Cassley and Others v. GMP Securities Europe LLP & Sundance Resources Limited [2015] EWHC 22 (QB)

This March 2015 judgment dismissing the claimants’ claim, considers in detail the burgeoning issue of employer’s liability in the context of aviation and foreign business travel. Sundance Resources Limited (Sundance) was successfully defended by Norton Rose Fulbright LLP and John Williams of Crown Office Chambers.

Facts

In June 2010, Sundance, an Australian mining company with iron ore resources in Cameroon and the People’s Republic of Congo, chartered a CASA C212-100 aircraft from a Congolese operator, Aero Service, to fly from Yaoundé, Cameroon, to Yangadou, Congo. On board were Sundance’s Board of Directors and others, including Mr James Cassley, a London-based employee of GMP Securities Europe LLP (GMP), who had been invited to advise on financing for the iron ore project.

Tragically, the Aero Service plane crashed into a mountain ridge and all on board were killed.

In 2013, Mr Cassley’s dependants commenced proceedings in the High Court against GMP and Sundance, alleging that GMP (as Mr Cassley’s employer) and Sundance (as the charterer) had been negligent in the selection of Aero Service and in allowing Mr Cassley on board the CASA plane.

The claim

The claimants alleged that both GMP and Sundance had failed to make proper enquiries of Aero Service prior to the accident flight, and that proper enquiries would have revealed serious shortcomings in the operator such that no reasonable employer would have allowed their employee to take the flight. Specifically, the claimants alleged that a full audit should have been carried out on Aero Service by the defendants, which would have revealed a poor safety culture, and/or that the defendants ought to have known that Aero Service (along with all other Congolese operators) had been blacklisted by the EU due to concerns over the country’s poor regulatory oversight. The claimants alleged that, had these factors been identified, the flight ought to have been cancelled.

The defendants maintained that adequate checks had been carried out on Aero Service prior to the charter, which had revealed nothing untoward, and that the accident had been caused by pilot error (specifically a ‘controlled flight into terrain’), which could not reasonably have been foreseen by the defendants. In particular, the defendants relied upon three audits of Aero Service carried out on behalf of another mining company in the region in the 18 months prior to the accident, all of which had approved Aero Service and its CASA aircraft for use (notwithstanding the EU blacklist).

Decision

Coulson J found that, as an employer, GMP owed a non-delegable duty to Mr Cassley, which included a duty to take reasonable steps not to expose Mr Cassley to foreseeable unnecessary risks in the course of work-related travel. He found also that Sundance owed a duty of care to Mr Cassley, notwithstanding that it had produced (and asked GMP to sign) a written waiver of liability agreement prior to the flight. The scope of the duty owed by Sundance was to take reasonable care in the selection of Aero Service (which was a lesser duty than that owed by GMP, as Mr Cassley’s employer).

In considering the scope of the duty of care owed by the defendants, Coulson J found that this did not extend to a duty to commission an audit of Aero Service by an aviation consultant, particularly in the context of what he found was a low-risk, one-off flight.

Notwithstanding this, he found that GMP had breached its duty of care to Mr Cassley, as it had made no enquiries at all as to the safety of the proposed trip. In the circumstances, Coulson J held that GMP ought to have made enquiries of Sundance as to the proposed carrier and/or the Foreign and Commonwealth Office (FCO) website as to the risks of air travel in the region.

By contrast, Sundance had not breached the duty of care it owed to Mr Cassley. Coulson J found that Sundance had made sufficient enquiries and had a good deal of information about the operator, having: received a personal recommendation from a Congolese pilot; asked another pilot to carry out checks on Aero Service in March 2010; and flown successfully with Aero Service on a previous occasion. Coulson J accepted that Sundance’s Board of Directors had been satisfied with the safety of the operator and the competence of the pilots and that it was reasonable of them to have chartered the CASA plane.

On the question of causation, which was dealt with extensively in the judgment, Coulson J found that, regardless of any breach of duty by GMP (or by Sundance, if such a breach had been identified), the accident was caused by third party pilot error, for which the defendants could not be held liable. Coulson J considered that, even if the defendants had carried out additional checks on Aero Service (such as requesting copies of previous audits, consulting the FCO website and/or commissioning their own audits), these would have made no difference to the outcome, as the flight still would have gone ahead.

As a result, neither of the defendants was found liable to the claimants.

Comment


The decision provides useful guidance to employers on the scope and standard of the duty of care owed to employees in relation to travel abroad in the course of their employment.

