Bellini v Brit: The Court of Appeal serves up a slightly sour COVID-19 decision
Bellini (N/E) Ltd trading as Bellini v Brit UW Limited [2024] EWCA Civ 435
The Court of Appeal has handed down judgment in a case that will have significant repercussions for business interruption cover and should be on every policyholder and broker’s radar.
Non-damage endorsements commonly supplement the predominantly damage-based cover afforded by business interruption insurance policies. However, as this case demonstrates, care must be taken to ensure that the policy wording reflects the intention for the endorsement to be triggered without the need for actual damage – or the policyholder might find itself without the cover the endorsement appears to provide.
The Background
The case related to the proper interpretation of a ‘Murder, suicide or disease’ extension (the “disease clause”), as set out below:
We shall indemnify you in respect of interruption of or interference with the business caused by damage, as defined in clause 8.1, arising from:
- a) any human infectious or human contagious disease (excluding [AIDS] an outbreak of which the local authority has stipulated shall be notified to them manifested by any person whilst in the premises or within a [25] mile radius of it;
- b) murder or suicide in the premises; […]
Many similar disease clause wordings, giving cover for cases of Covid-19 at the premises or within a certain vicinity, have been the subject of litigation arising out of the pandemic.
The core issue here was, whether on a true construction of the disease clause there could be cover in the absence of damage, as defined in the policy.
At first instance, the court had held that, on the wording of the disease clause, there was no cover without damage. Our article on that decision can be found here.
The Common Ground
It was common ground between the parties that standard business interruption insurance is contingent on physical loss or damage to the insured premises or other property, but that non-damage-based cover is typically available as an extension. Such extensions may take various forms and the FCA Test Case considered a number of examples which did not require physical damage to be triggered.
It was also common ground that there had been no physical loss of or damage to the premises or property used at the premises.
It is also worth noting that it was assumed for the purposes of the preliminary issues trial that the insured was able to establish that Covid-19 was manifested either at the premises or within the 25-mile radius. It was further assumed that the premises were closed by reason of government intervention, and this intervention amounted to "interruption or interference" within the meaning of the disease clause, resulting in financial loss.
The Principles
The principles of contractual interpretation are by now a well-trodden path in recent insurance coverage disputes. The concept of “correction of mistakes by construction” was considered in East v Pantiles (Plant Hire), where the Court found that two conditions must be satisfied: “…first, there must be a clear mistake on the face of the instrument; secondly, it must be clear what correction ought to be made in order to cure the mistake. If those conditions are satisfied, then the correction is made as a matter of construction.”
The principles of contractual interpretation in the context of insurance policies were neatly summarised by the Supreme Court in the FCA Test Case: “The core principle is that an insurance policy, like any other contract, must 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. Evidence about what the parties subjectively intended or understood the contract to mean is not relevant to the court's task.”
The Arguments
The policyholder argued that the disease clause should be understood as if the words "caused by damage, as defined by clause 8.1" were deleted. The words "in consequence of the damage", according to the policyholder, should instead read as "in consequence of the insured perils set out above at paragraphs (a)-(e) above". It was argued that this was the only way to make sense of the policy, and reflected how the court had interpreted the trends clause in FCA Test Case.
In addition, it argued that the words "damage, as defined in clause 8.1" made no sense on the basis that Damage was not defined in clause 8.1, which simply provided for business interruption coverage subject to certain defined provisos.
The court was invited to rewrite the policy in the most sensible way that accorded with the obvious intention of the parties (i.e. that the disease clause provided non-damage rather than damage cover).
The insurer asserted that such an approach was impermissible. They argued that it did not matter that the disease clause provided only very limited extensions of cover for disease, nor did it matter that it was hard to imagine how liability could ever arise under the disease clause on their interpretation: the parties should be held to their bargain.
The Decision
The Court of Appeal considered the well-established principles and held that it would only be permissible to rewrite the clause if something had gone wrong with the language used.
In circumstances where it was not clear that something had gone wrong, and where the clause was not ambiguous on its face, the court identified the correct approach as one that gave the clause its natural meaning - even where the end result was the provision of only limited, if any, additional cover.
In applying the principles to the facts of the case, the court considered that when objectively viewed, and taking into account the policy in its entirety, it did not provide non-damage business interruption cover as asserted by the policyholder.
