damage may not have been expected

Clarke (1981 article)

o if peril covered = proximate cause of damage – liable for all

consequences that flow naturally from it – even if these

couldn’t have been expected at the time of the loss

Reischer (collision) and Leyland (torpedo) – influx of seawater =

reasonably certain consequence – effect of events continued

not overshadowed by subsequent events

o if Ikaria (Leyland) had sunk after hitting harbour wall while

being towed out – torpedo overshadowed – negligence =

proximate cause doesn’t matter that torpedo was reason

she was in the harbour

Burden of Proof

insured must establish on the balance of probabilities – loss

proximately caused by an insured peril (Foreign Marine Insurance

Co Ltd v Gaunt [1921], The Popi M [1985])

burden switches to insurer – show another explanation more

probable

o Slattery v Mance [1962]

ship insured against fire – insured shows loss from

fire – insurer must show on balance of probabilities

fire not proximate cause or from excepted peril

If insurer alleges loss deliberate – burden of proof commensurate

with gravity of allegation – must prove that there is a substantial

probability that the loss wasn’t accidental

Agreements to alter the rule of Causation

proximate cause rule is a term implied into the contract – parties

can alter it, but must be displaced using clear words (Coxe v

Employers’ Liability Assurance Corpn Ltd [1916]) – words must

give a clear indication of test to apply (attributable to, arising

from – not clear)

Attempts to exclude liability where injury linked to another cause – not

just accident

Lawrence v The Accidental Insurance Co Ltd (1881)

o ‘direct and sole cause’ – deemed restatement of PC test –

even though policy excluded fits

Fitton v Accidental Death Insurance Co [1864] – Williams J

o injury must be direct and sole cause of death – excluded

hernia or other disease within system before/ after accident

which caused death

o accidental fall strangulated hernia

o Held: insurer liable policy exempted hernia within the

system – not one caused by accident

*Isitt v Railway Passengers Assurance Co (1889) – Willes J

o Facts : policy covered effects from an accidental injury –

accidental injury – confined to bed – so painful – no bed

sheets – pneumonia – died

o Q : were circumstances leading up to death reasonable and

natural consequences of the injury and condition which

insured had to live under as a result?

if what was reasonably to be expected under

circumstances occurred = within policy

Insurers reworded policies: direct or proximate cause – not

covered if disease or other intervening cause, even if accident

aggravated it = cause of death

*Ethrington Arbitration [1909]

o Facts : E fell during hunt – soaked – pneumonia – died

o CoA : insurers hadn’t avoided Isitt – would be difficult to

establish a claim unless insured died at time of accident

limited utility

o Vaughan Williams LJ : company must express intention

plainly – where disease or other cause dependent on

accident – covered by direct an PC results of accident

two reasons for decision it was PC:

a) clause ambiguous, or

b) construction principle – avoid literal meaning of

clause rendering cover illusory

Smith v Accident Insurance Co (1870)

o policy excluded death arising form erysipelas – before/

during/ after accident – S cut foot – erysipelas set in – died

o Cleasby B: clause put in – don’t have to determine if it

arose due to injury or independent – Fitton distinguished by

majority – diff wording

o Kelly CB: dissenting – only exempted if it was independent

preferable – dissent appears to have been adopted – not

referred to since

*Coxe v Employers’ Liability Assurance Corpn Ltd [1916]

o Facts : excluded death ‘indirectly caused, arising from or

traceable to war’ – Captain Ewing – inspect sentries on

railway line – poorly lit (air raids) – access forbidden to

civilians – hit and killed by train

o Scrutton J: train proximate cause – “indirectly” – determine

if loss indirectly caused by excluded peril – war – reason on

train track = excluded peril was indirect cause claim

refused

o limit to this – cause may be indirect but must be cause

on platform waiting for troop train – died like

Lawrence = diff decision – war part of background

only – not part of danger

*Jason v Batten [1969] (read)

o Facts: policy covered where injury resulted from accident –

exclusive direct and immediate cause

o motorist – narrowed coronary artery – severy coronary

thrombosis – car accident – blood clotted – blocked artery

o Held : narrowed artery led to thrombosis (pre-existing

condition) – would have an attack within three years –

accident advanced it – caused blood clot – not independent

of all other causes the exclusive cause – not liable

If the accident had activated condition – but for

accident would have remained latent = liable

*Blackburn Rovers Football & Athletic Club plc v Avon Insurance

plc [2005]