Employer’s liability in the context of aviation incidents is a growing field of litigation, and this judgment was handed down just weeks after the decision in Dusek v. Stormharbour Securities LLP [2015] EWHC 37 (QB), in which Hamblen J found an employer liable for the death of its employee in a helicopter crash in Peru.

Coulson J distinguished the Dusek case on the basis that the flight in Dusek was a high risk flight over hostile Andes terrain (and therefore a more detailed risk assessment had been required), and that the defendant in Dusek had been warned of the risks of the flight in question by a third party. By contrast, the flight in the present case was a low risk, routine flight to a bush airstrip, and therefore the standard of care required by the defendants was more limited. Both judgments confirm that such claims are extremely fact-sensitive and that the checks required to be undertaken by an employer when sending employees to locations overseas will vary from case to case.

The judgment provides also a useful reminder to claimants of the importance of identifying a full cause of action against defendant employers, particularly on the issue of causation, which in this case could not be made out on any analysis.

For further information please contact Natasha Marshall.

Three new cases on Business Interruption insurance – proving loss, Trends Clauses and the TOWIE effect

'…the Club was a beautiful place teeming with beautiful people. It was filled with ornate Thai artefacts, velvet drapes and exotic flowers. It was an opulent and extravagant venue with a unique atmosphere created by lavish decoration, elaborate lighting and music. The Club was extremely successful. Every weekend there would be queues of customers down the High Street in Brentwood waiting to get in.'

Unfortunately, the Club burnt down. In common with two other cases decided by the Commercial Court in the final quarter of the year, this incident gave rise to a substantial business interruption (BI) claim which was wholly or partly rejected by the policyholder’s insurers. In two of the cases, Sugar Hut Group Limited & Ors v AJ Insurance [2014] EWHC 3775 (Comm) and Eurokey Recycling Limited v Giles Insurance Brokers Limited [2014] EWHC 2989 (Comm), the policyholder looked to its broker in order to recover its losses. In the other case, Ted Baker Plc & Anor v Axa Insurance UK Plc & Ors [2014] EWHC 3548 (Comm), the judgment marked the culmination of a lengthy action in which the policyholder had previously established that its BI policies responded to employee theft.

Whereas the Eurokey judgment focused on the nature of a BI insurance broker’s duties at the time of placement and following inception, the other two decisions looked at the policyholder’s ability to prove its loss. In this context, the Sugar Hut and Ted Baker cases also concerned the application of a ‘Trends Clause’ – the first occasion that the English Courts have had reason to consider this type of provision since Orient Express Hotels Limited v Assicurazioni Generali S.p.A. [2010] EWHC 1186 (Comm). We therefore pass comment below on the lessons learned from these cases.

The difficulties of proving loss

While the precise wording varies, the basic structure of most BI covers is an indemnity for loss of ‘Gross Profit’ as a consequence of an insured peril calculated by reference to the ‘Standard Turnover’ of the business (i.e. the turnover during the period of 12 months immediately prior to the indemnity period). A mechanism is also often included in the form of a Trends Clause, allowing for an adjustment to the standard formula in order to take account of any overarching trends in the business. When it comes to evidencing loss, Trends Clauses can be a source of particular difficulty (as to which, see below).

However, demonstrating that a loss exceeds the excess is not usually a problem. In the Ted Baker case, the underlying claim was for the fashion retailer’s (TB) BI losses arising from the theft of stock by a rogue employee from the fashion retailer’s warehouse. The unusual difficulty faced by TB was that the multitude of thefts were incremental and took place over a period of five years. Having concluded that the claim failed as a result of TB’s failure to comply with a claims provision which operated as a condition precedent to liability, the Court went on to consider whether TB had proved its loss, accepting TB’s contention in light of recent authority (including Equitas v R&Q [2009] EWHC 2787 (Comm)) that precision as to quantum is not a bar to recovery.

In attempting to ascertain the quantum of TB’s losses, one of the issues for the Court was whether TB could demonstrate on a balance of probability (or to the lower standard envisaged in the authorities) that its numerous losses exceeded the excess of £5,000 each and every loss. Although TB was able to rely on expert evidence derived from a model, the issue for TB was that there was negligible (if any) concrete evidence as to the exact incidence, number and size of the thefts. For this further reason, the Court concluded that TB’s claim would also have failed.

Trends Clauses
A further issue in the Ted Baker case was whether adjustments could be made under the Trends Clause in order to reflect the fact that the lost profit on any given item of stock depended on a range of factors such as the timing of the hypothetical sale (e.g. at the start of a season or in the sales). Although there was also a question as to whether TB’s adjustments were permitted by the other terms of the policies, the limitations of TB’s model were such that it was ultimately unnecessary to decide this point. Because TB could not prove its lost profit above the excess, there was also no need to consider the accuracy of insurers’ model.

