Ace European Groups & Ors v Standard Life Assurance Ltd  EWCA Civ 1713 concerned an appeal against a decision of the Commercial Court that Standard Life’s cash injection into its Pension Sterling Fund constituted an insured “mitigation cost” under the policy and that no apportionment of costs was required. Please see our previous blog on the Commercial Court’s decision here.
The main ground of appeal was that Standard Life was not entitled to recover the full amount of the cash injection because there should have been an apportionment of the uninsured costs of reducing brand damage and the insured costs of avoiding third party claims.
Lord Justice Tomlinson, who delivered the leading judgment, rejected this argument as a matter of construction and held that it was “inconsistent with the clear language of the policy” that the ancillary objective of avoiding brand damage should prevent the insurers from paying out the full amount that they had promised to pay for costs incurred in avoiding third party claims.
Tomlinson LJ did not agree that apportionment, having its origins in sue and labour provisions of marine contracts, could be applied beyond the scope of marine property insurance and found the principle to be “unworkable in the field of liability insurance.”
The court also rejected the subsidiary ground of appeal concerning windfall. The appellants submitted that 36% of the cash injection had been paid to customers who would not have had any claim because no misrepresentation had been made to them. Tomlinson LJ described this argument as “quite hopeless” because the cash injection was indivisible and could not be reduced if it were to fulfil its purpose of reinstating the Fund to its original value.
This decision confirms that the principle of apportionment will not apply in the field of liability insurance. The decision can be read in full here.