o footballer – spinal injury

o CoA: exclusion for injury caused by degeneration – applied

regardless of if the degeneration was part of normal aging

process if normal – good to exclude it

o if not normal unlikely to conclude it was cause of injury

induced by sports trauma

o Can’t recover if disablement, even a small bit, attributable

to pre-condition, doesn’t matter if its normal or not

o Dobbs J: degenerative condition caused the injury –

couldn’t recover

Orient-Express Hotels Ltd v Assicurazioni General SA [2010] –

Hamblen J

o terms of policy replace PC with ‘but for’ test

o Facts: OEH – hotel in New Orleans – hurricane Katrina –

physical damage = closed – state of emergency =

mandatory evacuation

o policy covered business interruption from physical damage

– could OEH recover for loss – claim arose due to physical

damage and wider area disruption

o clause – reduce amount payable which wouldn’t have

occurred, but for the hurricane and wider damage (don’t

get money for wider area damage)

o Held : arbitrator didn’t err in law in applying test – rule

harsh, but no other test fairer or more reasonable – what

parties had agreed

Multiple causes

more than one PC = new concept – insurers are looking to find

causation to include indirect coses of loss – court becoming more

likely to find more than one cause

Wayne Tank and Pump Co Ltd v Employers’ Liability Assurance

Corpn Ltd [1974] – Cairns LJ

o judges shouldn’t strain to find a dominant cause

*Kuwait Airways Corporation v Kuwait Insurance Co [1999]

o number of perils covered – only show PC one

o two separate PC – independent of each other – both would

produce part of loss – no contribution other – only liable

part covered

*Ford Motor Co of Canada Ltd v Prudential Assurance Co Ltd

(1959) – SC Canada

o Facts: loss due to riot covered – cessation of work and

change in temp not – riot factory closed – damage from

freezing

o Held: only liable for part from riot

*JJ Lloyd Instruments Ltd v Northern Star Insurance Co Ltd (The

‘Miss Jay Jay’) [1987] – Slade LJ

o Facts: ship lost – 1) adverse condition of sea – 2) defects in

boats design – insured unaware 1) covered, 2) not

mentioned

o CoA : insurers liable – no relevant exclusions or warranties –

proof of peril which was within the policy was enough to

entitle the plaintiffs to judgement – didn’t matter that there

was another PC – design fault on its own, wouldn’t be liable

*Wayne Tank and Pump Co Ltd v Employers’ Liability Assurance

Corpn Ltd [1974]

o Facts: W installed equipment – store and convey liquid wax

in a factory – factory burnt down two negligent actions

1) supplied plastic pipe to convey hot wax +

ineffective thermostat

2) switched on equipment and left unattended

o Q: did public liability policy cover W’s negligence?

covered damage as a result of accidents – exception

– equipment sold or supplied by W

o CoA: goods included pipe and Thermostat

o Lord Denning MR, Roskill LJ:

1. PC = defective pipe and thermostat – exclusion

applied

2. even if two PC’s insurers not liable – only way to

give effect to exception is to exempt altogether

o Cairns LJ: preferred 2.

California Courts – diff approach

*State Farm Mutual Auto Ins Co v Partridge 10 Cal3d 102 (1973)

o Facts: insured accidently shot and injured friend – two acts

negligence: 1) filed down trigger ‘hair trigger’ 2) drove

with gun in hand – friend passenger seat

o both actions required for injury – liable for negligence ‘hair

trigger’ not negligent driving

o Held: two PC – one covered = liable, regardless if other

excluded

Keeton and Widiss (1988 Book)

o where there are several factors – courts apply causation

theory to allow cover to prevail – construe policies in light

of reasonable insured’s expectation construe ambiguous

policy provisions against insurer

Not gained wide acceptance – reasonable expectation of insured

only where ambiguity in contract (Montrose Chemical Cor v

Admiral Ins Co (1995))

exclusionary clauses – narrow interpretation, clauses identifying

coverage – broad interpretation relatively easy to persuade

ambiguity in exception clauses (Garvey v State Farm Fire and

Casualty Co (1989))

Pro-Wayne

o exclusion clauses determine premium – insurer shouldn’t

be liable where PC is excluded

Pro-Partridge

o application of exception unclear – construe against insurer

Both Wayne and Partridge involved third party – what if first

party? eg. Property insurance

o indemnify insured if property covered suffers loss – defined

by causation (loss caused by X peril) or loss caused by any

risk (less exceptions) pays irrespective of fault

o Liability – agrees to pay indemnify if insured liable to third

party only pay if degree of fault = liable to third party

Argue for differentiation

o Liability: liable if one PC covered, other expressly excluded

o Property: not liable if one PC covered, other excluded

The Cendor Mopu [2011] – SC (oil-rig case)

o overruled The Miss Jay Jay – can’t be loss by both perils of

the sea and inherent vice of subject-matter

o Lord Clarke: loss PC, at least partly by perils of the seas =

no inherent vice avoid causation issue

inherent vice = not excepted peril – illustration of

type of peril not = PC of loss

o Lord Mance: distinguished where two risks combine to

cause loss, one excepted v one risk specifically excepted needs to hear more arguement

