Apportionment of £100 million insurance claim rejected by Court of Appeal

19/12/12

The Court of Appeal has upheld the judgment of the Commercial Court awarding Standard Life Assurance Limited damages of close to £100 million for its claim against insurers to indemnify the company for compensating its customers for falls in the value of an investment fund in 2009.

The factual background to the claim was the collapse in the value of asset backed securities following the bankruptcy of Lehman Brothers, which led to fall in unit prices in the Standard Life Sterling Fund of around 5%. In February 2009, Standard Life topped up the Fund to compensate customers. The Insurers alleged that the Standard Life had not acted to stem claims, but to improve its brand image. The Judge at first instance accepted Standard Life's case that it reasonably believed that its actions would cost less than paying customers individually and held that the expenditure qualified as "Mitigation Costs" under the policy.

In the Court of Appeal, the main issue was whether the expenditure should be apportioned between the "insured interest" of mitigating policyholders' claims and the "uninsured interest" of Standard Life's brand damage. The Court held that the principle of apportionment that applied in marine property claims was not applicable to a liability policy.

The judgment is here.