Albion Insurance Co Ltd v Government Insurance Office

The plaintiff insurer asserts a right in these circumstances to recover from the defendant insurer one-half of its expenditure for damages and costs. No distinction is drawn by either party between the costs which the plaintiff incurred in defending the action and the damages and costs which it paid to the injured employee. The defendant resists the claim for contribution upon one ground only, namely that the case does not fall within the principle of law as to contribution between insurers, because the two policies, if each be considered as a whole, were different as regards subject matter, and differed so widely as regards the rights and liabilities they conferred that it would not be just and equitable to decree contribution between the insurers. The defence was based upon a judgment of Myers J. in a similar case: Government Insurance Office of New South Wales v. Royal Exchange Assurance of London [1] ; and Street J., being assured by both parties that the matter would be taken on appeal to this Court whatever he might decide, very properly followed the judgment of Myers J. as a matter of comity and without staying to give the matter fresh consideration.

The question now is whether Myers J. correctly interpreted the law as to contribution between insurers. After examining in detail the provisions of the two policies that were before him his Honour held that the case was not one of double insurance, because the insurances were upon different subject matters and for different risks. The subject matter of the one policy, he considered, was the liability of a master to his servant while the subject matter of the other was the liability of a motor vehicle owner to any person injured by the use of it; and from the circumstances that the policies were issued in respect of different relationships, for different purposes, and in pursuance of different statutes exhibiting different objects, his Honour concluded that the risks insured against could not be regarded as the same. The argument that is put to the contrary may be condensed to the proposition that a right to contribution exists whenever a loss has occurred against which each of two or more insurers has contracted to indemnify the one insured, whatever differences there may be in other respects between the policies.

The authorities on the topic show that this proposition is to be upheld as necessarily resulting from two fundamental principles of law. Their significance may be overlooked if the supposition is made, as it seemed to be in the argument of this case, that the rule as to contribution between insurers began as an arbitrary rule of marine insurance, "evolved apparently by Lord Mansfield" (as MacGillivray's Insurance Law, 4th ed. (1953), par. 1651, suggests by reference to Newby v. Reed [1] , and Godin v. London Assurance Co. [2] , and extended to other kinds of indemnity insurance by decisions of the Courts such as North British and Mercantile Insurance Co. v. London, Liverpool, and Globe Insurance Co. [3] . If this were the truth of the matter there would be no point in seeking in more general principle for illumination of the language of judgments which have insisted that a right of contribution between insurers arises only in cases of "double insurance" and depends upon identity of subject matter and of risk. But what Lord Mansfield was doing (sitting in a court of law, not equity, be it noted) was simply bringing together two principles. The first, a principle applicable at law no less than in equity, is that persons who are under co-ordinate liabilities to make good the one loss (e.g. sureties liable to make good a failure to pay the one debt) must share the burden pro rata. The second is that since a policy of marine insurance is a contract of indemnity only, so that where several insurers have separately insured the one person against the one loss that person, though he may upon suffering the loss sue any or all of the insurers, may not recover more in total than a single reparation for the loss, the relation between the insurers in such a case is analogous to the relation between several sureties for a debt. When it came to be recognized that a policy of fire insurance, no less than one of marine insurance, is a contract of indemnity, the analogy of suretyship was at once seen to apply: see Darrell v. Tibbitts [1] , and the doctrine as to contribution has been applied accordingly. So it has in respect of other kinds of indemnity insurance: see e.g. Gale v. Motor Union Insurance Co. [2] ; but whereas in regard to marine and fire insurance it was right to speak of a necessity for identity both of subject matter (e.g. the ship or house) and of risk (e.g. damage by fire caused in a particular manner) the corresponding point in regard to accident insurance is made by saying that each policy must insure the same person against the very loss that in the event he has sustained, or the very liability that in the event he has incurred.

1. (1763) 1 Bl. W. 416 [96 E.R. 237]. 2. (1758) 1 Burr. 489 [97 E.R. 419]. 3. (1877) 5 Ch. D. 569, 583, 587. 4. (1880) 5 Q.B.D. 560, at p. 563. 5. [1928] 1 K.B. 359.