Result: narrows circumstances court can find concurrent causes –

little discussion one insured, one excepted

*Midland Mainline v Eagle Star Insurance Co Ltd [2004]

o Lowry and Rawlings article is basically this section of the

book with the Midland case added, short and easy to read if

you want to get a better overview

o Facts: Hatfield Rail disaster 2000 – four people killed –

derailed – broken track – Emergency Speed Restrictions

(ESR) across large parts of network similar to accident –

disruption – rail businesses suffered losses

o sought to recover from policies – excluded “inherent vice,

latent defect, gradual deterioration, wear and tear…”

o denied policy for “wear and tear”

o FI – Steel J : cause of loss = ESR – liable – cracks were part

of normal features, usually maintined on a gradual basis –

scale was more than usual – but not the event that

triggered the action

o CoA – Nourse LJ : FI was wrong – just because wear and tear

didn’t trigger the cover – the extent of it was so defective

that ESR were triggered – created loss

similar to Leyland – track damage was same as

torpedo, even though it may not have been

immediate cause it was underlying

criticised Steel J for only talking about one cause –

previous cases talked about multiple causes

Lowry and Rawlings – think criticism harsh

Probably multiple causes, but like in Wayne Tanks

when one excluded – insurer not liable

Lowry and Rawlings Article

o distinction Miss Jay Jay and Wayne Tanks/ Midland Mainline

(one cause exempted)

o in light of s55(1) MIA Miss Jay Jay can be deemed to be

incorrectly read – but it is sensible, as long as one

proximate cause of the loss is an insured peril – insurer =

liable

o Wayne Tank – once one cause is excepted – not liable,

courts will try take a narrow reading so that the insurer

isn’t excepted from the principal purpose of the insurance

o US (California) – exclusionary clauses interpreted narrowly

– clauses identifying coverage are broadly interpreted

(Garvey [1989]) – contra preferendum rules apply

o English – same contract principles for insurance and normal

contracts

o Reason for difference –

English same rules for contract

US treat contracts for insurance different treatment –

industry of public interest – held to a broader legal

responsibility than private contracts (Continental Life

& Accident Co v Songer (Ariz 1979)

attempt to address imbalance of power

between insurers (who generally write

contract) and insured

contrast English – uphold freedom of contract

Lowry and Rawlings – suggest welfare state in UK

means less incentive for judges to protect individual

insured – greater protection v US where welfare

provision based more on private insurance

o Reform

see Wayve v Partridge debate above

Deliberate Actions by insured

Actions to reduce Loss

insureds sometimes take actions to reduce a loss, but actually

cause more damage in the process – Q: did insurer contract for

the event the caused the loss?

*Canada Rice Mills Ltd v Union Marine and General Insurance Co

[1941] (The Segundo)

o Facts: rough weather – captain closed ventilators to stop

seawater entering – rice cargo damaged

o PC: loss covered – perils of the sea – even though water

didn’t touch cargo

o Lord Wright: action by captain – “such a mere matter of

routine seamanship necessitated by the peril that the

damage can be regarded as the direct result of the peril”

o perils of sea effect not broken by action – same as torpedo

in Leyland

*Symington & Co v Union Insurance Society of Canton Ltd (1928)

– Scrutton LJ

o Facts: fire near insured goods – port authorities threw some

into sea, doused others in water – prevent spread of fire

o Held: fire insurers liable – test when action is taken by

insured to protect insured property from peril covered – Is

it fear that something will happen in the future, or has the

peril already happened or is it so imminent that I is

immediately necessary to avert the danger by action?

* The Knight of St. Michael [1898] – Gorrell Barnes J

o fire didn’t break out – reasonably certain it would have –

actual existing state of peril of fire, not merely a fear of fire

Becker, Gray and Co v London Assurance Corpn [1918]

o voyage abandoned for fear of capthure

o HoL: threat wasn’t imminent – loss = captains voluntary

decision

o Lord Sumner: apprehension not good enough – mus be an

actual or imminent threat

*Joseph Watson and Son Ltd v Firemen’s Fund Insurance Co of

San Fransico [1922] – Rowlatt J

o Facts: captain thought he saw smoke from cargo hold – was

steam – water sprayed – goods damaged

o Held: not liable – can’t be liable for loss they didn’t contract

for – insured for fire – not for captain’s error in judgement

MIA – s78(4) – obligation to take actions to avert or minimise loss

from an insured peril as an uninsured person would – no

requirement for non-marine

British Westinghouse Electric Co Ltd v Underground Electric Rys

Co of London [1912]

o unreasonable conduct is taken into consideration in

mitigation – unable to claim addition damages if they wer

PC caused by insureds failure break chain of causation

*Yorkshire Water Services Ltd v Sun Alliance & London Insurance

plc [1997]

o Facts: sewage leak – YWS carried out work £4m – aim: to

reduce costs of claims likely to be brought by neighbouring

properties – public liability policy – legal liability for

damages and all other costs and expenses which may be

subject of the claim

o CoA : rejected YWS claim that insurer was liable for

reasonable expenditure on work undertaken to alleviate

loss – only had to indemnify for sums due as compensation

to third parties – not work costs carried out on prpoerty –

difficult to assess what is reasonable – £4m work for likely

£300k claim hard to assess, harder if not quantified

o Q: What had insurer agreed to cover?

