Castellain v.

Preston
(1883) 11 Q.B.D. 380
Quorum - Brett , Cotton and Bowen , L. JJ.
Facts -
• The Defendant was the owner of certain land and
buildings which were insured by the plaintiff.
• Hadcontracted to sell the land and the buildings to their
tenants, for the sum of 3100l., and they received a
deposit.
• Subsequently, before the sale, a fire occurred damaging
part of the buildings. A claim was made on behalf of the
defendants,
• The claim was fixed at 330l., and that sum was paid by the
insurers, who were at that time ignorant of the existence of
the contract for sale.
• Afterthat, the contract of sale between the defendants and
the vendees of the property, was carried out, and the full
amount of the purchase-money was paid by the vendees to
the defendants notwithstanding the fire.
• Underthose circumstances the plaintiff representing the
insurance company brought an action with respect to the
money.
Issues -
• Whether the claim is maintainable.
• Whether the defendant had an insurable interest when
the house was burnt down.
• Whether the doctrine of subrogation as applied in
insurance law can be in any way limited.
Judgement
• Uponthe house being burnt down the defendants
had an insurable interest.
• Theywere at all events the legal owners of the
property;
• The vendees might not carry out the contract,
and if for any reason they should never carry out
the contract, then the vendors, if the house was
burnt down, would suffer the loss.
The fundamental principle of insurance

• The contract of insurance contained in a marine or

fire policy is a contract of indemnity, and of
indemnity only, and that this contract means that the
assured, in case of a loss against which the policy has
been made, shall be fully indemnified, but shall never
be more than fully indemnified.
• The doctrine of subrogation does not arise upon any of the
terms of the contract of insurance.

• It has been adopted for the purpose of carrying out the

fundamental rule.

• It shall prevent the assured from recovering more than a

full indemnity and favours the insurers.
• Subrogation shall not be limited to enable the assured to
recover more than a full indemnity.
• Between the underwriter and the assured the underwriter is
entitled to the advantage of every right of the assured,
whether such right consists in contract, fulfilled or unfulfilled,
or in remedy for tort capable of being insisted on or already
insisted on, or in any other right, whether by way of condition
or otherwise, legal or equitable, which can be, or has been
exercised or has accrued, and whether such right could or
could not be enforced by the insurer in the name of the
assured by the exercise or acquiring of which right or
condition the loss against which the assured is insured, can
be, or has been diminished.
• The defendant received the money according to their right
which was at one time merely in contract, but was fulfilled
afterwards
• Itaffects the loss by enabling the assured, the vendors, to
get the same money which they would have got if the loss
had not happened.
• Therefore, in accordance with the true principles of
insurance law, and in order to carry out the fundamental
doctrine, namely, that the assured can recover a full
indemnity, but shall never recover more, it is necessary that
the plaintiff in this case should succeed.