Alabama: The Devil Fools with the Best Laid Plans

Abstract

The Supreme Court of New Zealand in Xu v IAG New Zealand Ltd has decided by a bare majority that the purchaser of a damaged building who has also taken an assignment of the insurance claim relating to that building is precluded from recovering anything more than the reduced value of the building. If the policy also provides coverage for rebuilding costs, the assignee cannot recover such costs. However, the position of the assignee could have been so much worse had the insurers refused all payment to the assignee on the basis that the assured’s insurance claim had been satisfied by payment of the purchase price. Could the insurers have done so? The question turns on the correct interpretation of the decision of the House of Lords in Burnand v Rodocanachi, which arose out of the activities of the Confederate cruiser Alabama during the American Civil War. This article examines the complex yet fascinating historical background of Burnand v Rodocanachi, and highlights the limitations of the decision.