Australian line of cases:

*Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd

(1974)

o HC: colud recover costs of repairing uninsured items

outside and excavation – had been damaged – repair of

items necessary to restore insured excavation to

undamaged condition – viewed as loss or damage to

excavation – not repairing office block would cause more

damage to excavation

*Re Mining Technologies Australia Pty Ltd [1999] – majority

decision

o Facts: mine collapse – insured equipment trapped

underground – rescued – less than half value of equipment

o Davies JA: policy clause – excluded liability for loss to

property which could have been avoided by the insured

exercising reasonable care – implied term allowing

recovery of expenditure incurred exercising such care

o McPherson JA: retrieving equipment amounted to repair –

recover under that clause – don’t need to imply in term

*PMB Australia Ltd v MMI General Insurance Ltd [2001] – affirmed

2002

o Facts: policy – losses incurred through business

interruption – outbreak of salmonella – stopped

manufacture of peanut butter – didn’t cover expenditure

incurred to alter factory, prevent future outbreaks ∴ losses

o FI: Davies JA in Re Mining Technologies Australia was

minority view – related to property insurance – expense

was incurred while loss was taking place – not the case in

this case

Negligent and Wilful Conduct of the Insured

Negligence of insured

MIA s55(2)(a) – loss covers insured’s negligence unless expressly

excluded (AG v Adelaide Steamship Co Ltd [1923])

*Harris v Poland [1941]

o Facts: lit fire – forgot hidden jewellery there – loss or

damage by fire policy

o Held: insurers liable – actions probs negligent – not

intentional

*JE Adams (1998 Article) – requirement to take reasonable care

to avoid loss won’t necessarily relieve insurer of loss, even if

insured acts negligently

Tinline v White Cross Insurance Asssociation Ltd [1921] –

Bailhache J

o attempt to exclude negligence in liability insurance =

nonsensical – liability to third party requires negligence

*Fraser v BN Furman (Production Ltd), Miller Smith & Partners (A

Firm) Third Party [1967] – Diplock LJ

o Held: insurer liable under employers’ liability policy –

negligence clause – unless conduct was reckless acted

with actual recognition that a danger exists – not caring if

its averted or not – reckless clause there to ensure

employer take precautions – prevent moral hazard – take

risks just because they are covered

* Paine v Catlins [2004]

o Held: requirement that part of an extraction hood be

cleaned at least monthly and ducting at least annually –

fire – grease from hood/ ducting dripped onto fire – severe

damage to hotel

o Held: disputed section of equipment deemed to have been

cleaned monthly in compliance with policy – as clean as it

could be – would be dirtier at diff stages of cleaning regime

– no negligence by insured

Property Insurance

*Sofi v Prudential Assurance Co Ltd [1993]

o Facts: Theft policy – take all reasonable steps to safeguard

insured property – locked jewellery worth £42k in glove box

in car – 15 mins – stolen

o CoA : liable – insured not reckless – thought safer in car

Pre Sofi IOB had taken a view that was more favourable to

insurers (Digest of Annual Reports and Bulletins (London, IOB,

1999) –IOB website) couldn’t find online…

*Cooke v Routledge [1998]

o drove very drunk – car wrote off

o Held: liable – required to take reasonable care to safeguard

from loss – not a deliberate act – not inevitable or probable

consequence of action – construed protect from external

theft – not his driving

*Gunns v Par Insurance Brokers [1997]

o Facts: jeweller left valuables in a safe – previously declared

unsatisfactory – went away for weekend – didn’t turn on

alarm – shortly before theft reported that he thought he

was being followed

o Held: not liable – conduct = reckless

* Hayward v Norwich Union Insurance Ltd [2001]

o Facts: Porsche – petrol station – left keys to pay – electronic

locking device and immobiliser – prevent being driven,

even with keys – thief targeted him – device to deactivate

safety features – policy couldn’t leave keys in or on car

o FI : not left in or on if not unattended – not case – relatively

close – had to be close enough so as to be likely able to

prevent theft (left unattended)