The court’s reasoning can be summarised as follows:
- The standard business interruption cover clearly required damage to property. The extensions to the standard cover effectively provided cover for various things caused by physical damage;
- The same phraseology (which stated “Damage, defined in clause 8.1”) was used in most of the other extensions to the standard cover, and the reference was not a mistake, but instead made clear that the damage-based business interruption coverage in clause 8.1 was being extended to the indemnity clauses in clause 8.2;
- The policy must be interpreted as at 20 October 2019 when it incepted, and therefore cannot be interpreted through the telescope of Covid-19; and
- The fact that the disease clause provided limited additional cover does not in and of itself make it absurd. The court acknowledged that insurance policies are often somewhat repetitive and also sometimes clumsily drafted.
Comments
This judgment, while undeniably sound in its reiteration of well-established legal principles, still manages to feel particularly ugly for policyholders.
The disease clause in question, in all other respects, is a typical non-damage endorsement, and in our view should have been read as affording non-damage cover. We do not agree, as the court found, that a “reasonably informed small-business-owning policyholder” would conclude that they had only damage-based cover. Au contraire. Rather, we suggest, they would share the view of court in the FCA Test Case in finding the reference to “damage” inapposite and requiring of a wider interpretation in a non-damage context. Not least where the outcome is that the extent of cover the “extension” actually provides is so limited as to verge on being illusory.
Undoubtedly policyholders are swayed when making purchasing decisions by the idea that some policies are more extensive than others. This appeal serves as an apt reminder to policyholders and brokers that there is a real need to be alive to standard form wordings and extensions, which as this case shows, may not provide the policyholder with anything tangible.
As a parting comment, there is a theme emerging in the reporting of Covid-19 insurance disputes, including this judgment, which we find unpalatable as a concept: namely that where clauses are included automatically and no “additional” premium is paid, the policyholder is getting something it has not paid for. That cannot be right. The insurance market is not in the business in handing out “free” cover, and policyholders are not being provided with extensions free of charge. There has been and always will be a calculation of risk by insurers, for which a policyholder pays a premium and the insurer provides the end product. Free, it is not.
Authors
Joanna Grant, Managing Partner
Anthony McGeough, Senior Associate
Fenchurch Law announces key leadership changes as it enters next phase of growth
Fenchurch Law has announced that Joanna Grant has been appointed Managing Partner of the firm, with predecessor and founder David Pryce taking on new Senior Partner role, leading the firm’s expansion into Singapore. In addition, Daniel Robin will step into the role of Deputy Managing Partner.
Joanna Grant joined Fenchurch Law as Partner in 2016 and has since led the firm’s expert Construction and Property Risks team, advising clients on some of the most high-profile commercial insurance disputes in the UK. She steps into the role of Managing Partner following the 14-year tenure of founder and predecessor David Pryce. David now takes up the role of Senior Partner, where he will oversee the firm’s global expansion strategy, starting with the opening of its recently-announced Singapore office later this year.
Joining Joanna on the firm’s senior management team is the head of the firm’s Leeds Office Daniel Robin, who becomes Deputy Managing Partner, supporting and overseeing Fenchurch Law’s continued growth strategy in the UK market.
These leadership changes signify an exciting growth milestone for the firm, which has represented clients in some of the most high-profile and complex policy disputes in recent years, including Stonegate Pub Company’s Covid-19 Business Interruption (BI) claim, which remains the highest-value Covid-19-related BI claim to pass through the English courts.
This announcement also follows recent news that the firm has transitioned to an employee-owned business model through the launch of an Employee Ownership Trust (EOT), which saw 60% of its shares awarded to its people.
Fenchurch Law becomes one of the few female-led law firms in the UK.
David Pryce, Senior Partner at Fenchurch Law, commented: “It’s a hugely exciting time for Fenchurch Law, and I’m so proud of what we’ve achieved since our inception in 2010. I’m absolutely delighted that Joanna and Daniel will be leading the firm into its next stage of growth, as we look to expand our footprint even further.”
Joanna Grant, Managing Partner at Fenchurch Law, added: “I’m delighted to be leading the charge for Fenchurch Law in its ongoing mission to level the playing field for policyholders, with a particular focus on complex and high value coverage disputes in the UK.”
Daniel Robin, added: “I’m very proud to be able to support the further growth of Fenchurch Law and give even more policyholders in the UK access to the wealth of expertise we have across the team.”