The general doctrine of contribution, as I have said, forms part of the common law. It was applicable by Lord Mansfield in Godin v. London Assurance Co. [3] and Newby v. Reed [4] no less than by Lord Chief Baron Eyre when exercising the equitable jurisdiction of the Court of Exchequer in Dering v. Winchelsea (Earl) [5] . This was because the basic concept was accepted by both law and equity as one of natural justice, as indeed it had been by the law of other countries since ancient times. (The historically-minded may care to consider, with Lord Watson's reference to the maritime law of Rhodes in Strang, Steel & Co. v. A. Scott & Co. [6] , Mr. Justice Story's Commentaries on Equity Jurisprudence, 3rd English ed. (1920), arts. 490 et seq., and an article on the Rhodian Law in the Yale Law Journal (1909), p. 225.) Lord Mansfield put the matter squarely on that ground: "If the insured is to receive but one satisfaction, natural justice says that the several insurers shall all of them contribute pro rata, to satisfy the loss against which they have all insured" [1] ; and indeed Mr. Justice Park, in his work on Marine Insurance, had described the principle of contribution as a principle of natural justice: see Sir William Blackstone's note to his report of Godin v. London Assurance Co. [2] . The justification for the description may be seen from Dering v. Winchelsea [3] itself and the notes to that case in White and Tudor's Leading Cases in Equity, 9th ed. (1928), vol. 2, pp. 488 et seq. The principle proceeded, as Lord Redesdale said in Stirling v. Forrester [4] which Lord Halsbury approved in Ruabon Steamship Co. v. London Assurance [5] , "on a principle of law that must exist in all countries, that where several persons are debtors, all shall be equal". Lord Redesdale had observed that the principle was universal "that the right and duty of contribution is founded in doctrines of equity" [5a] ; and the reference was not to doctrines peculiar to chancery but to doctrines of equity in the sense of "reason, justice and law", the expression used by Martin B. in Marsack v. Webber [6] . The judgment in Dering v. Winchelsea [7] itself had said that "If we take a view of the cases both in law and equity, we shall find that contribution is bottomed and fixed on general principles of justice" - "founded on equality, and established by the law of all nations" (to quote the same judgment as differently reported [8] ) - and it had gone on to show that law and equity were at one as to the nature of the right, though the doctrine of equality operated more effectually in a court of equity than in a court of law, and there were differences as to the mode and conditions of its application: see generally Halsbury's Laws of England, 3rd ed., vol. 14, pp. 492, 493, pars. 934, 935; vol. 22, pp. 266-268, pars. 527, 528. The right arises at law when "one of several persons has paid more than his proper share towards discharging a common obligation": Davies v. Humphreys [9] ; Dimdore v. Leventhal [10] , and it arises in equity when a liability of one of several to pay more than his share has been ascertained: Wolmershausen v. Gullick [11] ; McLean v. Discount & Finance Ltd. [12] ; but for present purposes this difference is immaterial: what is important is the reason, namely that payment by the one discharges not only himself but each of the others, and qui sentit commodum sentire debet et onus.

1. (1758) 1 Burr. 489 [97 E.R. 419]. 2. (1763) 1 Bl. W. 416 [96 E.R. 237]. 3. (1787) 1 Cox Eq. Cas. 318 [29 E.R. 1184]. 4. (1889) 14 App. Cas. 601, at p. 607. 5. (1758) 1 Burr. 489, at p. 492 [97 E.R. 419, at p. 420]. 6. (1758) 1 Bl. W., at p. 105 [96 E.R., at p. 59]. 7. (1787) 1 Cox Eq. Cas. 318 [29 E.R. 1184]. 8. (1821) 3 Bli. 575, at p. 596 [4 E.R. 712, at p. 719]. 9. [1900] A.C. 6, at p. 11. 10. (1821) 3 Bli., at p. 590 [4 E.R., at p. 717]. 11. (1860) 6 H. & N. 1, at p. 6 [158 E.R. 1, at p. 3]. 12. (1787) 1 Cox Eq. Cas. 318, at p. 321 [29 E.R. 1184, at p. 1185. 13. (1787) 2 B. & P. 270, at p. 274 [126 E.R. 1276, at p. 1278]. 14. (1840) 6 M. & W. 153, 168-169 [151 E.R. 361, at pp. 367, 368]. 15. (1936) 36 S.R. (N.S.W.) 378, at p. 385. 16. [1893] 2 Ch. 514. 17. (1939) 64 C.L.R. 312, at p. 341.

What attracts the right of contribution between insurers, then, is not any similarity between the relevant insurance contracts as regards their general nature or purpose or the extent of the rights and obligations they create, but is simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained; for that is the situation in which "the insured is to receive but one satisfaction" (to use Lord Mansfield's expression) and accordingly all the insurances are "regarded as truly one insurance": Sickness and Accident Assurance Association Ltd. v. General Accident Assurance Corporation Ltd. [1] .

1. (1892) 19 Rettie, at p. 980; 29 Sc. L.R. 836, at p. 837.

In my opinion it follows from these considerations that the judgment in Government Insurance Office of New South Wales v. Royal Exchange Assurance of London [2] is at variance with the true principle as to contribution between insurers and should be overruled.

I agree that the appeal in the present case should be allowed.

I agree that this appeal should be allowed. I agree in the reasons given by Kitto J. for that conclusion. The defendant in the Supreme Court (the present respondent) should, I think, have been held liable to pay to the plaintiff $8,071.92, being one half of the sum of $16,143.84, the amount which was paid by the plaintiff to the insured pursuant to the policy.