Court Of Appeal Orders Insurance Companies To Pay The Total Sum Insured For Stolen Vehicle

Author: Dr Ramona Galea
Published: 24th September 2024
Litigation Unit

On the 17^th July 2024, the Court of Appeal (inferior jurisdiction) in the case ‘Michael Scicluna v. Middlesea Insurance plc and Laferla Insurance Agency Limited’, dismissed the defendant’s appeal and thus confirmed the decision of the Court of Magistrates, which had ordered the appellant company to pay the sum of €5,950 plus interest from the date of judgement, representing the fair and realistic insured value of a stolen vehicle. Scicluna had originally filed a claim after the insurers had only offered to pay €3,000 for the stolen vehicle, while the insured amount was that of €7,000.

The Court of Appeal in confirming the decision of the First Court made a number of considerations.

1. Competence of the Court

The Court of Appeal, in its decision, declared that mandatory arbitration only applied to matters of collision and involuntary damage, not theft. Given that this was a deliberate act and not an involuntary one, the parties were not obliged to commence arbitration. In its considerations, the Court of Appeal noted that the appellants had not raised this plea at the appropriate time before the First Court, that is prior to the making of any pleadings by the parties as required under the Arbitration Act, Chapter 387 of the Laws of Malta. In addition, the Court of Appeal also highlighted that this matter could have been raised by the Court itself ex-officio, however the appellants’ arguments were not such as to convince the Court to do so and therefore the Court proceeded to confirm the competence of the First Court in determining the dispute.

2. Legal Relationship between the Parties

The Court went on to analyse the juridical relationship of the parties. The appellant companies had argued that the relationship was quasi-contractual given the involvement of a broker ‘Peak Insurance Brokers’. However, the Court explained that the relationship between the parties was contractual given that the insurers had throughout the years accepted the value of the vehicle and the premium to be paid.  In reaching its decision, the Court noted that whilst the appellant companies were arguing in favour of the insurance policy provisions, they did not however seem to consider themselves as being equally bound to the terms and conditions contained therein, including the amount insured under the premium

3. Procedure for valuation of the vehicle

Subsequently, the Court examined the vehicle’s valuation procedure by considering the various testimonies made by representatives from the insurance company. The appellant companies had claimed that according to standard practice, the valuation was to be suggested by the person insured. However, Mark Laferla in his testimony explained that the insurance company had control over the valuation of the vehicle during policy renewals. In contrast, the testimony given by the Head Assessor of Mapfre Middlesea was considered by the Court to be unreliable and based on poor research on Maltapark listings, leading to an unrealistic valuation and offer of €3,000. The Court concluded that the appellant companies had never contested the amount insured and paid by Scicluna under premium until this claim was instituted, and that contrary to what was claimed, it was ultimately the appellant companies who had suggested and declared such a high amount to be insured

The court in confirming that the amount reached by the First Court was correct, explained that the final depreciation value was based on several factors;

• The benefit that the insurance companies enjoyed over the years as the vehicle was in a good state of condition until the day it was stolen;
• The vehicle was fourteen years old; and
• Given the upcoming expiry of the insurance policy, meant that the amount was to be subject to an annual depreciation of 10% to 15% per year as confirmed by Mark Laferla.

Finally, the Court rejected the appellant companies’ argument that the First Court had ignored the preliminary judgment regarding the legal relationship between the parties by focusing solely on the insurance policy without considering the broker. It was emphasized that, contrary to the appellants’ assertions, the insured had dealt directly with the insurer, hence the Court dismissed the appellants’ plea and confirmed that the legal relationship between the parties was contractual.

FFF Legal represented Mr. Scicluna in the proceedings.

 

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