Starfire Diamond Rings Ltd v Angel (1962) – Lod

Denning physical proximity to keep car under

observation

o CoA : reversed decision – policy didn’t incorporate “left

unattended” authorities – only q did he leave keys? – didn’t

matter only reason thief could take was due to device –

rejected narrow interpretation of left – (tried to say car-

jackings couldn’t recover with broader one – held: they are

involuntary – not left)

o Ombudsman (March 2004): was insured in a position to

intervene – not if they were successful in preventing theft

packing car – demisting – ran back inside if on

public highway, doesn’t matter if it is close to home

= left

Claim dependent on illegal act of the insured

PP exclude claim dependent on criminal act – doesn’t preclude

claim by innocent person – insurer liable if act by third part not a

party to insurance contract

Beresford v Royal Insurance Co Ltd [1938] – Lord Atkin

o not liable for intentional criminal or tortious act – insurers

haven’t agreed to this – not part of contract

o insane committing suicide – once not excluded – might

recover

o Lord Wright MR : no distinction between criminal and estate

as estate claiming is equivalent to criminal claiming – but

innocent beneficiary not claiming through the estate can

benefit – not tainted by criminality

MIA s55(2) – not responsible for losses from insured’s wilful

misconduct – proximate from (1) replaced with attributable

even if misconduct not PC claim can be denied – against PP to

indemnify man against crime he knowingly commits

Porter v Zurich Insurance Co [2009]

o Facts : P had delusional disorder – set fire to home – suicide

attempt – changed mind – escaped – house and contents

damaged

o Coulson J: well know PP prevents recovery from criminal act

knowingly committed by insured

o could recover if he’d been insane – proof on the balance of

probabilities under M’Naghten Rules at time of fire didn’t

know the nature and quality of the act he was doing, or if

he did know, didn’t know it was wrong – not insane – knew

what he was doing and that it was wrong

allowing a person to profit from crime would remove restrains in

minds against committing crimes (Stone & Rolls Ltd (In

Liquidation v Moore Stephens (A Firm) [2009], Bolland, Hare and

Koops Knight (1830))

*Hardy v Motor Insurers’ Bureau [1964] – Diplock LJ

o claim being denied unlikely to deter someone who isn’t

deterred by criminal sanctions – criminal law most

appropriate for dealing with deterrent

o must weigh up anti-social act v right being asserted

(gravity of the two) – will enforcing it encourage the act?

o legal fiction that criminal shouldn’t benefit preventing valid

recovery of claims by beneficiaries

JG Shand (1972 Article)

o contract never supposed to regulate conduct of community

– admitted deterrent now used in application of PP

*Cleaver v Mutual Reserve Fund Life Association [1892]

o Fry LJ: courts won’t support enforcing a claim based on a

criminal act – excludes criminal and all those claiming

under them, but won’t exclude alternative or independent

rights – protect an innocent beneficiary

o Lord Escher MR: has to be a causal connection between

crime and loss – contract is made contrary to PP can’t

enforse in law or equity – where PP is being used to avoid

when full consideration has been paid – rule should be

narrow – shouldn’t go any further than PP requires

*Estate of Cunigunda Crippen, Deceased [1911] – Evans P

o human mind revolts at thought of law being used to

enforce a claim based on a criminal act

*Saudners v Edwards [1987] – Bingham LJ

o court won’t refute claim merely because there’s been an

illegal act

o Two issues with illegality

1) court shouldn’t enforce or help a contract which is

against the law, but

2) shouldn’t refuse it automatically to enforce

contract due to any little illegality regardless of how

disproportionate it is to the loss

*Hardy v Motor Insurers’ Bureau [1964] – Diplock LJ

o courts refusal to assert a right in favour of someone who

has committed an anti-social act depends on nature of act

and right

court must draw a boundary between enforceable and

unenforceable claim

*Haseldine v Hosken [1933]

o solicitor suffered loss entering champertous contract (no

longer illegal – one side to litigation has costs paid by an

outsider – gets share of profits) – couldn’t claim on policy

because it was criminal – didn’t matter that he didn’t know

it was

Forfeiture Act 1982 c34 s2(2) – courts can alter the PP rule based

on offenders conduct and that of the deceased – based on

circumstances of the case and those deemed necessary to do

justice in the case

Dunbar v Plant [1997] – Phillips LJ

o judges would have modified rule, if legislature hadn’t – but

would have been based on facts, limited connection to

claim or a lot of mitigating circumstances

Australia haven’t modified the PP rule

Suicide Cases:

Beresford v Royal Insurance Co [1938]

o HoL: died by suicide – clause excluded paying if suicide

committed in first year – death outside period – not liable

suicide = crime – PP wouldn’t allow recovery - whole

contract not void ab initio – clause could be severed

US SC diff direction – Northwestern Mutual Life Insurance CO v

Johnson (1920) – imply term re: suicide only if mentioned (eg.

