Measure of indemnity I - Valued and unvalued policies

(Quorum AS v Schramm (No 1) [2002] Lloyd’s Rep IR (forthcoming))

Under a valued policy, in the event of a total loss of the insured subject matter, the assured is entitled to recover the full sum insured even though it subsequently proves that the subject matter was overinsured. Equally, if there is a partial loss, the assured is entitled to recover the proportion of the agreed value which represents the proportion of damage to the subject matter. By contrast, if the policy is unvalued, the assured is entitled to recover only the amount of his loss (subject to any policy cap), determined by calculating the difference between the value of the subject matter immediately before the loss and the value immediately after the loss. If it is likely that the value will be difficult to determine, the policy will generally be valued so as to remove all arguments at the loss stage. In Quorum AS v Schramm (No 1) [2002] Lloyd’s Rep IR (forthcoming) Thomas J had to determine whether a policy was valued or unvalued and, having concluded the latter, then to calculate the measure of indemnity for unique subject matter under an unvalued policy.