Fenchurch Law announces Singapore expansion plans
Fenchurch Law, the UK’s leading firm working exclusively for insurance policyholders and brokers, plans to offer its specialist legal support outside of the UK for the first time, announcing plans for the opening of a new office in Singapore.
Through its new hub, Fenchurch Law will be working with policyholders and brokers from across Singapore and the wider Asia-Pacific region to provide first-class support on high value, complex, commercial insurance coverage disputes, as it has done in the London Market since 2010.
The firm’s international expansion follows the recent announcement that it had transitioned to an employee-owned business model through the launch of an Employee Ownership Trust (EOT), which saw 60% of its shares awarded to its people. Fenchurch Law will be the first EOT business to operate in Singapore.
Managing Partner at Fenchurch Law, David Pryce, commented: “As a purpose driven organisation, we exist in order to help level the playing field between policyholders and their insurers. This is a need that exists in all insurance markets around the world, and we’re delighted to be taking the first step in furthering our purpose internationally with the opening of our Singapore office."
What is unfairly prejudicial conduct entitling a shareholder to relief from the Court – and are such claims indemnified under the company’s D&O Policy?
Successive versions of the Companies Act (most recently Section 994 of the 2006 Act (“CA 2006”)) have provided protection and relief for minority shareholders against unfairly prejudicial conduct of the company’s affairs by majority/controlling shareholders and the board of directors.
However, the petitioning shareholder has the burden of establishing such conduct.
The recent case of Re Cardiff City Football Club (Holdings) Ltd [2022] EWHC 2023 (Ch) (summarised below) emphasises that (i) even if a majority shareholder’s conduct is vindictive, unpleasant or morally unfair, it does not always follow that it will be classed as unfairly prejudicial and (ii) the conduct of a majority shareholder, even if unfairly prejudicial, must be within the affairs of the company itself, and not merely carried out in his or her personal capacity.
Background
Mr Issac was a minority shareholder in Cardiff City Football Club (Holdings Limited) (“the Company”) which is the holding company of Cardiff City Football Club (“the Football Club”). He brought a petition against Vincent Tan and the Football Club on the grounds that Company’s affairs had been conducted in a prejudicial manner. The claim related to an open offer of shares made by the Company following a board resolution in May 2018. Mr Tan was the majority shareholder of the Company who before the offer of shares owned 94.22% of the issued shares. No other shareholders took up the offer of shares. This increased Mr Tan’s shareholding to 98.3% and Mr Issac’s was reduced from 3.97% to 1.18%.
Mr Issac argued that this dilution was prejudicial because the value of his shares was diminished. He argued that the whole offer was arranged by Mr Tan due to his animosity to Mr Issac rather than for any proper commercial purpose. Whilst the Board of Directors approved the offer, Mr Issac contended that it had merely “rubber stamped” Mr Tan’s decision, in breach of Section 173 of the CA 2006, which requires directors to exercise their own independent judgment, and of Section 171 of the CA 2006, which requires an allotment of new shares to be for a proper purpose.
Mr Tan denied these allegations. He argued that he provided consideration for the new shares issued to him by agreeing to write off £67 million which was owed to him by the Company. Therefore, Mr Tan argued there was a good commercial purpose behind the offer - which improved the Company’s balance sheet - and it was not because of any animosity towards Mr Issac. and that the directors had exercised their allotment power for a proper purpose.
Mr Issac sought an order that Mr Tan should buy his shareholding for a fair value. He sought an order for sale on the basis of a 3.97% shareholding as opposed to a 1.18% shareholding.
Decision
In deciding whether there was any unfair prejudice, the Court asked the following three questions:
- Was Mr Tan's conduct the conduct of the Company’s affairs?
- Did the directors act independently?
- Did the directors act for a proper purpose?
Was Mr Tan's conduct the conduct of the Company’s affairs?
The Court answered that question in the negative.
Mr Issac argued that Mr Tan used his position as a majority shareholder to put pressure on the Board to give in to his demands. However, the Court held that this could not be seen as conduct of the Company because these acts were a personal or a private act. The Court cited Re Unisoft Group Ltd (No. 3) [1994] 1 BCLC to distinguish between the acts or conduct of a company and the acts of a shareholder in his private capacity. The Court held Mr Tan was entitled “qua” shareholder and creditor to exert commercial pressure and act in his own interests.