In contrast, the application of the Trends Clause was the major issue in dispute in Sugar Hut. In that case, the defendant broker having accepted liability for 65 per cent of the claimant’s losses, the Court was asked to determine if the trajectory of the business was such that the BI losses for a 49-week period amounted to approximately £1.35 million (as the claimant contended) or no more than around £400,000 (on the defendant’s case).

In support of an elevated figure, the claimant argued that the Club had significant ‘momentum’ at the time of the fire. For the purposes of the Trends Clause, this was said to be evidenced by the 11 months of trading immediately preceding the fire, coupled with the Club’s significantly increased turnover when it re-opened. With regard to the Club’s trading history prior to the fire, the judge agreed that it was very difficult to discern any underlying trend in the business over such a short period of trading but that the general condition of the Club and the expertise of its main investor pointed to a modest increase in turnover.

The judge was also unable to draw any reliable conclusions from the turnover achieved by the Club after the reinstatement works. This was for a number of specific reasons, including the extensive additional refurbishments undertaken, the increase in the Club’s capacity and a phenomenon labelled the ‘TOWIE effect’. This referred to the Club’s appearance on a well-known television show (The Only Way Is Essex – which the judge admitted he had not seen), resulting in an influx of new customers. Unfortunately for the policyholder, the overall effect of these factors was that the business was not comparable in its post-fire condition.

Relief for BI insurance brokers
In the Eurokey case, the problem faced by the policyholder (a waste recycling company) was that it had significantly under-insured by approximately £16 million. When its premises burnt down in May 2010, insurers threatened to exercise their avoidance rights on grounds of material non-disclosure relating to the under-insurance and a negotiated settlement was reached. In this action, the policyholder attempted to recover the shortfall in cover from its former broker (Giles), claiming that it had been negligently advised.

The central issue in the case was therefore whether Giles had discharged its duty to provide sufficient information for the claimant to calculate its indemnity period and the appropriate BI sum insured (including an explanation as to the insurance definition of ‘gross profit’). The extent of the information which Giles was required to provide depended in turn on the level of the client’s sophistication. This was a wholly evidential question which was decided in Giles’ favour, based on what was found to have been said at a number of pre-renewal meetings and the client’s familiarity with BI insurance concepts.

More notably, the claimant also put forward an argument in connection with a set of draft accounts sent to Giles immediately following inception. These draft accounts had been sent to Giles for onward transmission to a premium finance company. Crucially, they showed a far higher figure for the turnover of the business than the figure on which the sum insured had been based. Relying on HIH Casualty & General Insurance Ltd v JLT Risk Solutions Ltd [2007] EWCA Civ 710, it was the claimant’s case that Giles should have reviewed the draft accounts in order to identify potential coverage issues, notwithstanding the purpose for which they had been sent.

The judge disposed of this argument in short order, observing that there was nothing to alert Giles to the fact that the draft accounts might contain materially inconsistent information. As a result, Giles had been entitled to pass on the draft accounts without reviewing them.

Conclusion

Except for confirming that the policyholder bears the burden of proving that its losses exceed the applicable excess, the Ted Baker and Sugar Hut cases decide nothing in the way of new insurance law. However, both cases clearly demonstrate that policyholders must provide cogent evidence of their BI losses, even if precision is not required. This applies as much to proving that lost profit attributable to an insured peril surpasses the excess, as it does to showing an underlying trend in the business when relying on a Trends Clause.

As for Eurokey, this decision provides a modicum of comfort to brokers that there are circumstances in which it is appropriate to act as a postbox. It is therefore a positive development for brokers and will be particularly welcome news for those who operate in the BI insurance market. As a result, HIH v JLT remains the high-water mark for post-inception duties.

For further information contact Susan Dingwall and Charles Weston-Simons.

Genesis Housing Association Ltd v Liberty Syndicate Management Ltd [2013] EWCA Civ 1173

Court of Appeal upholds effect of "basis of contract" clause for commercial contracts

In Genesis Housing Association Ltd v Liberty Syndicate Management Ltd [2013] EWCA Civ 1173, the Court of Appeal upheld a decision by Akenhead J that the claimant could not recover under an insurance policy, which covered, among other things, the insolvency of the builder.