pay after one year) no general prohibition – each state could

legislate

*Bolland, Hare and Koops Knight (1830)

o henry Fauntleroy hanged 1824 – forged Bank of England

note – estate unable to claim on life policy – crime led to

death, didn’t matter that he didn’t intend it to

Charlton v Fischer [2001]

o insurer can apply same defence against claims from a third

party as the can against the insured where the claim is a

derivative claim – accident not on a public road – it was a

derivative claim

o Rix J: distinction should be drawn loss caused by a

deliberate criminal act – could recover V loss intentionally

caused couldn’t recover

o Other judges: accident – included all acts motor

insurance peculiarities

*Bird v Appleton (1800) – Lord Kenyon CJ

o insured can claim under theft policy even if goods bought

with proceeds of sale from an illegal cargo – would have to

examine all previous transactions to establish if insured

had acquired funds illegally

*Geismar v Sun Alliance and London Insurance Ltd [1978]

o Facts: jewellery smuggled into UK – liable to confiscation,

but authorities no claim to insurance money – jewellery

stole – theft policy

o Talbot J: Insurance covers property law forbids them from

having = contract connected to illegal act ∴ contract is

unenforceable

*Euro-Diam Ltd v Bathurst [1987]

o Facts: wholesaler of diamonds – exported diamonds to

West Germany – misrepresented value to German customs

– help importer avoid tax – no misrepresentation to insurer

– jewels stolen after arrival

o CoA : claim allowed – transaction illegal in W. Germany –

right to possess goods will be enforced even if owner

acquires by illegal contract once they don’t have to relyon

that illegal contract to enforce claim ( Tinsley v Morgan

[1994] Lord Browne-Wilkinson)

o Kerr LJ: defined degree of connection by adopting and

expanding *Thackwell v Barclays Bank plc [1986]

won’t automatically deny a claim based on an illegal

act – look at quality of act – consider if it would

offend public conscience to allow remedy sought – is

it encouraging criminal in act [or encouraging others

to do the same *Saunders v Edwards [1987] Nicholls

LJ]

o issuing false invoice bad – didn’t benefit insured – no

bearing on loss – didn’t deceive insurers no direct

connection between illegal act and contract V Geismar

insured better off with money – jewels could be

confiscated – direct connection to illegal act

*Tinsley v Milligan [1994]

o Facts: house acquired by two people – name of one –

fraudulent social security claims

o HoL : house acquired – trust – owner of legal title = trustee

for other – who could claim under trust without having to

rely on illegal contract – only claim against this by first

person based on illegal contract – won’t be considered

o majority: disapproved of pubic conscience test – more

flexibility than minority – not as much as public conscience

test

Cohen (1994 article) majority opinion inspired by

Public conscience test

o Lord Goff: minority – wanted to go back to rigid rule –

property rights created by an illegal contract should be left

as they were

Stone & Rolls Ltd [2009]

o HoL : affirmed Tinsley – won’t allow claimant recover

compensation for own illegal act – won’t query transfer of

property rights if claimant doesn’t rely on contract

(Article to read: N. Cohen, “The Quiet Revolution in the Enforcement of

Illegal Contracts” 1994 LMCLQ 163)

*American Cases

Millen v John Hancock Mutual Life Insurance Co (1938)

o can’t find online…

Weeks v New York Life Insurance Co (1924)

o SC South Carolina

o just because a contract to insure against death by legal

execution would be against PP, does not mean that an

ordinary life policy that doesn’t except against it will be

declared unenforceable on PP grounds – there’s no reason

to presume insured intended to accelerate maturing of

policy by committing a crime

John Hancock Mutual Life Insurance Co v Tarrence (1957)

o dismissed notion that allowing beneficiaries to collect

insurance if criminal killed in the commission of a crime will

increase crimes – remote, speculative and theoretical. 

o Both the public and the insurer have “a guaranty against

increasing the risk insured, by that love of life which nature

has implanted in every creature.”

Oldfield v Transamerica Life Insurance Co of Canada (2002)

o Canadian SC – McLaghlin CJ

o P separated from wife – agreed he would maintain life

insurance coverage in lieu of child and spousal support –

wife would be beneficiary until kids 18 – P died – 30 cocaine

filled condoms – on burst – heart attack

o Wife wanted money – insurer refused – claim barred by PP –

can’t insure against own criminal act

o FI and CoA: no PP or contract rule barred claim

o SC : not against PP to allow innocent beneficiary to claim

when insured dies through criminal act – criminal can’t

profit from crime – if claiming through his estate = no

claim, but has a claim as beneficiary not tainted with

husbands illegality – shouldn’t penalize innocent victim

o PP doesn’t make policy void – makes it unenforceable by

the criminal – contract lawful on face but carried out

unlawfully not void

contract to insure death by cocaine bursting

unenforceable, but one to insure against death and

death occurring through illegal act enforceable by

innocent beneficiary

o Major J : delivered majority decision

main reason to use PP is because the insurer hasn’t

provided for provision in policy

Insurance Law in Canada (Brown) – denying recovery

to an innocent beneficiary would be to penalise them

for the insured’s anti social behaviour

parties intention is important – of criminal act is

incidental to the contract, may even be

enforceable by criminal insured

differentiation between (backed up by MacGilivray

and Chitty)

