Insurable interest - contract paying fixed sums by reference to persons connected with insured's members - insured having sufficient insurable interest in lives of those persons

Feasey v Sun Life Assurance Co of Canada and another; Steamship Mutual Underwriting Association (Bermuda) Ltd v Feasey: CA (Lords Justice Ward, Waller and Dyson): 26 June 2003

Consequent on changes to Lloyd's risk codes in 1994, the insured underwriting association renegotiated its policy with a Lloyd's syndicate and its reinsurers.

Thereby the insured agreed to receive fixed-level benefits, the amount being arrived at by reference to the death or injury of a class of persons (original persons) defined in the policy and having some connection with the insured's members.

The aim was to cover the insured's liability to its members while maintaining the syndicate's 'personal accident' classification and entitlement to premium income.

Mr Justice Langley [2002] EWHC 868 (Comm); [2002] Gazette, 11 July, 30, dismissed claims by the syndicate and the reinsurers that the insured had no relevant insurable interest in the lives of the original persons.

The syndicate and reinsurers appealed.

Julian Flaux QC and David Lord (instructed by Lovells) for the syndicate; Dominic Kendrick QC and Simon Kerr (instructed by Clifford Chance) for the reinsurers; Anthony Boswood QC and Richard Handyside (instructed by Richards Butler) for the insured.

Held, dismissing the appeal (Lord Justice Ward dissenting), that section 1 of the Life Assurance Act 1744 required the insured to have an insurable interest in the lives of those for whom the policy was effected; that 'insurable interest' was difficult to define in words which would apply to all situations; that it was not an abuse of language to say that in the circumstances the provision of fixed-sum benefits intended to track as closely as possible the insured's overall liability was sufficient to give the insured an insurable interest in the lives of the original persons; and that, accordingly, the policy could not be avoided under section 1 of the 1774 Act.