Sheenan v FBD Insurance

• Jurisdiction: Ireland
• Judge: Keane,J
• Judgment Date: 20 July 1999
• Neutral Citation: 1999 WJSC-SC 7358
• Court: Supreme Court
• Docket Number: 153 & 154/98
• Date: 20 July 1999

1999 WJSC-SC 7358

THE SUPREME COURT

Barrington, J.

Keane, J.

Lunch, J.

153 & 154/98

SHEEHAN v. FBD INSURANCE PLC

IN THE MATTER OF THE ARBITRATION ACTS, 1954– 1980 AND IN THE MATTER OF AN ARBITRATION

BETWEEN

JOSEPH SHEEHAN

Plaintiff/Appellant

AND

FBD INSURANCE PLC

Defendants

Citations:

HICKMOTT PRINCIPLES & PRACTICE OF INTERRUPTION INSURANCE

ARBITRATION ACTS 1954 – 1980

KEENAN V SHIELD INSURANCE CO LTD 1988 IR 89

DOYLE V KILDARE CO COUNCIL 1995 2 IR 424

Synopsis

Arbitration Law

Arbitration; contract of insurance; defendant had resisted claim under insurance contract on ground that damage had not been caused by an insured peril; matter referred to arbitrator pursuant to contract; arbitrator had made awards in respect of property damage and consequential loss suffered by plaintiff; High Court had dismissed plaintiff's challenges to the awards; whether arbitrator's awards revealed an error on the face of the record; whether matter should be remitted to arbitrator; Arbitration Acts, 1954 and 1980.

Held: Appeal dismissed; although freedom to alter standard terms of insurance policy is restricted, policy of the courts should be to make an arbitration award final; High Court has no jurisdiction to interfere with arbitrator's conclusions unless award carried on its face an error of law so fundamental that it should be set aside.

Sheehan v. FBD Insurance PLC - Supreme Court: Barrington J., Keane J., Lynch J. - 20/07/1999

An arbitration award may show on its face an error of law so fundamental that the courts cannot stand aside and allow it to remain unchallenged. An insured may not recover loss under an insurance policy where he has failed to mitigate that loss. In this case the plaintiff had failed to mitigate his loss; once the defendants had expressly disclaimed liability, the plaintiff ought to have carried out the necessary repairs and re-opened for business. The Supreme Court so held in dismissing the plaintiff’s appeal.

1 20th day of July, 1999 by Keane,J [NEM DISS]

2 The factual background to this case is as follows. The plaintiff was at the relevant times the owner of a licensed premises in the City of Limerick called "The Saints and Scholars" in which there were a public bar, restaurant, night-club and function rooms. He was insured with the defendants against damage or loss to the property and employers' and public liability, the policy being in the same terms as a master policy entered into by the Vintner's Federation of Ireland with the defendants.

3 On the 8th/9th February 1994, the floor in the ladies' toilet in the premises collapsed. The plaintiff made a claim under the policy in respect of this damage on the ground that it had been caused by the bursting or overflowing of water tanks, apparatus or pipes, one of the risks covered by the policy. After a number of inspections had been carried out on behalf of the defendants, they disclaimed liability on the ground that the damage had been caused by wet rot and other factor which were not perils insured by them.

4 The premises had been closed shortly after the accident and remained closed at the time the defendants disclaimed liability under the policy. In pursurance of an arbitration clause in the policy, the parties agreed to refer to arbitration, first, the question as to whether the damage had been caused by an insured peril and, if so, the amount to which the plaintiff was entitled in respect of the damage and, secondly, the amount to which the plaintiff was entitled under the consequential loss clause of the policy arising from the closing of the premises.

5 Mr. vincent Hoeym solicitor, was appointed the arbitrator by agreement and conducted an oral hearing. In his first interim award, he determined that the damage to the premises had been caused as to one third thereof by an insured peril and the parties subsequently agreed that the sum to which the plaintiff was entitled in respect of that damage was £7,000. There was then a further oral hearing on the question of consequential loss and in his second award the arbitrator determined that the plaintiff was entitled to consequential loss in respect of a period of 78 days during which the premises had remained closed and assessed the sum to which the plaintiff was entitled in respect of consequential loss at £63,755. He then made a final award dealing with the question of costs.

