The Supreme Court of Appeal has ordered an insurer to pay interest from the date upon which the indemnity should have been furnished rather than the date the insured issued a summons.
In Viking InShore Fishing vs Mutual & Federal Co Ltd the court found that the insurer was liable to pay the claim relating to the sinking of a vessel that happened on 8 May 2005. The policy was a valued policy. The insurers repudiated liability under the policy on 8 October 2005. The summons was issued after 2005.
The court awarded interest from the date the indemnity should have been finished on 8 October 2005 and not from the subsequent date of issue of the summons because the insurers, the court said, had kept the insured out of the money to which they were entitled. Interest was awarded at the legal rate applicable at the date of issue of summons (namely 15.5%) because the applicability of the legal rate had not been challenged and no evidence had been led to show this was an inappropriate rate of interest.
The prescribed rate of interest is currently a variable rate of 3.5% above the repo rate.