Deliberate or wilful acts: the case of Patrick v. Royal London

Policyholders are occasionally agreeably surprised to learn that they are in fact protected by their insurance, when something goes wrong expensively and "it was your own fault".

In fact, of course, one purpose of insurance contracts is precisely to offer protection against the unwanted and unexpected consequences of things that we do, even negligently: think of road traffic accidents. Experts, including lawyers, almost always carry insurance against their own negligence.

Insurers constantly worry, however, about what is quaintly referred to as "moral hazard" in connection with cover of this kind. Life is full of moral hazards, but the only one insurers have in mind is the risk that policyholders might be influenced by the fact of cover to do things they would not otherwise do and which might end up costing the insurers money.

For this reason, contracts often exclude from their scope the result of "deliberate" or "wilful"acts. The declared intention is to discourage policyholders from doing things which are purposefully harmful rather than accidental or a result of error. An example of the former might be a builder who, while erecting a building, deliberately damages the house next door because the owner is, say, a love-rival. When sued, he asks the insurance company to pay.

In practice, these situations are usually less clear-cut. It is surprising that there are so few reported cases on this aspect of the interpretation of insurance contracts. I suspect that this may be because, either on their own or with the encouragement of the insurer, policyholders decide not to claim when this exclusion is invoked.

 My favourite case is the Canadian one of the medical doctor who died after taking a drug over-dose.  The life insurance company tried to escape paying on the grounds that he had deliberately caused his own death, but were ordered to pay the claim by the court because the evidence was that it was likely that the overdose was accidental ! Read it here: http://scc.lexum.umontreal.ca/en/2003/2003scc16/2003scc16.html

The most recent case has been drawn to my attention by David Martin Clark (whose website http://www.onlinedmc.co.uk/insurance.htm I recommend to all those interested in insurance law).

The case is that of Patrick v. Royal London Mutual [2006] EWCA Civ. 421.  Mrs Patrick had a household insurance policy which included cover for accidental damage caused by her or any member of her family.  Her son lit a fire on a derelict premises which unfortunately consumed not only that premises but also a non-derelict property next to it.  The son, aged 11, testified that it had not been his intention to burn any building down, but simply to destroy the wooden structure he had built himself.  He claimed that he did not realise this could lead to the consequences that it did, and his testimony was accepted by the court.  On that basis, the English Court of Appeal held that the exclusion on Mrs Patrick's policy to the effect that the policy would not cover damage "wilfully" caused did not apply and the claim had to be paid.

Read the full judgment here: http://www.hmcourts-service.gov.uk/judgmentsfiles/j4172/patrick_v_rlmis_0306.htm

Comments

[life insurance girl]

I have noticed lately that there are alot of concerns about life insurance policies and the fact that you have to keep them for at least a year or whatever the term says before you can actually bank on the policy. So if you get a life insurance policy and you die in 2 weeks, then you do not get the life insurance payoff because you died too fast (no matter what the reason is). It is important to check out the life insurance company you are going to be dealing with on this aspect.

[Fergus O'Rourke]

Generally speaking, a contract can say whatever the parties agree that it will say. The provision that Karen cites is not that common in my experience (which is in the UK and Ireland). However, life in general, and insurance contracts in particular, is full of traps for the unwary. I recommend use of a broker.