6 The plaintiff thereupon instituted these proceedings by way of special summons in which he claimed inter alia an order setting aside so much of the second interim award as held that the plaintiff was entitled to consequential loss in respect of a period of 78 days only and an order remitting the award to the arbitrator. The matter having come on for hearing before Kelly J, he dismissed the plaintiff's claim in a written judgment. The plaintiff now appeals to this court from that judgment and order.

7 The defendants had disclaimed liability for the damage to the premises by a letter dated 19th July 1994. The premises at that date were still closed and remained closed until they were eventually sold by the plaintiff on the 31st January 1996. It is clear from the second interim award of the arbitrator dated 16th July 1996 that he was of the view that the plaintiff had failed to minimise the interruption to his business by having the repairs carried out to the premises within a reasonable time and that they should have been carried out and the premises opened for business not later than the 27th April 1994. It was that finding by the arbitrator which was the principal issue between the parties in both the High Court and this court.

The policy of insurance

8 The relevant provisions of the insurance policy in force at the time should first be set out.

9 Section I sets out the extent of the cover in respect of the buildings and provides that:-

"The Company shall by payment, reinstatement or repair at the Company' option Indemnify the Insured in the event of Loss or Damage to the property…by:-"

10 SUB-SECTION A…

11 (vii) Bursting or overflowing of Water, Tanks, Apparatus or Pipes, but excluding:-

12 (a) destruction or damage by water discharged or leaking from an Installation of Automatic Sprinklers.

13 (b) destruction or damage caused whilst the Building is unfurnished."

14 Section 3 under the heading "CONSEQUENTIAL LOSS", so far as material, is as follows:-

"DEFINITIONS…"

15 "INDEMNITY PERIOD":-

16 The period beginning with the occurrence of the loss or damage and ending not later than the 12 months thereafter during which the results of the business shall be effected (sic) in consequence of the loss or damage.

17 "THE COVER"

18 The Company shall indemnify the Insured in respect of:-

"(a) The loss of gross profit during the indemnity period…"

19 Under the heading "GENERAL CONDITIONS", the policy provides as follows:-

20 5(a) The Insured shall…

21 Upon any defect or danger being brought to his notice FORTHWITH cause such defect of (sit.) danger to be remedied and in the meantime shall take such temporary precautions to prevent accidents as the circumstances may require but so far as practicable no alteration or repair shall without the consent of the Company be made to any premises after any occurrence covered by this policy until inspection. The company shall at all reasonable times have free access to inspect any property and the Insured shall facilitate the Company in every way requested."

22 Clause 7(g) provides that:-

"The Company and every person authorised by the Company may, without thereby incurring any liability and without diminishing the right of the Company to rely upon any conditions of this Policy, enter, take or keep possession of the building or premises where the loss or damage has happened, and may take possession of or require to be delivered to them any of the Property hereby insured and may keep possession of and deal with such Property for all reasonable purposes and in any reasonable manner. This condition shall be evidence of the leave and licence of the Insured to the Company so to do…"

23 Clause 10 provides that:-

"All differences arising out of this Policy shall be referred to the decision of an Arbitrator to be appointed in writing by the parties in difference or if they cannot agree upon a single Arbitrator to the decision of two Arbitrators one to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties or in the case of disagreement between the Arbitrators to the decision of an upon the reference…"

The claim and the arbitration

24 The premises were first inspected on behalf of the defendants on the 23rd February and it was pointed out to the plaintiff that there was dry rot in the premises. On the 9th March, the solicitors for the plaintiff wrote to the defendants enquiring what the attitude of the defendants was to the claim and whether their client could trade in view of the present difficulties. The loss adjusters acting on behalf of the defendants replied on the 11th March that their operate in respect of the loss. They also asked for an explanation as to why the premises were closed and said that under the terms of the policy the plaintiff was obliged to minimise his losses. It would appear from the next letter from the plaintiff's solicitors of the 28th March that in the interval the defendants has said that if the premises were reopened in their then condition the public liability cover would not be provided. On the same day a fax was sent by the defendants to the plaintiff's solicitors extending the cover in respect of public liability for a further 14 days on the basis that the premises remained closed to the public. It was stated that if they were reopened, the public and employers' liability...