The National Farmers Union Mutual Insurance Society Ltd v HSBC Insurance (UK) Ltd

Double insurance requires co-ordinate liabilities under two policies covering the same insured, interest, subject matter and risk. The parties may modify or exclude contribution by contract. Where an insurance policy extends buildings cover to a property buyer, a specific term denying payment where the buyer has equivalent insurance of their own qualifies the extension itself. A general excess or rateable-contribution clause does not override that specific qualification. The buyer’s own policy may therefore be the only policy providing indemnity, even though the seller’s policy purports to extend cover to the buyer. The effect depends on the proper construction of the particular policies and their commercial context.

The claimant insurer indemnified buyers after fire damaged a property between exchange of contracts and completion. The buyers had acquired their own buildings insurance, while the sellers’ policy with the defendant extended buildings cover to anyone buying the sellers’ home until completion, but stated that the defendant would not pay if the buildings were insured under any other insurance.

The claimant sought a contribution, arguing that both policies covered the buyers and that the policies therefore created double insurance. The defendant argued that its specific buyer-extension clause excluded cover where the buyers had equivalent insurance, or alternatively made its policy excess cover. The court tried three preliminary issues concerning the construction and interaction of the policies.

1. Preliminary issues. The HSBC policy did not provide cover or an indemnity to the buyers for the fire damage. The NFU policy contained a general pro rata clause which operated only if other insurance covered the same damage. The third issue did not arise.
2. Double insurance and construction. Double insurance ordinarily arises where the same party is insured with two insurers for the same interest, subject matter and risk. The right to contribution depends on co-ordinate liabilities and may be varied or excluded by contract. The policies had to be construed according to their ordinary and natural meaning in their commercial context.
3. Specific buyer extension. The HSBC buildings section extended cover to a buyer until completion, but the adjacent qualification denied payment where the buyer had taken out buildings insurance covering the same risks. That qualification was an integral limitation on the grant of cover. The buyer could not take the extension without its qualification.
4. Priority of clauses. The specific qualification in the buildings section prevailed over the general Claims Condition concerning other insurance. The special clause was directed specifically to the buyer extension, whereas the Claims Condition applied generally to all sections of the policy.
5. Application. The NFU policy covered fire damage to the buildings without an exclusion for other insurance. The existence of that cover triggered the HSBC qualification, so HSBC provided no cover to the buyers. The NFU pro rata clause was consequently not triggered, and NFU was liable subject only to its policy limit.
6. Authorities. The motor-insurance authorities concerning conflicting escape clauses were materially different. They did not require the court to disregard the clear, unilateral and specifically applicable HSBC qualification. The reasoning of the majority in State Fire Insurance v Liverpool & London Globe Insurance supported giving priority, so far as liability was concerned, to the special indemnity provision over a general contribution provision.
7. Disposition. There was no double insurance and no basis for contribution from HSBC to NFU.

Not stated in the judgment.