When Are Damages For A Delay In Paying Out Under An Insurance Policy Appropriate?

• Published date: 27 May 2022
• Subject Matter: Insurance, Insurance Laws and Products
• Law Firm: Gowling WLG
• Author: Ms Samantha Holland, Susannah E. Fink and Teresa Edwards

The case of Quadra Commodities SA v XL Insurance Company SE & Ors [2022] EWHC 431 (Comm) (04 March 2022) (bailii.org) provides an interesting consideration of the law of insurable interest. Perhaps of more interest is that it is the first reported judgment which considers whether insurers are liable to pay damages for late payment of an indemnity. While the damages claim for late payment was not accepted in this case, the judgment provides some very helpful analysis on the factors to be taken into account when considering a claim under Section 13A of the Insurance Act 2015.

Background

The claimant and the insured, Quadra Commodities SA (Quadra), was a commodities, trading and logistics company specialising in the trade of agricultural commodities including grains, oil seeds and vegetable oils. Quadra entered into contracts with Agroinvest Group companies to purchase and trade grain. Warehouse receipts were provided to Quadra to confirm that the required quantities of grain were held in specific warehouses in Ukraine, following which Quadra then made payment. Quadra did not see the grain before payment was made, although it had retained a third party to undertake inspections on its behalf.

It subsequently transpired that the receipts issued to Quadra had been fraudulent, forming part of the 'Agroinvestgroup Fraud' uncovered in Ukraine in 2019. The warehouses were issuing receipts to multiple entities in respect of the same grain and there was insufficient grain to satisfy the receipts they had issued. When Quadra sought to take delivery of its grain, there was not enough available - the same grain had been sold many times over.

Quadra sought to recover the loss it had suffered, having paid for the grain it would never receive, and claimed under its Marine Cargo Policy. Insurers declined the claim, arguing that there had been no physical loss of property - Quadra had suffered only financial loss, in respect of which it was not insured.

Quadra issued proceedings, claiming in respect of its lost goods and its sue and labour costs. It also made a damages claim under Section 13A of the Insurance Act (the Act).

Insurers argued that Quadra had no insurable interest in the goods that had been lost and there was no misappropriation of any goods. There had been no loss of physical property. The insured's loss was purely financial and no payment was due under the Policy as a result.

Commercial court decision

The court held that Quadra was entitled to an indemnity...