May 2–4, 9–11, 15–18;
July 7
The claimant company, a provider of adventurous expeditions worldwide for school students, had personal accident and business travel insurance, including cancellation cover, with the defendant underwriter. The claimant believed that it was insured under the policy in respect of any deposits or advance payments which it was obliged to refund to customers since, from 2016, the defendant had settled over 100 cancellation claims on that basis, albeit that no physical payments were ever made by the defendant, since all such claims had fallen within the applicable policy deductible. Due to global travel restrictions caused by the Coronavirus pandemic, the claimant was obliged to cancel nearly all of its booked expeditions for 2020 and, as a consequence, the claimant repaid more than £10m which it had received from customers by way of deposits and advance payments. The claimant sought recovery of such amounts under the policy. The defendant denied the claim, contending that on its true construction the policy only indemnified the claimant for irrecoverable costs paid out by the claimant to third party suppliers, which did not include refunds, and, on that basis, the claimant was entitled to an indemnity under the policy of less than £150,000. The defendant further contended that, in any case, its liability was subject to a limit of £100,000, which was stated to apply to any one event. The claimant sought a declaration as to: (1) the correct construction of the policy; (2) whether the defendant was precluded by estoppel or collateral contract from denying coverage as a result of its previous conduct in accepting similar claims notified under previous policy periods; (3) whether the cause of the cancellations constituted one event, defined as a “sudden, unforeseen and identifiable occurrence”, thereby engaging the aggregation clause.
On the claim—
Held, claim allowed. (1) The core principle of construction applicable to an insurance policy, like any other contract, was that it should be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean. Further, that the process of construction involved both textual and contextual considerations, looking iteratively at the natural and ordinary meaning of the words used against the background of the facts known or reasonably available to both parties at the date of the contract. Where there was more than one possible meaning, resort might be had to business commonsense, albeit with due caution not to rewrite the contract for the parties or to create an ambiguity where in truth none existed. In the present case, the natural and ordinary meaning of the words in the relevant clause was that cover was only provided for irrecoverable costs and not for refunds paid to participants and, further, that meaning was not displaced by contextual consideration (paras 199, 200, 233).
(2) For an estoppel by convention to arise, the following factual elements were required: (i) a common but mistaken assumption of law or fact which was expressly shared between the parties (or made by the claimant and acquiesced in by the defendant) by means of conduct crossing the line between them; (ii) an assumption by the defendant of some element of responsibility, in the sense that the defendant conveyed an understanding that it expected the claimant to rely on the common assumption; (iii) reliance by the claimant in its subsequent mutual dealings with the defendant on the common assumption, rather than on its own independent view of the matter; and (iv) some detriment to the claimant or benefit to the defendant sufficient to make it unjust or unconscionable for the defendant to assert the true legal position. The underlying rationale of the requirements was that the claimant ought to know that the defendant shared the common assumption and was strengthened or influenced in its own reliance on the assumption by that knowledge and, further, since the question of detrimental reliance was closely related to the question of unconscionability, thus the claimant had to show a change of position in reliance on the representation or assurance in such a way and to such an extent that it would be unjust in all the circumstances to allow the defendant to resile. Applying those principles of law to the facts of the present case, the defendant was estopped by convention from denying that the claimant was entitled to be indemnified under the policy for the amount of its customer refunds, subject only to giving credit for any third party recoveries, given the claimant’s reliance on the common assumption in relation to cover previously provided by the defendant with respect to the cancellation of trips (paras 237, 238, 240, 304).
(3) In accordance with authority established in the wake of the Coronavirus pandemic, the relevant principles governing the correct approach to aggregating provisions, included, inter alia, that: (i) “event” and “occurrence” were usually treated as synonymous and meaning “something which happens, at a particular time, at a particular place”, which was to be contrasted with a “cause” which was something altogether less constricted and could be a continuing state of affairs; and (ii) in considering whether there had been an “event” or “occurrence”, the matter was to be judged from the perspective of an informed observer in the position of the insured and an important consideration was “the degree of unity in relation to cause, locality, time, and, if initiated by human action, the circumstances and purposes of the persons responsible”. The definition of “event” here was narrower than the generally accepted meaning, due to the superadded requirements that the relevant occurrence be both “sudden” and “unforeseen”. On the facts, the cancellations for which the claimant was entitled to be indemnified did not arise out of a relevant “event”, but instead from the overall situation, relating to worldwide existing and anticipated travel restrictions, which was not an occurrence for these purposes and, accordingly, the aggregation clause was not engaged (paras 306, 307, 310, 311, 331).
Stonegate Pub Co Ltd v MS Amlin Corporate Member Ltd [2022] EWHC 2548 (Comm); [2023] Bus LR 28 applied.
Daniel Shapiro KC, Michael Harper and Alethea Redfern (instructed by Fenchurch Law Ltd) for the claimant.
Jonathan Hough KC and William Harman (instructed by Clyde & Co LLP) for the defendant.