Roach v (N.E.M.) West Indies Insurance Ltd

• Jurisdiction: Montserrat
• Court: High Court (Montserrat)
• Judge: Saunders, J.
• Judgment Date: 19 July 2000
• Neutral Citation: MS 2000 HC 4
• Docket Number: No.30 of 1998
• Date: 19 July 2000

High Court

Saunders, J.

No.30 of 1998

Roach

and

(N.E.M.) West Indies Insurance Limited

Contract of insurance - Cancellation of contract by insurance company — Whether notification of cancellation by letter sufficient to terminate contract — Peril occurring after notification but before refundable portion of premium returned to policy holder — Whether company entitled to cancel policy unilaterally — Whether return of premium a condition precedent to cancellation — Whether company guilty of bad faith and if so, relevance of same — Judgment for insurance company.

1 Saunders, J. The plaintiff owned a dwelling house in St. Patrick's, Montserrat. She first insured this property with the defendants in 1994. The policy of insurance covered, among other perils, loss or damage occasioned by volcanic activity. In mid 1995, the Soufriere Hills volcano began acting up. As time wore on, the eruptions grew more and more serious. The insurance community naturally became very nervous. The volcano threatened the most built-up areas of the island.

2 The plaintiff's insurance fell to be renewed in July, 1996. The company accepted her offer to renew the policy. The premium of ECC$2,600.00 was received by the company for coverage running from 30th July, 1996 to 30th July, 1997. The plaintiff left for England shortly thereafter leaving her sister, Mrs. Elizabeth Ryan, to look after her affairs in Montserrat.

3 In August, 1997 the company sent letters to all their policy holders. The plaintiff's letter was dated 20th August. The plaintiff acknowledges receiving her letter but she says she only got it in or about mid September, 1997. In this letter, the company stated that they had hoped that the volcanic situation would have subsided but that instead it was raging on. They said that their re-insurers, unconvinced that the volcano would soon become dormant, had advised them to withdraw cover with effect from 28th August, 1997. The letter continued, “In the circumstances we are left with no other alternative but to invoke the cancellation condition contained in your policy with us, giving you notice of cancellation as at 28t August 1997. You are entitled to a refund of premium …………” and the letter goes on in this vein.

4 On the 26th December, 1997 the plaintiff's property was completely destroyed by volcanic activity. On the 5th January, 1998, a letter from the company was hand delivered to the plaintiff's sister. That letter contained a cheque representing refunded premium for the unexpired portion of the plaintiff's policy. The plaintiff instructed her sister to refuse the cheque. The letter and the cheque were returned to the company. The plaintiff then commenced this suit in July, 1998. She claims a declaration that she is entitled to the full sum for which her property was insured.

5 I agree with Mr. Markham that there are fundamentally three bases upon which the plaintiff seeks the relief prayed for. The first surrounds the matter of the right of the company to cancel the policy. The second turns on the effect of the neglect to return the appropriate portion of the premium until after the occurrence of the peril. The third has to do with whether the company has acted in good faith.

6 The obvious starting point in resolving issues of the company's right to cancel the policy is the contract that the parties have entered into. Listening to the plaintiff as she gave her evidence, it seems to me that she formed the opinion that the company could not unilaterally terminate her contract of insurance. The express provisions of Condition 9 of the contract do not bear out that view. Condition 9 of the policy states:

“The Insurance may be terminated at any time at the request of the insured in which case the company will retain the customary short period rate for the time the policy has been in force. This insurance may also at any time be terminated at the option of the company on notice to that effect being given to the insured in...