Rio Brown v N E M Insurance Company (JA) Ltd

• Jurisdiction: Jamaica
• Judge: Mangatal J
• Judgment Date: 02 March 2012
• Neutral Citation: [2012] JMSC Civ 27
• Court: Supreme Court (Jamaica)
• Docket Number: CLAIM NO. HCV 00008 OF 2009
• Date: 02 March 2012

Between

Rio Brown

Claimant

and

N.E.M. Insurance Company (JA) Ltd.

Defendant

[2012] JMSC Civ 27

CLAIM NO. HCV 00008 OF 2009

IN THE SUPREME COURT OF JUDICATURE OF JAMAICA

COMMERCIAL DIVISION

INSURANCE POLICY-LAW OF CONTRACT—WHAT CONSTITUTES OFFER BY INSURED AND ACCEPTANCE BY INSURER-WHETHER ACCORD AND SATISFACTION, RELEASE AND DISCHARGE-WHETHER AVERAGE CLAUSE APPLICABLE-SIGNIFICANCE OF TERM ‘SUBJECT TO THE TERMS AND CONDITIONS OF THE POLICY’

IN CHAMBERS

Mangatal J

1 This matter was commenced by Fixed Date Claim Form and Particulars of Claim and a Defence have been filed. Affidavits have also been filed by both sides and, at a case management conference in March 2010, and subsequently on the 22 ^nd of September 2011, it was ordered that all Affiants were to attend for cross-examination on the trial date.

2 The Defendant N.E.M. Insurance Co. (J'ca) Ltd. ‘NEM’ is a limited liability company duly incorporated under the Laws of Jamaica and carries on the business of general insurance, including property insurance.

3 The Claimant Rio Brown ‘Mr. Brown’ was at all material times insured with NEM for property damage, under a Fire and Insurance Policy No. 02 FAP 1210138 ‘the subject Policy’. This was in respect to commercial premises owned by Mr. Brown at Lot 2 Salt Marsh in the Parish of Trelawny. The contract of insurance which culminated in NEM issuing the subject Policy was originally entered into in or about June 2003. There have been a number of subsequent renewals.

4 On the 7 ^th of November 2011, when this matter was scheduled to commence, I exercised my case management powers under Rule 26.1(f) of the Civil Procedure Rules 2002, ‘the CPR’. I ordered that the following issue, which is a matter of law not requiring cross-examination, be tried first:

“The question of whether the Claimant having executed the Form of Acceptance and having accepted payment of the sum due on the said Form of Acceptance, is still at liberty to pursue a claim for relief under the Policy of Insurance. Whether the Claimant is estopped from so doing.”

5 Whilst NEM's Attorneys agreed with my view that these were discrete legal issues, and that it may save time and costs if they were to be resolved first, Mr. Paris thought that the matter should be heard in its entirety, including cross-examination. Having heard argument on this preliminary matter, I made the order set out in paragraph 4 above, requiring these legal issues to be tried first.

Mr. Brown's Case

6 The Particulars of Claim state that NEM in or about June 2003 entered into a contract of insurance under the subject Policy. The subject Policy of Insurance is exhibited to the Particulars. Thereafter the parties annually renewed the subject Policy during the period 2004-2007 so that during that period the sum insured was increased from the original sum of $8,000,000.00 to $10,580,000.00.

7 In 2006 Mr. Brown obtained and provided NEM with a Valuation Report in relation to the subject property dated 4 ^th July 2006 from Lawrence Rentals & Investments Ltd. which valued the replacement cost of the Claimant's building at $20,000,000.00. NEM then revised the sum insured for the period June 2006 to June 2007 from $10,580,000.00 to$20,000,000.00.

8 Mr. Brown avers that since 2006 NEM failed to increase the sum insured for the period 2007 to 2008 and 2008 to 2009 and only increased it to $22,100,000.00 for the period 2009 to 2010.

9 On the 30 ^th September 2008 Mr. Brown's building was damaged by fire and the estimated cost of repairs was assessed by Mr. Desmond Simpson, Quantity Surveyor, at $9,173,650.00, by letter dated 17 ^th February 2009. The quantity surveyor's fee was $137,604.75.

10 Crawford Jamaica Ltd. ‘Crawford’, Loss Adjusters, and Mr. Simpson then together adjusted the sum of $9,173,650.00 to $8,470,523.00 and Mr. Brown accepted this adjustment.

11 By letter dated the 21 ^st of December 2008 Crawford applied a formula to arrive at an average of the loss suffered by Mr. Brown based on their valuation of Mr. Brown's property after the 30 ^th September 2008 at $27,000,000.00 instead of at the sum insured of $20,000,000.00. As a result, Crawford determined that Mr. Brown was only entitled to recover $6,056,538.00 as the amount of his loss due to fire.

