ABSTRACT
Lord Justice Bowen in Castellain v Preston5 was confident that the principle of indemnity will solve all problems. His words were:
Admittedly, most of the problems can be resolved by applying the principle. But this, as will be seen, is a somewhat optimistic point of view. A contract of marine insurance, though a contract of indemnity, is by no means a perfect contract of indemnity. As in all walks of life, there is always a margin of error: in some instances, the theory may more than indemnify the assured for his loss, and in others, he may be under-indemnified. That the principle is not infallible was noted by Lord Sumner in British and Foreign Insurance Co Ltd v Wilson Shipping Co Ltd6 where he said: ‘In practice contracts of insurance by no means always result in a complete indemnity, but indemnity is always the basis of the contract’. In similar terms, Mr Justice Patteson in Irving v Manning,7 who, also resigned to the fact that perfection may be difficult, if not impossible, to achieve, openly declared that: ‘A policy of assurance is not a perfect contract of indemnity.’ He acknowledged the fact that it has to be taken with qualifications, one of which is the effects of a valued policy, the problem he was asked to resolve.8
