injury inflicted upon their property, rights and interests, including the loss of use of
the ship. The underwriters and the British Government as reinsurers laid claims
against the compensation paid to the owners. The Crown represented by the Attorney General of the Government contended that its right to recover the money was in
respect of a proprietary right incidental to the ship’s ownership. The insurers were
entitled to it by virtue of their rights of subrogation pursuant to s.79 of the Marine
Insurance Act. The House of Lords held that the compensation was paid in virtue of
the application of “exceptional war measures;” it was personal to the shipowners and
was neither for the benefit of insurers nor the Government. The monies paid to the
owners was not in respect of the loss of the ship suffered by them but rather, in
respect of the loss of profits which they might have reasonably expected to earn from
the use of the ship had it not been captured and detained. Therefore, the insurers were
not entitled to the monies by reason of the payment they made for a total loss under
the insurance policies of the ship.
In the observation of the present author, the decision bears a noticeable resemblance to the judgment in Burnand v. Rodocanachi discussed above, in one conspicuous aspect. In effect, the House of Lords in Glen Line treated the compensation
paid by the German authorities as being in the nature of a gift personal to the
shipowner, which precluded the Crown and the insurers from laying any claim to
it. In the further observation of this author, the compensation received by the owners
was ostensibly in the nature of a windfall as it was surplus to the indemnification
paid by the insurers. In such a typical factual situation, the question raised is—who is
entitled to the windfall, that is, the surplus over and above the amount of the
indemnification? The Government and the insurers argued that the compensation
amount enured to their benefit under the principle of subrogation, but the court
decided otherwise. The decision in this case, in terms of the conclusion reached by
the House of Lords on this particular issue, served as an important precedent for what
is probably the most prominent English case in this field discussed below.
The facts of Yorkshire Insurance Co. Ltd. v. Nisbett Shipping Co. Ltd.,
22 are
contained in the judgment rendered by Diplock J. (as he then was) as follows: The
steamship Blairnevis owned by the defendant shipping company Nisbett Shipping at
all material times, collided with the H.M.C.S. Orkney belonging to the Canadian
Government. The collision took place in the Irish Sea on 13 February 1945. Later,
the same day, the vessel beached in the River Mersey and became an actual total
loss. The Blairnevis was insured with the plaintiff company Yorkshire Insurance and
others for 12 months from 27 June 1944 for the sum of pounds sterling £ 36,888 of
which £ 2523 was underwritten by Yorkshire. In the policy, the ship was valued at £
72,000 and the balance of that value was covered by other policies on similar terms
as the subject policy. The plaintiff and subscribers to all other policies including the
policy in question are herein collectively referred to as “the insurers”. The assured
gave notice of abandonment on 15 February 1945 which was not accepted. Thereafter, the vessel having become an actual total loss, the insurers, on 20 April, 1945
22 [1961] 1 Lloyd’s Rep 479 (Comm Ct).
Windfall in the Law of Subrogation: Marine Insurance in Motion
569
the ship. The underwriters and the British Government as reinsurers laid claims
against the compensation paid to the owners. The Crown represented by the Attorney General of the Government contended that its right to recover the money was in
respect of a proprietary right incidental to the ship’s ownership. The insurers were
entitled to it by virtue of their rights of subrogation pursuant to s.79 of the Marine
Insurance Act. The House of Lords held that the compensation was paid in virtue of
the application of “exceptional war measures;” it was personal to the shipowners and
was neither for the benefit of insurers nor the Government. The monies paid to the
owners was not in respect of the loss of the ship suffered by them but rather, in
respect of the loss of profits which they might have reasonably expected to earn from
the use of the ship had it not been captured and detained. Therefore, the insurers were
not entitled to the monies by reason of the payment they made for a total loss under
the insurance policies of the ship.
In the observation of the present author, the decision bears a noticeable resemblance to the judgment in Burnand v. Rodocanachi discussed above, in one conspicuous aspect. In effect, the House of Lords in Glen Line treated the compensation
paid by the German authorities as being in the nature of a gift personal to the
shipowner, which precluded the Crown and the insurers from laying any claim to
it. In the further observation of this author, the compensation received by the owners
was ostensibly in the nature of a windfall as it was surplus to the indemnification
paid by the insurers. In such a typical factual situation, the question raised is—who is
entitled to the windfall, that is, the surplus over and above the amount of the
indemnification? The Government and the insurers argued that the compensation
amount enured to their benefit under the principle of subrogation, but the court
decided otherwise. The decision in this case, in terms of the conclusion reached by
the House of Lords on this particular issue, served as an important precedent for what
is probably the most prominent English case in this field discussed below.
The facts of Yorkshire Insurance Co. Ltd. v. Nisbett Shipping Co. Ltd.,
22 are
contained in the judgment rendered by Diplock J. (as he then was) as follows: The
steamship Blairnevis owned by the defendant shipping company Nisbett Shipping at
all material times, collided with the H.M.C.S. Orkney belonging to the Canadian
Government. The collision took place in the Irish Sea on 13 February 1945. Later,
the same day, the vessel beached in the River Mersey and became an actual total
loss. The Blairnevis was insured with the plaintiff company Yorkshire Insurance and
others for 12 months from 27 June 1944 for the sum of pounds sterling £ 36,888 of
which £ 2523 was underwritten by Yorkshire. In the policy, the ship was valued at £
72,000 and the balance of that value was covered by other policies on similar terms
as the subject policy. The plaintiff and subscribers to all other policies including the
policy in question are herein collectively referred to as “the insurers”. The assured
gave notice of abandonment on 15 February 1945 which was not accepted. Thereafter, the vessel having become an actual total loss, the insurers, on 20 April, 1945
22 [1961] 1 Lloyd’s Rep 479 (Comm Ct).
Windfall in the Law of Subrogation: Marine Insurance in Motion
569