UK: (Re)insurance Weekly Update 36- 2016

Last Updated: 21 October 2016
Article by Nigel Brook
Most Read Contributor in UK, November 2017

A summary of recent developments in insurance, reinsurance and litigation law.

This Week's Caselaw

Great Lakes Reinsurance v Western Trading: Court of Appeal considers reinstatement issues and insured's duty following rejection of a claim

The first instance decision in this case was reported in Weekly Update 04/15. A fire insurance claim was resisted by the defendant insurer on the grounds of lack of insurable interest and misrepresentation/non-disclosure. Both defences failed on the facts. The insured sought and obtained a declaration that it was entitled to be indemnified for the cost of reinstatement, even though the property had not been reinstated yet and the insurer alleged that the insured showed no signs of planning to reinstate. The judge had declined to determine the issue of intention to reinstate at trial. The insurer appealed and the Court of Appeal has now held as follows:

(1) The insured was entitled, pursuant to the terms of the policy (see further below) to the cost of reinstating the property. Furthermore, as the insured was bound to reinstate the property (without the need for a request to do so), it could not be said that it had only a limited interest in the property (which would have required it to be accountable to others for any sum received in excess of its interest). Because of the contractual entitlement to reinstatement, it did not matter that there was no loss of market value because of the fire.

(2) However, the policy had imposed conditions on the entitlement to reinstatement: namely, the reinstatement work had to be carried out and the cost of reinstatement had to have been actually incurred. Since the reinstatement work had not actually been carried out, or the costs incurred, the Court of Appeal considered what the position would be had the contractual entitlement to reinstatement not been incorporated.

(3) Where the insured is bound to replace the lost property, the cost of doing so is prima facie the measure of indemnity. However, the evidence in this case was that, for a number of reasons, the value of the property had actually increased as a result of the fire. Clarke LJ held that "I doubt whether a claimant who has no intention of using the insurance money to reinstate, and whose property has increased in value on account of the fire, is entitled to claim the cost of reinstatement as the measure of indemnity unless the policy so provides". Here, there was a real possibility that reinstatement would not take place. In such a situation, the insured must show that it not only has a genuine intention to reinstate but that such intention is also "fixed and settled". If an insurer pays out and the insured then finds that it cannot reinstate (or it sells the property instead), "in a case where, at the time of the hearing, there is a real possibility that reinstatement may not in fact occur it is open to the court to decline to make an immediate award of damages and either to make some form of declaratory relief or, alternatively to postpone assessment of the extent of indemnity (and the payment of it) until such time as it is apparent that reinstatement (i) can and (ii) will go ahead or, at least that there is a reasonable prospect that it will".

(4) It was argued that the judge had been wrong to hold that where an insurer has repudiated the policy, it cannot rely on policy conditions (here, that the costs of reinstatement would only be repaid once they have been incurred). The Court of Appeal found that that had not been the judge's conclusion: instead, he had held that the requirement on the insured to begin to reinstate cannot be regarded as arising until the insurer has confirmed that it will indemnify: "Whether an insured has acted with reasonable despatch is a question of fact. I would, however, accept that in many cases, of which this is one, the insured will not have failed to act with reasonable despatch whilst insurers deny any liability or assert that the insured is not entitled to be compensated on the basis of reinstatement".

(5) The judge had been wrong to accept the declaration wording advanced by the insured. Instead, the judge should have made a declaration that, if the insured reinstated the property, then it would be entitled to an indemnity from the insurers. There was no need to further define "reinstatement" in the declaration.

COMMENT: The distinction between an insurer being unable to rely on policy conditions where it has repudiated the policy and an insured being under no obligation to comply with policy conditions unless cover is confirmed is, in practice, likely to be a fine one. The Court of Appeal did not refer to other decisions, such as Ted Baker v Axa (see Weekly Update 41/14) and Lexington v Multinacional (see Weekly Update 22/08), where it was accepted that the insured was still bound to comply with a claims/cooperation provision even though insurers had rejected the claim. It therefore seems that this aspect of the decision is confined to the obligation to reinstate only, and is not intended to apply more widely.

Shalabayev v JSC BTA Bank: Whether a non-party can challenge a finding in earlier proceedings

It is an established principle that it is an abuse of process to re-litigate an issue which has previously been decided by another competent court (known as "a collateral attack"). Of issue in this case is whether that principle applies to a non-party to those earlier proceedings.

Here, a finding had been made (in the course of committal proceedings) that the defendant to a claim brought by the claimant bank was the owner of a property (over which the bank was seeking a charging order). The claimant in this action, Mr Shalabayev, had appeared as a witness in those earlier proceedings, in order to argue that he was the true owner of the property instead. He sought to intervene in the bank's application for a final charging order over the property, arguing that he was not bound by the finding that he was not the true owner because he had not been a party to the earlier proceedings. He lost at first instance and appealed to the Court of Appeal.

The Court of Appeal has now allowed that appeal.

It was held that Mr Shalabayev had had no opportunity to establish his claim to ownership by being a party to any relevant judicial process: "Being a witness in [the defendant's] committal proceedings was a totally different ball game from being a participant ... Witness status did not entitle him to address the court upon the conclusion to be derived from the totality of the evidence".

However, there was no "bright-line" test of whether or not a litigant was a party, or the privy of a party, in earlier proceedings. Instead (citing Secretary of State for Trade and Industry v Bairstow [2004] as authority), it will only be an abuse of process where a party was not a party to the earlier proceedings if "(i) it would be manifestly unfair to a party to the later proceedings that the same issues should be re-litigated or (ii) to permit such re-litigation would bring the administration of justice into disrepute". Here, there had been a significant difference between the earlier application for a committal order and the subsequent application for a charging order. A contempt application is a self-contained procedure which does not lend itself to the resolution of other disputes which may later arise.

(Re)insurance Weekly Update 36- 2016

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Nigel Brook
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions