GIM9030 | Mutual insurance: mutual insurance as a trade

The question sometimes arises whether mutual insurance is a trade at all.

Many mutual activities do not amount to trading. The position in relation to mutual insurance was clouded for a long time by conflicting House of Lords’ decisions in The New York Life Assurance Company v. Styles 2TC460 and CIR v The Cornish Mutual Insurance Co. Ltd. 12TC841. In the former case it was held that the mutual activities of the company did not amount to the carrying on of a trade, while in the latter case it was held that the company conducted “the ordinary and well known business of fire insurance”. The New York case has never been over-ruled (the House of Lords has only been able to review its own decisions since a practice statement issued in 1966) and it is still occasionally argued that there are circumstances in which mutual insurance does not amount to a trade. On the authority of the later cases this contention will be resisted. It is evident that by the time the House of Lords heard Ayrshire Employers Mutual Association v CIR (1946) 27TC331 it was satisfied that the Cornish Mutual case was the better authority (per Lord Moncrieff at 341/2).