Sobrany v UAB Transtira

Where insurers have paid replacement-vehicle hire charges, the payment may be treated as payment by the insured. The insurer may pursue the insured’s claim by subrogation, and the tortfeasor cannot obtain a double-recovery advantage where the insured must account for damages. Overlapping insurance policies with other-insurance exclusions should be construed to avoid a result in which each exclusion cancels the other and the loss is covered nowhere. If an unpleaded factual issue is allowed to determine the case, the resulting finding must apply consistently to both parties. New evidence available before trial and not disclosed will not ordinarily be admitted on appeal merely because it is decisive.

The appellant’s Bentley was damaged in a road accident. He entered credit hire agreements for replacement vehicles and insurance was used to pay hire charges totalling £142,751.56. The defendant had pleaded that there was one insurance policy, but evidence at trial led District Judge Lethem to find that there were two. The judge construed an exclusion in the first policy as limiting recovery to the first hire period and awarded £8,959.38, with costs against the claimant.

The appeal concerned whether the two-policies point should have been allowed, whether new evidence should be admitted, and whether, assuming two policies, the claimant’s recovery was limited by the first policy or its exclusion.

1. Disposition. The appeal was allowed. Judgment was entered for the claimant in the sum of £101,382.22, with interest. The parties were invited to agree the rate and relevant dates.
2. Unpleaded factual issue. Christopher Clarke LJ held that it was within the trial judge’s discretion to allow reliance on the two-policies point. The evidence was clear, concerned matters within the claimant’s and Accident Exchange’s knowledge, and no objection or adjournment had been sought when the point emerged. There was a distinction between advancing an unpleaded positive case and relying on evidence volunteered by the opposing party. Lewison LJ considered the decision difficult and would have preferred an amendment, but accepted that it was a discretionary decision which could not be overturned merely because another judge might have exercised the discretion differently.
3. Once the point was allowed, the factual finding bound both parties. It was impermissible to allow the defendant to rely on two policies while confining the claimant to a pleaded case that there was one. Pleadings remained important, but they could not support inconsistent factual bases for the same decision.
4. New evidence. The notices of the right to cancel were refused admission. They could have been produced before trial and should have been disclosed. The overriding objective did not justify stretching the Ladd v Marshall criteria in circumstances where the insurers had access to the documents. Evidence about the number of policies was also refused because the court was being asked to accept it without a retrial or further cross-examination.
5. Insurance cover and subrogation. Assuming two policies, both remained in force from 5 October 2009. The claim remained the claimant’s claim for all the hire charges, and the defendant could not defeat it by denying his title to sue. The claimant was to be treated as having claimed and been paid under both policies, leaving the insurer subrogated under both.
6. Clause 4.9 was capable of applying to claims for which another policy provided indemnity, whether or not that policy had paid. It could not, however, be construed so that reciprocal exclusions cancelled one another and left the loss covered under neither policy. Applying the approach in Weddell and Another v Road Transport and General Insurance Company Limited [1933] 2 KB 563, both policies remained liable; no apportionment arose because the insurer was the same.
7. The insurer’s payment of the hire charges amounted to payment by the claimant and, under clause 3.7.15, damages were held subject to a charge in the insurer’s favour. There was therefore no double recovery. The failure to rely on an exclusion did not allow the tortfeasor to take advantage of the payment: King v Victoria Insurance Co [1896] AC 250. The court did not follow the obiter view in W v Veolia Environmental Services [2011] EWHC 2020 (QB) concerning payments above a policy limit.

1. Court of Appeal (Civil Division) — Appeal allowed. Judgment entered for the claimant for £101,382.22 plus interest: [2016] EWCA Civ 28.
2. Tunbridge Wells County Court — District Judge Lethem found two policies but limited recovery to the first hire period, awarding £8,959.38 and ordering the claimant to pay the costs.