Giving the lead judgment, Jackson LJ found that inaccurate statements about the identity of the builder, in the proposal form completed by the claimant's agent, had become warranties forming the basis of the policy. He confirmed that earlier authorities established the principle that, where a proposal form contains a "basis of contract" clause, the proposal form has contractual effect (even if the policy contains no reference to it), and all statements in the form constitute warranties on which the insurance contract is based. Jackson LJ also held that:

  1. Even though the first sentence of the declaration in the proposal form stated that the statements were true to the best of the proposer's knowledge and belief, this did not qualify the "basis of contract" provision in the second sentence. Therefore, the claimant had warranted that the named company would be the builder.
  2. Far from curtailing the insurer's right to avoid for misrepresentation or restricting the warranties or the "basis of contract" clause in the proposal form, condition 7 (which made the policy voidable for misrepresentation with intention to defraud) conferred additional express rights on the insurers. He concluded that the policy was void due to the misstatement concerning the builder, in the proposal form. Further, since the insurers were providing cover against the risks of insolvency or defective work of an identified builder, only that builder's work and insolvency were covered.

For further information: Genesis Housing Association Ltd v Liberty Syndicate Management Ltd [2013] EWCA Civ 1173.

Oakapple Homes (Glossop) Ltd v. DTR (2009) Ltd and SJ Catlin Syndicate 2003 at Lloyd’s [2013] EWHC 2394 (TCC)

Oakapple Homes converted a former cotton mill into 72 residential apartments. DTR were appointed as architects for the project. Under the contract DTR was required to enter into collateral warranties in favour of purchasers or tenants on Oakapple’s request, as if the beneficiaries were original parties. Following the completion of the works the freehold was obtained by Zurich Assurance Limited (ZA) and Oakapple Homes became head lessee. The property was destroyed by fire in April 2007. DTR went into liquidation in August 2009. ZA called upon DTR to execute the collateral warranties in favour of lessees. DTR’s liquidator sought guidance from the court as to whether the execution of collateral warranties would remove cover under DTR’s liability policy.

That policy excluded the insurers’ liability for any claim arising out of any performance warranty unless liability would have existed in the absence of the performance warranty, although the indemnity did apply to a claim arising from performance under collateral warranty provided that the benefit of such warranty was no greater or no longer lasting than that in the original contract.

Ramsey J held that the insurers would face liability if the collateral warranties were entered into. The effect of the collateral warranties was that that DTR could not defend claims against it by reason of contributory negligence on the part of Oakapple because that defence was not available as against a pure contract claim. As far as the policy exclusion was concerned, it was worded to match the insurance cover to the liabilities under DTR’s contract and referred to the nature of the rights conferred by the warranty rather than the amount of damages.

For further information: Oakapple Homes (Glossop) Ltd v DTR (2009) Ltd and SJ Catlin Syndicate 2003 at Lloyd’s [2013] EWHC 2394 (TCC)

Genesis Housing Association Ltd v. Liberty Syndicate Management Ltd [2012] EWHC 3105 (TCC)

The assured was the tenant of 51 flats which were to be refurbished by a builder, Time and Tide (Bedford) (TTB), which was a newly formed company. A proposal for insurance was signed on behalf of the assured by TTB, and this wrongly stated that the builder would be Time and Tide Construction, an established company. The proposal contained a declaration that the assured had answered questions to the best of knowledge and belief and that the declaration formed the basis of the contract. The policy subsequently issued by the insurers defined Builder as "The person or company with whom the Policyholder has contracted to erect or refurbish the New Development(s)". Condition 7 of the policy stated that it would be voidable in the event of misrepresentation with intention to defraud. TTB became insolvent, thereby generating a claim under the policy. The insurers relied upon breach of warranty. Akenhead J held that the insurers were discharged from liability even though there had been no fraud or dishonesty for the following reasons:

  1. The declaration was in two parts, and the second part the basis clause was not limited by the best of knowledge and belief in the first part of the clause. So it was an unrestricted basis clause.
  2. The definition of Builder did not override the warranty as to the builder’s identity.
  3. Condition 7 of the policy was probably superfluous in the light of the warranty, but it similarly did not override the warranty and limit the insurers’ rights to cases where there had been dishonesty.

