Webinar - Sky Central Case Update
Agenda
The High Court has handed down the hotly anticipated judgment in Sky & Mace v Riverstone, which concerned a claim by Sky and Mace for the cost of remedial works to the roof at Sky Central. We will be covering the key issues in dispute and the Court’s findings, which are likely to be of general interest to contractors and CAR practitioners (and enthusiasts!).
Speaker
Rob Goodship, Associate Partner
Insurance News, views and more: July 2023
Insurance News, views and more - from Fenchurch Law
JULY 2023
Introduction
Welcome to the latest Fenchurch Law newsletter: concise, topical and often opinionated articles on the insurance disputes market, all from a pro-policyholder perspective.
In this edition, Anthony McGeough and Joanna Grant look at a recent Covid-19 BI decision, as they examine the court’s judgment in Bellini (N/E) Ltd trading as Bellini v Brit UW Limited [2023] EWHC 1545 (Comm).
Elsewhere, Dru Corfield looks at AI technology, its legal implications and how it might affect the insurance industry.
Rob Goodship analyses the recent judgment in FM Conway Limited v The Rugby Football Union, Royal & Sun Alliance Insurance PLC, Clark Smith Partnership Limited.
In our “100 Cases Every Policyholder Needs to Know” series, read why we think Rashid v Direct Savings Limited [2022] 8 WLUK 108 was an ugly one.
Lastly, thank you to our broker partners that attended our Northern Coverage Symposium earlier this month. Find out more about our upcoming symposia in the events section below.
I hope you enjoy reading Insurance News and Views and that you look out for future issues in your inbox.
David Pryce
Founder and Managing Partner
Viewpoint
Not so peachy – a disappointing Covid-19 decision for policyholders
Bellini (N/E) Ltd trading as Bellini v Brit UW Limited [2023] EWHC 1545 (Comm)
In a month where Covid-19 decisions are coming in thick and fast, policyholders will be disappointed by the most recent judgment concerning a disease wording.
On this occasion the policyholder, Bellini (N/E) Ltd, was issued with a policy by its insurer, Brit UW Limited, that contained an extension to business interruption cover for business interruption caused by damage arising from a notifiable disease manifested by any person whilst in the premises or within a 25-mile radius.
Read more here.
AI: The Wizard behind the Data Curtain?
“What is Chat GPT?” is a frequently heard question this year. “What is AI? How does it work?” is occasionally the follow up. And for the sceptics, “Will it take my job? Is it dangerous?” One cheerful BBC News headline recently read “Artificial Intelligence could lead to extinction, experts warn”.
Artificial Intelligence (AI) and Machine Learning Technologies (MLTs) have rapidly gone from the stuff of science fiction to real world usage and deployment. But how will they affect the insurance industry, what are the legal implications, and is the whole issue really that much of a concern?
Read more here.
Worth a Try? – judgment handed down on Rugby Football Union appeal
FM Conway Limited v The Rugby Football Union, Royal & Sun Alliance Insurance PLC, Clark Smith Partnership Limited
The Court of Appeal has handed down its judgment following FM Conway’s appeal of the High Court’s decision that it did not enjoy the same level of cover as its employer. Our previous article commenting on the first instance judgment can be found here.
The decision regards the potentially complicated factual and legal issues about the nature and extent of insurance cover obtained by one party on behalf of another.
Read more here.
Top 100 cases - The Good, The Bad and the Ugly
We continue our “100 Cases Every Policyholder Needs to Know” feature – our opinionated and practical guide to the most important insurance decisions relating to the London/English insurance markets, all looked at from a pro-policyholder perspective. As a reminder, we call them:
- “The Good” – cases that are correctly decided and positive for policyholders.
- “The Bad” – decisions that are bad for policyholders, wrongly decided and in need of being overturned.
- “The Ugly” – cases that can trip up even the most honest policyholder with the most genuine claim. Bad for policyholders but (even to our policyholder-tinted eyes) correctly decided.
The latest case we’re looking is an “Ugly one” – Rashid v Direct Savings Limited [2022] 8 WLUK 108 – Read here.
Events
2023 Coverage Symposia
Thank you to our broker partners that attended our Northern Coverage Symposium in Leeds earlier this month. If you missed the event, don’t worry, we have two more symposia events later this year.
Through a series of informative talks, engaging panel sessions, and valuable networking opportunities, attendees will gain the knowledge and insights to confidently guide clients through common coverage problems.
Upcoming Symposia Events:
- Southern Coverage Symposium
- Date: 23 November 2023
- Location: The Ned London
- Belfast Coverage Symposium
- Date: 7 December 2023
- Location: Grand Central Belfast
And finally…
We want to know your views. If you have a question or an interesting point that you’d like to share about all things insurance related, please let us know by emailing info@fenchurchlaw.co.uk
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Cladding PI Notifications - A View from Down Under
A recent decision in the Federal Court of Australia provides guidance on broad professional indemnity insurance notifications for external cladding works, confirming that a wide problem may be validly notified with reference to appropriate supporting information - MS Amlin Corporate Member Ltd v LU Simon Builders Pty Ltd [2023] FCA 581.
