The source of the dispute was a fire which broke out in October 2007, causing damage to a residential property which was in the process of being sold for £1.81m. Contracts had been exchanged, but the fire occurred before completion. The contract of sale provided that the risk of damage passed from the seller to the buyers on exchange.
Both the buyers and the seller were insured at the time of the fire. The NFU had provided buildings cover to the buyers. However, one of the policy’s general conditions provided that if the loss was covered by any other insurance, the NFU would only pay their share. HSBC had provided buildings cover to the seller under a policy that also extended cover to anyone buying the sellers home. It included a condition stipulating that HSBC would not pay any claim if the loss was covered wholly or in part under any other insurance.
After the fire, the buyers claimed on their cover with the NFU and were paid £1.85m. The NFU then sought a contribution from HSBC. The NFU’s case was that both it and HSBC had insured the buyers for the same loss.
It was held that this was not in fact a case of double insurance. The NFU policy covered the buyers; the only qualification being that if there was another insurer covering the same loss, the NFU would pay out on a pro rata basis. However, the existence of the NFU insurance triggered the qualification in the HSBC policy, with the result that the HSBC policy’s extension did not apply.
