The Plaintiff (formerly known as Dixons Stores Limited) operated
two promotions under which free flights were given to
The promotions were operated by a firm of Travel Agents,
The agreement between Dixons and JSI provided that Dixons would pay
JSI a fee of £7 per customer. In return, JSI would provide the free
flights. JSI hoped to cover the cost of the flights by earning
commission on accommodation and car hire.
Dixons agreed to pay for "over-redemption" insurance; JSI agreed to
comply with its conditions and indemnify Dixons against any losses
caused by their failure to do so.
JSI and Dixons were named as the Insured in the slip, which
provided that Dixons could only take over the Insured's rights
under the policy should JSI be unable to continue to run the
promotions. JSI went into liquidation; Dixons took over and claimed
approximately £1 million under the over-redemption
Underwriters refused to pay on the grounds of material
misrepresentation, non-disclosure and/or breach of warranty in the
proposal forms and the placing documentation.
The over-redemption cover related to two promotions:
- The first promotion was in November/December 1992. The sum
insured was £500,000 in excess of £15,000. Dixons estimated that
there would 15,000 eligible purchases. In answer to a question on
the proposal form, JSI estimated the cost of providing free flights
would be £41,850, as against an estimated fee income of £105,000.
JSI's figures were based on its own previous experience of a
similar promotion which they handled for Hoover.
- The second promotion was in March 1993. The sum insured was
£800,000 in excess of £40,000. Based upon Dixon's estimate of
29,000 eligible purchasers, JSI stated that their costs were likely
to be £76,038, as against estimated income of £203,000. In other
words, the risk of any loss appeared slight.
In these proceedings, the Judge decided a number of preliminary
issues and did not therefore need to determine Underwriters'
defences on their merits. The most important preliminary issue was
whether any misrepresentation by JSI affected Dixons' claim under
The effect of any misrepresentation by JSI on Dixons' claim
involved determining the true nature of the insurance contracts. If
there had been joint insurance, any defence against JSI would also
have succeeded against Dixons.
By contrast, Dixons argued that the insurance was composite. In
other words, Dixons and JSI were different insureds insuring
different interests. Thus a breach of the duty of utmost good faith
by one insured would not affect the other. On the facts, the
interest of JSI was in losses it might suffer in operating the two
promotions; the interest of Dixons, however, was the loss it might
suffer if JSI was unable to run the promotions. Thus, Dixons' risk
was that JSI would fail and not that the promotion would make a
Underwriters argued that the insurance was neither joint nor
- the insurance was not joint as the slip provided that Dixons
could only take over the insured's rights under the policy should
JSI be unable to continue to run the promotions. Accordingly, the
parties could not recover jointly; either JSI or Dixons could
- the insurance was not composite because only one risk was
insured: the risk that the promotion would result in a loss. That
loss was calculated in the same way whether JSI or Dixons was the
Underwriters therefore argued that the insurance fell into a third
category. Dixons' rights under the insurance were contingent. If
JSI was unable to continue to run the promotions, Dixons acquired
whatever rights JSI had and, if those rights were avoidable for
non-disclosure, so were Dixons'. The position was similar to an
assignment and Dixons, as an assignee, could have no better rights
The Judge accepted underwriters' argument. The risk insured was
that the promotion would result in a loss. JSI and Dixons had the
same insurable interest. Accordingly, any breach of the duty of
utmost good faith by JSI affected Dixons' claim under the insurance
- Cameron McKenna acted for the Defendant Underwriters (DSG
Retail Limited -v- QBE International Insurance Limited & Others,
QBD: Judgment 20th November 1997).