The Court acknowledged that Mr Tan did have personal animosity to Mr Issac, which was part of the reason he made the open offer of shares, and that his conduct was vindictive and unpleasant.
However, the Court held that there was nothing unlawful or unconscionable in Mr Tan's actions, and that what he did was unfair in a moral but not in a legal sense. There was no Shareholders' Agreement, and no provisions in the Articles of Association had been infringed. Accordingly, there was no breach of anything referable to the affairs of the Company.
The mere fact that respondents have caused prejudice to the petitioner does not always mean there has been unfairness. So, where two companies were always run as a single unit in disregard of the constitutional formalities of both of them, but with the acquiescence and knowledge of the petitioners, there was prejudice, but no unfairness (Jesner v Jarrad Properties [1992] BCC 807)
Conversely, conduct by those in control of the company may be unfair and reprehensible but not prejudicial. So, where directors entered into transactions pursuant to which (despite obvious conflicts of interest) they purchased company assets, this was unfair but no section 994 remedy was granted, as the price paid by the directors was not less than the company would have obtained from an arm’s length purchaser (Rock Nominees Limited v RCO (Holdings) Plc (In Liquidation) [2004] 1 BCLC 439 CA).
Did the directors act independently?
The Court held that the directors did act independently. There was a justifiable commercial rationale for what the Board was being asked to do. Board minutes were prepared in advance of the meeting, but there was nothing inherently wrong with that, so long as the Board had the opportunity to take its own view as the meeting developed.
Did the directors act for a proper purpose?
The Court decided that the directors did act for a proper purpose.
The Court cited Howard Smith v Ampol Petroleum [1974] AC 821, which held it would be "too narrow an approach to say that the only valid purpose for which shares may be issued is to raise capital for the company".
The allotment of the shares was deemed as being for a proper purpose, namely clearing debt owed to Mr Tan. This would improve the Company's balance sheet and provide greater financial stability.
Therefore, the Court concluded that there was no unfair prejudice.
Impact on D&O Policyholders
Directors’ and Officers’ (D&O) policies will usually respond if there has been a claim made for a wrongful act by a director, provided the director has been acting in that capacity (rather than as a shareholder). The policy will likely provide indemnity or defence costs of any director against such allegations, which is important protection as such costs cannot lawfully be met by the company.
However, in this case, because Mr Tan was held to have been acting in a personal capacity (rather than as a director in the conduct of the Company’s affairs), his costs are unlikely to have been indemnified under the Company’s D&O policy.
Ironically, the very grounds relied upon by Mr Tan and the nature of the Company’s defence would themselves have excluded the right to indemnity for defence costs under the policy, and the directors would have to seek reimbursement of costs from the unsuccessful petitioner.
This case serves as a reminder that personal acts of directors, outside the scope of their directorial duties, cannot be relied upon in claims for minority shareholder relief, and nor will they be indemnified under the company’s D&O policy, if the subject of third-party claims.
Authors
Michael Robin, Partner
Ayo Babatunde, Associate
Establishing Liability under the TPRIA 2010
A recent decision of the Scottish Court of Session (Outer House), Scotland Gas Networks plc v QBE UK Limited & QBE Corporate Limited [2024] CSOH 15, gives helpful guidance on the operation of the Third Parties (Rights against Insurers) Act 2010 (“the 2010 Act”).
Background
Scotland Gas Networks plc (“SGN”) operated a pipeline running adjacent to a quarry, operated by D Skene Plant Hire Limited (“Skene”). A landslip occurred at the quarry, causing damage to part of the pipeline. SGN claimed the damage was a result of quarrying operations carried out by Skene. It had to divert the pipeline away from the quarry and incurred costs in doing so.
SGN brought a claim against Skene for £3 million for damage to the pipeline. A decree by default was granted against Skene, as a result of failing to appear at a procedural hearing.
Skene was insured under a public liability policy (“the Policy”). SGN claimed against the defendants (“Insurers”) under Section 1(4) of the 2010 Act (which gives third parties rights against insolvent persons) as Skene was in liquidation.
The TPRIA
Under Section 1(2) of the 2010 Act, the rights of a “relevant person” (i.e. the insolvent insured party) are transferred to the third party who has suffered loss for which the relevant person is liable.
Section 1(3) of the 2010 Act states that an injured party can bring proceedings against an insurer without first establishing the insured’s liability.