1) insured indemnified against type of loss

suffered (death) but that loss arises through an

unlawful act in that case enforceable

2) contract of insurance is itself illegal not

PP rule change:

arbitrary to have distinction between refusing

claim on PP grounds to criminal and

beneficiaries through will v beneficiaries named

on policy

looks at Diplock LJ in Hardy – doesn’t modify

rule, leaves it to legislature or another court

based on facts to modify it clear dislike of

the rule as it stands (strict PP test) and

attempting to assert pressure to bring about

change of the rule

o L’Heureux - Dubé J :

“While a crime may prevent a person from benefiting

from that crime, it cannot affect the rights of

innocent third persons”

forfeiture rule based on PP is there to manage the

transfer of risk – criminal shouldn’t benefit, but

neither should insurance co get benefit of premium

without risk

alteration of PP rule should be done by legislature –

must carefully balance competing rights

if rule is bringing about harsh results should look at

the rule itself and change it – rather than on a case

by case basis

should not relax PP rule to allow a criminal to benefit

from his action, but should relax the forfeiture rule to

balance competing interests, particularly where the

beneficiary is innocent.

Courts won’t enforce an illegal contract

will enforce property rights acquired through illegal contract –

once claim made without relying on contract or can only be

defeated relying on contract

Deliberate Killing and the forfeiture Rule

Forfeiture Act 1982, s 1(1) – PP rule – prevents a person who has

killed another from benefiting from it

o even if domestic abuse or suicide pact

s5 – unless convicted of murder the courts can modify rule if they

see fit based on facts (s2(2))

*In the Estate of Cunigunda (otherwise Cora) Crippen, Deceased

[1911] – Evans P

o it is against what the public would want for the law to

enforce a contract based on a criminal act

o Dr Crippen hanged for murdering wife – estate not allowed

to claim of policy on her life

o valid contract – unenforceable by C or estate

o legal fiction allowing insurer to keep premiums and not pay

out – W not benefitting

The Prince of Wales & Association v Palmer (1855)

o policy void as Palmer could benefit by killing insured

Innocent beneficiaries:

*Cleaver v Mutual Reserve Fund Life Association [1892]

o Facts: W (Florence Maybrick) killed H – she couldn’t benefit

– her claim ignored– policy terms – reverted to estate of H

o Fry LJ : courts won’t support enforcing a claim based on a

criminal act – excludes criminal and all those claiming

under them, but won’t exclude alternative or independent

rights – protect an innocent beneficiary

o Lord Escher MR : has to be a causal connection between

crime and loss – contract is made contrary to PP can’t

enforse in law or equity – where PP is being used to avoid

when full consideration has been paid – rule should be

narrow – shouldn’t go any further than PP requires

Brown v American Internation Lif Co (1991)

o if beneficiary didn’t commit or scheme to commit criminal

act leading to death can recover

o wife died setting fire to house – husband could collect

Mackender v Feldia AG [1967] – Denning MR

o an innocent beneficiary can collect even where another

beneficiary is responsible for the death

o approved by Oldfield – SC Canada

Beresford [1938] – Lord Atkin

o would have been decided differently if suicides will not

claiming – no decision on third parties claiming – diff

attitude to suicide – if parties agreed exclusion time then it

would likely be followed

o offender shouldn’t benefit – shouldn’t be able to dictate

who will

Davis v Boston Mutual Life Insurance Company 351 NE 2d 207

Rule applies in a lot of cases

*Re S decd [1996] – convicted of murder, diminished

responsibility or provocation pleaded successfully – forfeiture still

applies

o court can consider provocation in deciding whether to alter

rule or not if it isn’t a murder conviction

Re K decd [1985]

o court consider moral culpability and financial position of

offender

*Re Giles [1972] – confined under mental health act – not

punished rule still applies

doubt if criminally insane

*Dunbar v Plant [1998] – Mummery LJ – CoA

o Elderly couple – incurable diseases – irrational desperation

or depression – criminally complicit in suicide pact

o crime must be deliberate and intentional resulting in death

of insured – nature of crime will determine that forfeiture

rule will apply

o violence doesn’t need to be used to kill the person – gas or

poison, if intention to kill – are sufficient to prevent claim

o Philips LJ : forfeiture should apply – where DPP declined to

prosecute due to suicide pact – court should follow lead

o no benefit in applying forfeiture – should be leniency – if

lead by one then would be diff

*R v Chief National Insurance Commissioner [1981] – Lane CJ

o doesn’t need to be a criminal conviction – not label on

crime = nature

*Gray v Barr [1971]

