ABSTRACT
A valued policy is defined in s 27(2) as ‘a policy which specifies the agreed value of the subject-matter insured’. The purpose of fixing in advance the amount of compensation to be paid to the assured is to avoid disputes as to the value of the subject-matter insured. The validity of such a policy – whether it offends the principle of indemnity – was raised as early as 1761 in Lewis v Rucker,1 where it was firmly established that it was not to be considered as a wager policy, or like an ‘interest or not interest’ type of policy. The learned Lord Mansfield remarked that, ‘… it must be taken that the value was fixed in such a manner as that the insured meant only to have an indemnity’. In Irving v Manning,2 Mr Justice Patteson (who delivered the judgment of the Court of Appeal) had first to admit that a policy of insurance is not a perfect contract of indemnity before he could proceed to identify a valued policy as an example of its imperfection.3 The convenience of a valued policy is, in the words of Mr Justice Gorell Barnes in The Main,4 to save both parties the ‘necessity of going into an expensive and intricate question as to the value in each particular case’. Of course, all is well and good if a fair and realistic figure is given as its valuation. But as to be seen, past cases have shown that the agreed values tended to be inflated and exorbitant.
