Insurance And Reinsurance - Weekly Update - 21 December 2012

Standard Life v Ace European

Court of Appeal decides whether apportionment principle applies in liability cases

http://www.bailii.org/ew/cases/EWCA/Civ/2012/1713.html

The first instance decision in this case was reported in Weekly Update 04/12. The insured operated a fund which suffered a one-day 4.8% fall in value. It subsequently paid customers who it estimated would have a valid claim against it and sought to recover those payments under the Mitigation Costs section of its professional indemnity insurance policy.

At first instance, Eder J held that these payments fell within the definition of Mitigation Costs as they were "reasonably and necessarily incurred..in taking action to avoid...or to reduce a third party claim". It did not matter that one motive was to avoid or reduce reputational damage.