For the purposes of Section 1(4) of the 2010 Act, liability is proven only if the existence and amount of liability are established by way of a judgment or decree, arbitral award, or binding settlement).
The main issues explored in this case were:
- Whether the decree by default “established” Skene’s liability?
- Whether SGN’s claim against Skene was excluded by terms of the Policy?
Did the decree by default “establish” Skene’s liability?
Insurers’ Argument
Insurers argued that the granting of a decree by default did not establish liability under the Act. This was on the basis that the decree granted to SGN established the loss suffered, but did not establish the actual liability of Skene. Insurers relied on case law applicable to the Third Parties (Rights against Insurers) Act 1930 (“the 1930 Act”) suggesting that it is necessary to show how Skene was liable to SGN. In addition, Insurers argued that establishing liability must take into consideration the merits of the dispute.
SGN’s Argument
SGN argued that Insurers’ position did not take into account the innovations of the 2010 Act and the effect of Section 1(3), which meant that proceedings could be brought without liability being established. Under the 1930 Act, the insured’s liability to a third party had to be established by judgment, arbitration or agreement before proceedings could be brought. By contrast, Section 1(4) of the 2010 Act already addresses how that liability is established. Sub-section 1(4)(b) confirms that this can be established by a decree and therefore the old case law referred to by Insurers was irrelevant.
The Decision
The Court noted that there are two elements to Section 1(4) when considering the establishment of liability:
- Firstly, the existence of liability and the amount; and
- Secondly, how the existence and amount of liability is established.
Both these elements were satisfied based on the existence of Skene’s liability in the amount of £3 million, established by decree.
Therefore, it rejected Insurers’ arguments that “establish” requires a consideration of the merits and instead concluded that “establish” does not require any additional elements apart from those contained in Section 1(4).
Was SGN’s claim against Skene excluded?
Clause 3.1.1 of the Policy provided that Insurers would indemnify the policyholder for loss resulting from damage or denial of access.
Insurers’ Argument
Insurers argued that liability founded upon a decree by default was not covered; and that the decree effected a “judicial novation” which meant that the rights SGN were enforcing against Skene through litigation were replaced with the right to enforce the decree, which did not fall within Clause 3.1.1. Further, Insurers argued that the pipeline had not suffered “damage” as defined under the Policy, and that instead SGN was claiming for pure financial loss. Clause 7.11 of the Policy contained an exclusion for financial loss not consequent upon bodily injury or property damage.
SGN’s Argument
SGN argued that the terms of the decree were “in full satisfaction of the summons” and this meant that the liability which the decree created fell under Clause 3.1.1 of the Policy. The requirements for Section 1(4) had been satisfied and this superseded the judicial novation. Insurers were wrong to say that financial loss consequent upon damage to property of a third party fell within the scope of the exclusion, taking into account the express provision for indemnity with respect to denial of access liabilities.
The Decision
The Court concluded that the decree by default “established” Skene’s liability to SGN for purposes of Section 1(4), and that Skene’s liability arguably fell within the scope of the Policy. A decree by default cannot be viewed in isolation, and in this case it was granted in an action brought by SGN against Skene. A judicial novation could not extinguish the underlying liability for the purposes of Section 1(4) of the 2010 Act. The Insurers’ motions for dismissal were rejected and SGN’s overall claim under the Policy was held over to trial.
Impact on Policyholders
The decision is helpful for policyholders in demonstrating that a judgment (or decree, in the Scottish parlance) in default will suffice to establish liability for purposes of a claim under the 2010 Act. The statutory provisions operate as an exception to the general rule that insurers are entitled to ‘look behind’ underlying claims to evaluate policy indemnity based on a merits assessment of legal liability, highlighting the risks faced by insurers where insolvent insureds fail to defend incoming claims in full, or at all.
Ayo Babatunde is an Associate at Fenchurch Law.
Fenchurch Law hands decision making power to its people, announcing shift to employee ownership model
Fenchurch Law, the UK’s leading firm working exclusively for policyholders and brokers on complex insurance disputes, has announced that 60% of its shares will now be owned by employees, via its newly formed Employee Ownership Trust (EOT).
The move, designed to recognise the valued contribution of all employees across the business, will also give staff the opportunity to put themselves forward to join the firm’s management team to represent their colleagues, giving them full oversight and decision-making power across all aspects of the business.