12 At paragraphs 10-12 of the Particulars of Claim, it is alleged:

10. The said Policy of Insurance does not include any provision for the application of any average formula for the determination of the value of the amount of the loss occasioned to the Claimant as a result of the damage to his property by fire.

11. The said Policy of Insurance specifically states that ‘the Defendant company agrees with the insured (Claimant) that if the property……shall be damaged by Fire……..the Company will pay to the Insured…..the amount of such damage;rdquo; The Defendant company instead caused Crawford J'ca Ltd. to prepare a Form of Acceptance by which the Claimant agreed to accept the sum of $6,056,538.00 in full discharge and satisfaction of his claim for loss and damage to his property. There is annexed and exhibited hereto as marked ‘R.B.5’ a copy of the Form of Acceptance prepared by Crawford J'ca Ltd. and signed by the Claimant. 12. The Claimant under the terms of the Form of Acceptance and of the said Policy of Insurance is not bound thereby to accept the said sum of $6,056,538.00 in full discharge and satisfaction of his claim and is accordingly not precluded from obtaining from the Defendant company payment of the full amount expended by him to repair the said damage caused by fire.

13 Mr. Brown is claiming against NEM the sum of $2,413,985.00 plus the Quantity Surveyor's fee of $137,604.00 and interest thereon under the Law Reform (Miscellaneous Provisions) Act, together with costs.

NEM's Case

14 NEM admits that it entered into a contract of insurance with Mr. Brown in or around June 2003 but further states that it entered into the contract with Mr. Brown on the basis of the Proposal Form which was signed by him, by which he applied for coverage, including the representations which he made in it.

15 The Proposal Form required Mr. Brown to indicate the full value of the property to be insured, and in June 2003, he stated that value to be $8,000,000.00. NEM agreed to insure Mr. Brown's property at that value based on this representation.

16 NEM, at paragraphs 5 and 6 of its Defence pleads:

5. The said Proposal Form included the following:

i. a notice indicating that the insured should for his own protection state the full value of the property to be insured.

ii. a notice in red setting out the terms of one of the standard conditions in the policy to be issued, the Under-Insurance Clause (‘Average’) which takes effect where property is insured for less than its full value as follows:

If the property hereby insured shall, at the breaking out of any fire or at the commencement of any destruction of or damage to such Property by any other peril thereby insured against, be collectively of greater value than the sum insured thereon, then the Insured shall be considered as being his own Insurer for the difference, and shall bear a rateable proportion of the loss accordingly. Every item, if more than one, of the Policy shall be separately subject to this condition.

6. In the premises, the Claimant was at all material times under a duty to advise the Defendant of the full value of his property and of any changes in same and the sum insured under any policy issued in his favour by the Defendant was informed by his said advice.

17 NEM agrees that the policy was renewed annually but it avers that the value at which the property was insured on each renewal was based on Mr. Brown's representation as to the value of the property.

18 NEM further admit that the policy was renewed for the period June 2006 to June 2007 with a sum insured of $20,000,000.00 and they state that this was based on Mr. Brown's representation made to NEM through his agents Marathon Insurance Brokers Limited which acted on his behalf in requesting insurance coverage from NEM, of the value of his property at that time.

19 NEM admits that the sum insured under the policy remained at $20,000,000.00 for the periods 2007 to 2008 and 2008 to 2009, but they say it so remained because of Mr. Brown's failure in breach of his duty to advise NEM of any changes in the value of his property. NEM relies upon a letter dated July 16 2008 from Mr. Brown's Brokers Marathon requesting the renewed coverage at $20,000,000.00.

20 In respect of the period 2009 to 2010, NEM admits that the policy was renewed at a value of $22,100,000.00 on the strength of a letter received from Marathon Insurance Brokers dated July 1 2009, requesting insurance at that value on behalf of Mr. Brown.

21 NEM admits that Mr. Brown's building was damaged by fire, that he submitted an estimate of repairs prepared by Desmond Simpson, and that they retained vastly experienced Loss Adjusters Crawford to investigate and assess Mr. Brown's claim.

22 NEM avers that Crawford provided them with two written reports of its findings indicating the reasonable costs of repairs at $8,470,523.00 and that Mr. Brown's property had a value of $27,000,000.00, which exceeded the sum for which the property was insured. NEM states that Crawford advised Mr. Brown of these values and Mr. Brown agreed to the determination of his entitlement under the subject Policy on the basis of those values. Copies of Crawford's Preliminary Report and Final Report dated 27 ^th January 2009 are exhibited to the Affidavit of Miss Donna Brown, Chartered Insurer, employed to NEM as its Claims Manager.

23 NEM states that the formula which Crawford used to determine the amount due to Mr. Brown involved a pro rating of the repair costs based on the ratio of the sum insured to the actual value of the property. NEM...