A full copy of the judgment can be found here.
The Policies
LU Simon Builders Pty Ltd and LU Simon Builders (Management) Pty Ltd (the “Policyholders”) operated a construction and project management business. Professional indemnity (“PI”) insurance was arranged through local Australian and London placing brokers for the 2014/2015 period, including excess layers.
The insuring clause provided cover for civil liability arising from claims first made against the Policyholders during the policy period, and reliance was placed upon section 40(3) of the Insurance Contracts Act 1984, whereby an insurer is also liable for claims made after expiry of the period of insurance:
“where the insured gave notice in writing to the insurer of facts that might give rise to a claim against the insured as soon as was reasonably practicable after the insured became aware of those facts but before the insurance cover provided by the contract expired”.
This creates a statutory mechanism similar to the common position in the English PI market, where claims made covers are frequently extended to allow notification of circumstances known to the policyholder that may give rise to a claim: if notification of circumstances is made during the policy period then the third party claim itself – even though it may actually come in at a later date – is deemed to have been made during that same policy year.
The Claims
In 2019 proceedings were commenced against the Policyholders by developers and owners of Atlantis Towers in Melbourne, alleging that unsuitable ”Alcotex” aluminium composite panels (“ACP”) were used as cladding for the building (the “Atlantis Claims”). The Policyholders sought indemnity for the Atlantis Claims, and excess layer insurers applied for a declaration that the PI policies would not respond.
The Atlantis Claims came about following investigation by the Metropolitan Fire Brigade (the “Fire Brigade”) and Municipal Building Surveyor for the City of Melbourne (the “Municipal Surveyor”) into a fire on 25 November 2014 at Lacrosse Tower, another building constructed by the Policyholders. The investigation found that ACP at Lacrosse Tower (Alucobest) was not compliant with the Building Code of Australia, and had contributed to the rapid spread of fire.
The Victorian Building Authority (the “Building Authority”) subsequently commenced an investigation and audited around 170 high-rise buildings in Melbourne. The Building Authority concluded that ACP on the Atlantis Tower (Alcotex) was combustible, and Building Orders were issued requiring replacement.
The Notifications
The dispute centred around two notification emails headed “Potential Claim”, sent to insurers in May 2015, neither of which identified Atlantis Towers or the Alcotex brand of ACP which had been used in its construction.
The first notification email referred to: “a notification of circumstances that may result in a claim under [the Policyholders’] Policy … Really most of the noise is around the press release … No formal claim has been made against [the Policyholders] at this point in time”.
The email attached: (1) a newspaper article dated 28 April 2015, referring to the Building Authority’s investigation into the Policyholders’ building practices, to identify whether non-compliant ACP had been used elsewhere; and (2) a document headed “Lacrosse Apartments - Docklands” including commentary from the managing director of the Policyholders in relation to ACP having been widely used in Australia for decades with “no like product passing the test for combustibility”, and referencing a potential class action by owners of Lacrosse Tower.
The second notification email attached a report on Lacrosse Tower by the Fire Brigade entitled “Post Incident Analysis Report”, together with the design and construct contract. The report stated that the Fire Brigade was not aware of any competitor aluminium / polyethylene panel product which had satisfied combustibility tests, and expressed the Fire Brigade’s firm opinion that ACP without appropriate accreditation / certificates of conformity represented an unacceptable fire safety risk, given the need to prevent similar incidents. The Fire Brigade’s report contained hyperlinks to four media reports, suggesting that the Building Authority’s audit had revealed a pattern of poor compliance with regulations, and that “buildings may be a risk to occupants in a fire situation”.
The Decision
His Honour Justice Jackman concluded that the notification emails clearly pointed to a wider problem than one confined to the Lacrosse Tower, or to Alucobest products. The reference to broader investigations, alongside the proposal form statement that 100% of the Policyholders’ work in the last financial year related to high-rise buildings, had the effect of conveying to insurers that there was (at least) a real and tangible risk of the Policyholders facing claims for rectification of that aspect of its work on this building, and on others that it had constructed.
Applying principles discussed in P&S Kauter Investments Pty Ltd v Arch Underwriting at Lloyd’s Ltd [2021] NSWCA 136, the Court acknowledged notification need not be given in a single document, nor the likely claimant(s) identified. Information included by hyperlinks formed part of the notification, since the task of clicking “is not significantly more demanding than turning a physical page” - provided that the link is to a specific page or document. Opinions expressed by public authorities with appropriate expertise (such as the Fire Brigade or the Municipal Surveyor) were held to be capable of constituting “facts” for the purpose of s.40(3), despite the contrary Federal Court decision in Uniting Church (NSW) v Allianz Australia Ltd [2023] FCA 190.
Given a clear causal connection between investigations reported in the notification emails, and later proceedings against the Policyholders, the Court concluded that insurers had been notified before expiry of the policies of facts giving rise to the Atlantis Claims, within the meaning of s.40(3).
English Law
Australia is a common law jurisdiction originating from the English legal system, applying statutory provisions enacted by its various states and federal governments.