As part of its ongoing commitment to offering a supportive, dynamic, and rewarding workplace for all, the decision to become employee-owned makes Fenchurch Law one of the first law firms in the UK to adopt this model, which has seen significant success in other sectors with insurance broker Howden, retail group John Lewis and cosmetics brand Lush.
Managing Partner at Fenchurch Law, David Pryce, commented:
“This is the natural next step for Fenchurch Law, as we have always wanted to create a real feeling that everyone is in it together. Becoming employee-owned cements our progressive and unique values. It gets rid of the ‘us’ and ‘them’ mentality and enables every member of the firm to share rewards and responsibilities.
It enables us to ensure that every member of the team has the opportunity to be fully involved with the ins and outs of the firm.”
Financial Ombudsman Service Increases Awards Cap
On 13 March 2024 the Financial Ombudsman Service (FOS) announced increases to the cap that applies to their awards.
The increased awards will affect complaints referred to FOS on or after 1 April 2024:
- £430,000 will apply to complaints about acts or omissions by firms on or after 1 April 2019 where the complaint is referred on or after 1 April 2024;
- £195,000 will apply to complaints about acts or omissions by firms before 1 April 2019 where the complaint is referred on or after 1 April 2024.
Fenchurch Advocacy Services offers a non-legal service to assist Policyholders with insurance coverage disputes that may be eligible for referral to the FOS. In general terms this will include disputes from consumers, micro enterprises and SME businesses. The non-legal service is different from the services provided by our legal team, and offers a cost effective solution for FOS eligible complaints, with a view to levelling the playing field for all Policyholders.
For more information, please visit FOS Eligible Work | Fenchurch Advocacy Services (fenchurchlaw.co.uk) or contact our Insurance Consultant, Phil Taylor at phil.taylor@fenchurchlaw.co.uk.
The End of Days, or Just the Beginning? Current AI use
It’s seemingly the only thing anyone can talk about. It is hard to go to any conference, panel discussion or networking event without someone paying it lip service. And most cyber articles, opinion pieces or business plans contain some nebulous reference to it. Artificial Intelligence (“AI”) is certainly the flavour of the month. But what it is, how is it used and what does it mean for us all? This article will look at the development of AI and hopefully alleviate concerns by demonstrating how it has been part of our everyday lives for some time.
Part of the problem is that most definitions of AI are either too complicated or too broad. One with which most people work is something along the lines of “AI is a computer’s ability to perform the cognitive functions or abilities that we usually associate with the human mind”. This tends to make people think of HAL from 2001: A Space Odyssey or the more recent example of ChatGPT. But AI elements are far more ingrained in our lives than science fiction or Large Language Models. Regardless of how we view AI, it is very much present in our everyday world; whether in the personal space of helping to enable safer online payments, or travelling to work through our smartphones, to offering greater efficiency for businesses and their clients through automation and autonomy.
Although the history of AI can be traced back to 1950 – for example, Alan Turing’s paper entitled ‘Computing Machinery and Intelligence’ [1] – for present purposes it makes sense to start in the late 1970s. The 1950s to mid-1970s were a time of great advancement for AI but (like ordinary computers) they had less impact on everyday lives. The emergence of arcade games in the late 1970s can be viewed as perhaps the earliest widespread societal engagement with AI. Games like Pong, Space Invaders and Pacman may not be what spring to mind when we think of AI, but the way in which the computer responded in real time to the player’s actions can certainly be considered as artificially intelligent gameplay. Similarly, the 1997 defeat of Gary Kasparov, chess world champion, by IBM’s ‘Deep Blue’ AI system has been viewed as a milestone in the history of AI. At the time, there was widespread unease that a computer had defeated one of humanity’s great intellectual champions.
In the grand scheme of things, however, AI in the 20th century was far more widespread in popular culture than in everyday life. After 2001: A Space Odyssey, films like Star Wars, Alien, Blade Runner, The Terminator, RoboCop and The Matrix had great impact in shaping society’s (mis)understanding about AI. The dystopian sci-fi genre of cinema has perhaps been the single biggest contributor to the concern and fear around the technology. Most of the stories in these films centre around the concept of computers ‘taking over’ and subduing humanity. This unhelpfully incepted ideas about the scope and purpose of AI in the popular conscience, despite the fact that the grand narratives were entirely fictitious.
