Sprung v Royal Insurance (UK) Ltd
Category: Insurance case law · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~6 min read
Citation
- Case name: Sprung v Royal Insurance (UK) Ltd
- Reported at: [1999] 1 Lloyd’s Rep IR 111; also cited as [1997] CLC 70
- Court: Court of Appeal (Civil Division), England and Wales
- Judgment date: 14 June 1996
Law report citations for this case are given differently in different sources. The neutral position is that it is a 1996 Court of Appeal decision reported in the 1997 and 1999 series above; if a citation is needed for a pleading, check it against the report itself.
Facts
Mr Sprung ran an animal waste processing business. His plant was damaged by vandals and he claimed on his insurance. He did not have the money to fund the repairs himself, so the business depended on the claim being paid. The insurer did not pay. The dispute ran for around four years, during which the business failed. The insurer eventually abandoned its defence and paid for the property damage, together with simple interest and costs.
By then the property damage payment was no longer the real loss. Mr Sprung had lost the business and the opportunity to sell it, and he sued for the consequential losses flowing from the delay in payment rather than from the vandalism itself.
The issue
Could an insured recover damages from the insurer for the consequences of late payment of a claim that the insurer was, in the end, obliged to pay?
Held
No. The Court of Appeal dismissed the claim for consequential loss. The reasoning rests on how English law characterises an indemnity insurer’s promise. On the orthodox analysis, the insurer’s obligation is to hold the insured harmless against the insured peril: the loss caused by the peril is itself a breach of contract by the insurer, and the sum the insurer pays is damages for that breach. Since English law does not award damages for the late payment of damages, an insured could not recover for loss caused by delay in payment. Interest was the only compensation available for being kept out of the money.
The court reached that conclusion without enthusiasm. The judgments record open reluctance and a call for the law to be looked at again — the outcome was treated as compelled by authority rather than as a satisfactory result.
Why it mattered
The practical effect was stark. An insurer that delayed a valid claim, whether through inefficiency, over-cautious investigation or tactical pressure, faced no exposure beyond interest. For a policyholder whose whole reason for buying the cover was to survive the loss — a manufacturer needing to rebuild, a landlord needing to reinstate, a contractor needing to keep trading — that was a hole in the middle of the product. Business interruption cover pays for the interruption caused by the insured peril; it does not pay for the interruption caused by the insurer.
The decision was one of the principal drivers behind the Law Commissions’ work on insurance contract law and, ultimately, behind the statutory change that followed.
What changed: section 13A of the Insurance Act 2015
Section 13A was inserted into the Insurance Act 2015 by the Enterprise Act 2016 and took effect on 4 May 2017. It implies into every contract of insurance a term that, if the insured makes a claim, the insurer must pay any sums due in respect of the claim within a reasonable time. A reasonable time includes a reasonable time to investigate and assess the claim, and what is reasonable takes account of the type of insurance, the size and complexity of the claim, compliance with any relevant regulatory rules or guidance, and factors outside the insurer’s control.
Breach of that implied term is a breach of contract, so ordinary contractual remedies follow — damages, subject to the usual rules on remoteness, causation and mitigation, and in addition to the sums payable under the claim itself. The Act also restricts contracting out of the term, and does so more strictly where the insured’s breach was deliberate or reckless.
Section 13A applies to contracts entered into on or after 4 May 2017. For older policies, the Sprung position is the starting point.
Practical points for policyholders
Section 13A is a real remedy but it is not automatic. It requires the insured to show what a reasonable time would have been in the circumstances, that the insurer exceeded it, and that identifiable loss followed which was not too remote. That evidential burden is much easier to discharge if the claim file is built for it from day one.
So: put the consequences of delay in writing early. If a business cannot reinstate without an interim payment, say so, quantify it, and say what will happen if the money does not arrive. Keep the correspondence. Chase in writing with dates. Where the delay is causing loss that the claim payment itself will not repair, make that explicit rather than assuming the insurer understands.
And treat interim payments as a live request rather than a favour. A properly evidenced request for a payment on account is the most effective practical answer to a slow claim, and it puts the reasonable-time question squarely on the record.
Frequently asked questions
Can I claim damages if my insurer pays a valid claim late?
For policies entered into on or after 4 May 2017, yes in principle. Section 13A of the Insurance Act 2015 implies a term that the insurer must pay sums due within a reasonable time, and breach of that term sounds in damages in the ordinary way. You still have to prove what a reasonable time was, that it was exceeded, and that loss followed which was not too remote.
What was the hold harmless analysis in Sprung?
It is the orthodox English characterisation of an indemnity insurer’s promise: the insurer undertakes to hold the insured harmless from the insured peril, so the occurrence of the loss is itself the breach, and the claim payment is damages for that breach. Because English law does not award damages for the late payment of damages, no further remedy was available for delay.
Does Sprung still apply to any policies?
It remains the starting point for contracts entered into before 4 May 2017, since section 13A applies only from that date. It also remains the doctrinal background against which section 13A is read.
Is interest all I can get for a slow claim?
Under the pre-2017 position, in substance yes. Under section 13A, interest is not the limit: damages for loss caused by unreasonable delay are available in addition to the sums due under the claim, subject to the usual contractual principles.
Sources
This page is general insurance information, not legal advice, and describes the position as at August 2026. Cover depends on the wording of the policy actually in force. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.