Policyholders are similarly able to make “hornets’ nest” notifications under English law, i.e. general notification of a problem even where the cause of the problem or its potential consequences are not yet known (HLB Kidsons v Lloyd’s Underwriters [2008]; Kajima UK Engineering v The Underwriter [2008]; Euro Pools plc v RSA [2019]).
The operation of notification of circumstances provisions under liability policies is often contentious, and careful consideration should be given to the content and timing of notices to insurers, with supporting documents, to maximise the scope of cover. Policyholders should be mindful of precise wording in their PI policy conditions on the knowledge threshold for notifications (whether based on “may” or “likely to” give rise to claims language), and ensure that the trigger remains consistent between policy years and insurance layers where possible, in order to avoid potential gaps in cover.
Amy Lacey is a Partner at Fenchurch Law
Challenging times for Zurich: insurer ordered to pay out on Covid 19 claim
World Challenge Expeditions Limited v Zurich Insurance Company Limited [2023] EWHC 1696 (Comm)
The court has held that, having operated a business travel policy in a certain way for nearly four years, Zurich was estopped from denying that it provided cover on that basis.
An estoppel by convention had arisen such that it would be inequitable for Zurich to resile from the common assumption between the parties as to the operation of the policy.
As such, the successful policyholder, World Challenge (represented by Fenchurch Law), was entitled to an indemnity of almost £9m, being the amount of refunds paid to its customers following the cancellation of its global programme of expeditions necessitated by the pandemic.
The court further criticised Zurich for its handling of the claim and the time that it taken to clarify its position. This was a matter of utmost importance and urgency in circumstances where it was critical to World Challenge’s business and customer relations that it was able to confirm whether it had a covered claim. Mrs Justice Dias commented that: “This is not an impressive performance even in the difficult circumstances of early 2020 and ordinary policyholders might well be appalled to think that a reputable insurance company could treat a long-standing and supposedly valued customer in this way”.
A full copy of the judgment can be found here.
Background
The policyholder, World Challenge, provides adventurous, “challenging” expeditions worldwide for secondary school students, or “challengers”. As a result of the pandemic it was obliged to cancel nearly all of its booked expeditions for 2020.
The insurer, Zurich, provided World Challenge with wide ranging cover including cover for cancellation of trips by the challengers.
Prior to the pandemic, Zurich had handled and approved more than one hundred cancellation claims since 2016 in the amount of the refund paid to challengers. The amount of the refund, less an administration fee, was recorded against the aggregate deductible in the event of a trip cancellation. Prior to the onset of Covid-19, that aggregate deductible was never exhausted.
When the pandemic struck in early 2020, Zurich faced substantial claims for refunds to challengers for trips that would be cancelled in the coming months, and which would significantly exceed the aggregate deductible. World Challenge’s position was that Covid-19, and the mass trip cancellations which could eventuate, was precisely the type of ‘black swan’ event that it thought it had insurance cover for. It sought confirmation of that cover from Zurich prior to cancelling the relevant trips and exposing itself to the millions of pounds of refunds to its customers that it would need to make as a result.
In light of the significant losses it now faced, Zurich, after an extended period of delays in confirming its position, in a complete volte-face sought to depart from the “common assumption” of cover for refunds and instead informed World Challenge that it only had cover (and only ever had cover) for irrecoverable third party costs (for example, hotel or airline costs which World Challenge had paid out and was unable to recover).
The claim
The issue before the court was the correct construction of the policy and whether Zurich was precluded by estoppel or collateral contract from denying that the policy provided the cover that World Challenge thought it had.
Mrs Justice Dias concluded that, although the policy in fact only covered irrecoverable third party costs, Zurich’s previous conduct in agreeing claims in the amount of the refunds and setting them against the deductible had clearly conveyed to World Challenge that they shared its assumption as to the scope of cover and World Challenge was strengthened and confirmed in its own reliance on that assumption.
Zurich’s argument that the subjective understanding of its claims handlers was insufficient to establish any assumption on the part of the company was rejected.
Further, the court found that the delays in cancelling trips caused by Zurich’s delay in confirming its position on cover caused World Challenge to lose its opportunity to explore other avenues in order to maintain customer goodwill and manage its exposure.
It was therefore inequitable for Zurich to resile from the common assumption. Zurich had every opportunity to correct the error in handling claims, but took no steps to do so until such time as it became apparent that the aggregate deductible would be exceeded.
Conclusion
This judgment provides a welcome reminder to insurers about the importance of handling claims in a timely manner that responds to the needs of its customers, particularly in the face of a devastating loss with significant repercussions for the continued operation of its business.
Also welcome is the confirmation that the conduct of claims handlers in approving or rejecting claims will bind an insurer as they are the people charged with handling the claims on the company’s behalf.
From a legal perspective, in addition to being essential reading for anyone interested in the requirements of a variety of types of estoppel, practitioners will do well to take note of the comments made about the witness evidence and the dangers of putting forward statements that are inconsistent with the contemporaneous documents. This made for an uncomfortable time for Zurich’s witnesses in the box, and should be a salutary tale, particularly given the spotlight on witness evidence in light of the recent changes to the rules in respect of trial witness statements.
Authors:
Rob Goodship, Associate Partner
Anthony McGeough, Senior Associate