In reality, AI deployment is more nuanced, precise and limited. While the potential of the technology is astounding, the current everyday uses of AI are surprisingly narrow (meaning task-specific) albeit certainly widespread. If you unlock your smartphone with facial recognition, you use AI several times a day. If you have predictive text enabled on texts or emails, you use AI whenever you are drafting. When you use maps on your phone to navigate a car or public transport journey, the real time traffic and transport updates are analysed and evaluated by AI to assess the swiftest route. If you call a service provider and speak to an automated voice – that’s AI. If you engage with a customer chatbot – that’s AI too. If you have social media and engage with suggested posts/videos, the AI algorithms that show the content have prioritised posts based on previous ‘likes’, your location, wider online activity and user demographic. Similarly, if you use Spotify or Apple Music, AI assesses your music taste and playlists and creates a track list in a similar vein.
In business, if your company does not use AI, it is almost certain that one of your service providers does. For example, while London-based law firms are unlikely to develop their own AI software, it is highly likely that their disclosure providers use AI in document review and processing. And in healthcare, it is highly likely your local hospital is using AI, given that NHS Trusts use AI to analyse X-ray images to support radiologists make assessments. AI is also used to assist clinicians with interpreting brain scans. Whenever you fly on a plane, air traffic control systems log your flight data and use it to feed AI systems that aid efficiency in air traffic management. And in the military, AI has been used in autonomous ground vehicles and unmanned drones and it assists in the prevention of cyber warfare. Even the food you eat may have been produced with the assistance of AI, given that sophisticated farms use AI and drones to analyse soil health, crop health and yield potential, thereby applying fertilisers and water more precisely – which optimises resource use and minimises environmental impact. In short, AI has permeated consumer life, healthcare, travel, defence and agriculture in ways that may not have been realised by the man on the Clapham omnibus but are highly unlikely to be reversed.
So AI is here to stay. But it is not omnipotent, and it is not yet omnipresent. It’s been around for far longer than ChatGPT although has had more targeted deployment than people tend to think. And you’re likely using it every day. While we can’t say for sure how the technology will develop, it’s not a future discussion: it’s already happening. AI has almost certainly improved efficiency and ease in your life and hasn’t locked the pod bay doors just yet.
This is the first in a series of articles about AI by Dru Corfield and Dr Joanne Cracknell.
Dru Corfield is an Associate at Fenchurch Law and inaugural committee member of the City of London Law Society’s AI Committee. Fenchurch Law was the first law firm in the UK to focus exclusively on representing policyholders in coverage disputes with their insurers and is top-ranked by both Legal 500 and Chambers.
Dr Joanne Cracknell is a Director in the Legal Services PI Team, Global FINEX, WTW. E: joanne.cracknell@wtwco.com W: https://www.wtwco.com/en-gb/solutions/services/legal-services-practice
WTW (Willis Towers Watson) is a global insurance broker, multidisciplinary consultancy, and risk advisor with a mission to empower companies amidst rapid change
[1] Source: Turing, Alan M. (1950). Computing machinery and intelligence. Mind 59 (October): 433-60.
Seven things a good Insurer will never do
- Give You Up: Are you looking to your existing insurance provider to renew your cover and continue supporting your business through the good times and bad? A good insurer will always do that.
- Let you down: Under ICOBS rule 8.1.1, a good insurer will handle claims promptly and fairly, provide reasonable guidance to help a policyholder make a claim, provide appropriate information on its progress, and not unreasonably reject a claim (including by terminating or avoiding a policy).
- Run around: When investigating a claim, an insurer will never run around trying to find reasons not to pay. It will always treat its customer fairly.
- Desert you: In the case of liability insurance, a good insurer will always step up and pay defence costs, even where coverage might be under the microscope, and will not leave its policyholder in the lurch.
- Make you cry: Following a heavy loss, a good insurer will always take an even-handed approach to its claims process, rather than taking the opportunity to carry out a ‘post-loss underwriting process’.
- Tell a lie: A good insurer will never tell its policyholder that a claim is not covered by a policy when it clearly knows otherwise.
- Hurt you: Quick, lastly – A good insurer will always investigate and pay a claim quickly, lest it be on the wrong side of S13A damages for late payment claim, and will never add to the pain often felt by policyholders at such difficult times.
Alex Rosenfield is an Associate Partner at Fenchurch Law
“Just and equitable” under section 124 of the Building Safety Act 2022 – Triathlon Homes LLP v SVDP, Get Living and EVML [2024]
The First Tier Tribunal (“the FTT”) has decided that it was “just and equitable” to make a Remediation Contribution Order (“RCO”) against the respondent developers under section 124 of the Building Safety Act 2022 (“the Act”).