o Facts : B thought W had affair with G – went to G house with

gun – fired into ceiling – approached G – fight – shot fired –

G killed – B cleared of manslaughter – G’s wife sued B’s

liability insurance

o CoA : policy designed to cover B’s negligence

o Denning MR : two possibilities

1) shooting deliberate = no cover

contrasted hunting accident – accidently shot

person not animal = no intention = even if

gross negligence reduced it to manslaughter –

covered by accident insurance as intended by

policy

no separation here – entered home with

intention to shoot, even if result from second

unintended shot = linked

deliberate act so closely linked can’t

be seperated

2) civil court not bound by criminal court – Denning

thought he should have been convicted

o Philimore LJ : two shots can’t be separated – second shot

not unexpected given circumstances – reasonable objective

person would expect it and wouldn’t believe B’s version of

events

o Salmon LJ: separated shots – but implied in term

preventing recovery where accident happened while

threatening with a loaded gun would have denied on PP

basis either – should discourage public using guns

o Lane J : did person seeking indemnity use “deliberate,

intentional and unlawful violence or threats of violence”?

yes = no indemnity, even if death unintended

Academics dislike G v B but judges like it and follow it

o followed and cited by Canadian SC

No clear ratio from G v B – supports view court will look at

insured’s act – decide if there was a deliberate criminal intent

towards victim – even if no criminal conviction

what happens if third party is killed – Lane J test suggests

violence must be towards person killed, third party could claim,

but not definitively defined

Modification

Re H (Deceased) [1990] – Peter Gibson J

o suggested act could modify rule if the manslaughter didn’t

involve intentional deliberate threats or violence

*Dalton v Latham [2003] – Patten J

Articles to be read on this case – a lot of discussion in book

- J.A. Jolowicz, “Liability Insurance—Manslaughter—Public Policy” [1970] CLJ 194-J.G. Fleming, “Insurance for the Criminal” (1971) 34 MLR 176-R.A. Hasson, “The Supreme Court of Canada and the Law of Insurance 1975” (1976) 14 Osgoode Hall Law Journal 769 at 776–8

o sceptical of Re H – parliament could have excluded rule for

diminished responsibility but didn’t

Jones v Roberts [1995] – Kolbert J

o Re H not sited by CoA Royse v Royse [1984] – same facts -

shouldn’t be allowed to benefit from crime higher court

would need to rule before it would be allowable – battering

with hammer, even if diminished – shouldn’t be able to

benefit

Motor Manslaughter

*Tinline v White Cross Insurance Association Ltd [1921]

o speeding – Shaftesbury avenue – killed one, injured two

pedestrians – convicted manslaughter gross or reckless

negligence

o Ballihavhe J : generally negligence negates cover – motor

policy must include cover, even if negligence liable

o G v B: similar, but B entered G’s house = intention

o manslaughter requirement higher for motorist

*Hardy v Motor Insurers’ Bureau [1964]

o CoA : act deliberate and criminal – insured driver already

paid victims, driver couldn’t recover indemnity from

insurers – insurer only liable in driver can’t pay, if no

insurance Motor Insurers’ Bureau liable (Road Traffic Act

1988)

*Gardner v Moore [1984]

o HoL : convicted of inflicting grevious bodily harm

o deliberate nature – already paid, can’t recover

o approved Diplock LJ statement in Hardy look at social

harm of enforcement v not enforcing

o Denning MR in Hardy: motorist can’t recover sums paid –

but the law by requiring motorist to be indemnified – policy

must be read so wide that a third party won’t be tainted by

a motorists intent can recover from insurer

difficult to distinguish motor cases from G v B on PP grounds –

both dangerous to a third party – victim suffers by not holding

them liable

Perpetrator not deterred by criminal sanction – lack of insurance

not likely to work

o not wanting to indemnify criminal v compensating

malicious acts of motorist motorists – compensation won

o what’s the diff between someone with a shogun and driving

licence when both act recklessly?

Criminal courts should decide criminal matters – civil should

focus on parties and compensation – like with motor insurance

only looking at injuries

no PP reason for indemnifying insured where not provided for in

contract – leg is only thing helping motorists

o must have certain level of liability – limits ability for

insurers to restrict this

o Charlton v Fisher [2002]

CoA : driver deliberately steered into another car –

didn’t intend to injure private land – RTA 1988

didn’t apply – insurer not liable due to deliberate

criminal act

o shows leg is only thing differentiating motor from other

liability insurance