The decision is the first to consider an RCO under the Act, and raises some interesting implications for Building Liability Orders (“BLOs”), another type of order available under the Act.
What is an RCO?
RCOs can be issued by the FTT to require present or former landlords, developers, or other persons “associated” with the aforementioned to contribute towards the cost of remediation work “incurred or to be incurred” by someone else.
RCOs are “non-fault” based, and are amongst the suite of measures introduced by government to protect leaseholders from the costs of repairing building safety defects that cause a “building safety risk” – meaning “a risk to the safety of people in or about the building arising from the spread of fire, or the collapse of the building or any part of it”.
If the relevant qualifying conditions are met, the FTT may make an RCO if it considers it “just and equitable” to do so. That term is conspicuously not defined in the Act, albeit the Explanatory Notes state that it is intended to afford the Tribunal “a wide decision-making remit which it is expected will allow it to take all appropriate factors into account when determining whether an order shall be made”.
Background
The case concerned a number of residential blocks in East London which were developed by the first respondent, Stratford Village Development Partnership (“SVDP”), to house athletes participating in the 2012 Olympic Games in London. The blocks are now occupied by tenants on long leases.
The applicant, Triathlon Homes (“Triathlon”), is the co-owner of the blocks, which brought proceedings against the respondents after discovering significant building defects which included unsafe ACM cladding.
The respondents were (1) SVDP; (2) Get Living PLC (“Get Living”), which acquired an interest in the blocks long after the blocks were constructed; and (3) East Village Management Limited (“EVML”), the management company with responsibility for the repair and maintenance of the blocks, and which was invited to participate solely as the entity to which Triathlon had paid the costs of taking various interim fire safety measures.
The decision
The respondents argued that the Act had no application in this case as the relevant costs were incurred before 28 June 2022 i.e., prior to the Act becoming law. The FTT had no difficulty in quashing that argument, finding that, as a matter of statutory language, section 124 encompassed both historic and future costs.
The FTT was equally satisfied that the other grounds for making a RCO were met i.e., there was a “relevant defect” in a “relevant building” (as those terms are defined in the Act), and that the respondents were amongst the class of persons against whom an RCO could be made.
Fundamentally, the FTT was also satisfied that the “just an equitable” test had been made out. That aspect of the decision is of particular interest in relation to Get Living. In particular, despite it being accepted that Get Living was not involved in the blocks’ design or construction, and that it derived no financial benefit from its earlier disposals, the FTT found that those factors were irrelevant to the question of whether it was “just and equitable” to make the order. That is because, in the FTT’s view, Get Living acquired not only the assets of EVML, but also its liabilities, which included latent and consequential liabilities.
Fundamentally, the FTT found that it was “not open [to Get Living] to ask that the timing and circumstances in which they made their investment in those assets be taken into account in determining whether it is just and equitable for the companies in which they invested to be the subject of contribution orders.”
Accordingly, the FTT granted the orders sought by Triathlon, which required both SVDP and Get Living to reimburse the expenditure paid by Triathlon thus far, as well as to fund further liabilities which had not yet been paid.
Implications for BLOs
Although made under a different section of the Act, the decision raises some interesting implications for BLOs, which employ precisely the same “just and equitable” test.
In particular, if one assumes that the same wide decision-making remit is afforded to the High Court as it would the FTT, then a BLO is capable of being made against parent companies (and potentially those higher up the corporate chain) even where they were not involved with the work at the time it was carried out.
That thinking would appear consistent with the fact that BLOs can be made against corporate entities that have been “associated” with the entity that undertook the work during the very widely drafted “relevant period” i.e., from the date of the commencement of the work to the date any BLO would be made.
Conclusion
The decision in Triathlon Homes is a sobering reminder to those involved in construction that simply being “plugged in” to a corporate structure months or years after the work has been done by another entity will not constitute sufficient grounds to resist an RCO, and the same principles are likely to apply in relation to BLOs.
It remains to be seen precisely how the High Court will approach BLOs, albeit the first decision on that is expected shortly in the matter of 381 Southwark Park Road RTM Company Ltd & Ord v Click St Andrews Ltd & Ors.
Alex Rosenfield is an Associate Partner at Fenchurch Law