For further information: Genesis Housing Association Ltd v Liberty Syndicate Management Ltd

Commonwealth of Australia v Vero Insurance Ltd [2012] FCA 826

Comcover, a scheme established in July 1998 by the Department of Finance and Deregulation, offered insurance for Australian government agencies. One of the agencies, the Australian Antarctic Division (AAD), had cover for property damage in the year 1 July 1999 to 30 June 2000. The insuring clause referred to “all tangible real, or tangible personal property” consisting of property “which is in your possession, care, custody or control, or your responsibility...”, and covered replacement costs for damaged property. AAD was required to bear the first $250,000 of any claim. Comcover had itself insured with Vero under an Ultimate Net Loss policy which provided that indemnity would be provided for any claim in excess of $1,000,000 (Comcover’s In-House Retention) plus any deductible borne by the insured agency. Cover did not attach “unless and until Comcover shall be obligated to pay, or has agreed to pay, the amount of the In-House Retention.” A fuel oil spill occurred at Casey Base Station on the evening of 19 July and the morning of 20 July 1999. Comcover accepted liability on 21 June 2005 and confirmed the oil spill was an insured event subject to policy terms and conditions. However, Vero itself denied liability on 5 August 2005. Proceedings were thereafter brought by Comcover. The court held as follows:

  1. The policy was confined to buildings and did not respond to damage to land. That was clear from the fact that the policy covered rebuilding, which was not appropriate for land damage.
  2. Had the policy covered the loss, the claim would not have been time-barred. The six-year limitation period ran from the date on which Comcover’s liability was established and quantified: the policy was not a property policy, so the limitation period for claims against Vero did not start on the occurrence of the insured peril (20 July 1999) but from the later date on which Comcover was able to claim against Vero.

Ted Baker plc v Axa Insurance UK Ltd [2012] EWHC 1406 (Comm)

Ted Baker (TB) sold merchandise through retail outlets.

Between early 2006 and December 2008, TB noticed losses at a London warehouse but was unable to identify the cause. On 12 December, following a tip-off, an employee in charge of processing returns of stock, was arrested. He was, along with two accomplice van drivers, charged was stealing stock from the warehouse. On 13 March 2009, he pleaded guilty to conspiracy to steal between 10 September 2000 and 12 December 2008.

Claims for loss of property and for business interruption were made against the defendant insurers. The Material Damage section of the policy excluded damage caused by "acts or frauds of dishonesty by the Insured’s employees". However, cover was provided by the Theft Extension Clause: “The insurance by this Section extends to cover loss or damage resulting from theft or any attempted thereat but the Insured shall be responsible for the first £1,000 of each and every loss which does not involve entry to or exit from the Premises by forcible and violent means."

The Business Interruption section applied where there was insurance in place covering the loss of property, although it excluded consequential loss for all loss "arising directly from theft or attempted theft" (Exclusion clause 2(c)) and "caused by or consisting of…acts of fraud and dishonesty …" (Exclusion clause 4(c)). However, there was a special endorsement, headed "Theft Extension Clause" which stated “Exclusion 2(c) of the Cover is deleted.” Exclusion clause 4(c) was not deleted. The insurers denied that employee theft was covered by the policy.

Eder J ruled as follows:

  1. As a matter of construction of the wording of the policy, there was cover for employee theft under the Theft section. That construction was not contrary to business commonsense, it was not plain that something had gone wrong with the wording and this was not a case in which a term of the contract was open to more than one interpretation. The failure of TB to take up specific "Theft by Employees" cover available under the policy was not admissible as an aid to construction. The subjective views of the parties were inadmissible as part of the factual matrix, and there was no relevant evidence of market practice.
  2. Business interruption losses arising from theft by employees was covered by the policy. The cover under this section was on an "all risks" basis, the proviso that material damage covered was satisfied, exclusion 2(c) had been deleted and exclusion 4(c) had not been deleted but it applied only to fraud or dishonesty (see paras 108, 109, 110 and 113).
  3. There was no estoppel by convention. There were no relevant shared assumptions, and in any event it would now be inequitable for Axa to assert that there was no cover for employee theft under the Theft Section or BI Section of the policy (see para 118).
  4. Rectification was not made out. There was no outward expression of accord indicating an agreement to an exclusion clause or an agreement that employee theft was excluded, nor any cogent material upon which it could be said that the policy wording did not reflect what the parties agreed not merely what they or one of them thought that it meant (see para 124).

For further information: Ted Baker plc v Axa Insurance UK Ltd [2012] EWHC 1406 (Comm)

Sharon's Bakery (Europe) Ltd v. AXA Insurance UK plc [2011] EWHC 210 (Comm)

Sharon’s Bakery carried on a bakery business in North London.

Sharon’s Bakery sought funding from Lombard Finance, in the form of a sale and leaseback of machinery belonging to Sharon’s Bakery. Lombard Finance asked for proof of title, and Sharon’s Bakery provided receipted invoices dated 15 November 2007 and 3 March 2008 to demonstrate how it had derived title. In fact the invoices were false.

There was an accidental fire at the premises on 9 February 2009, and in support of its claim and at the request of the loss adjusters who were seeking copies of all purchase invoices, Sharon’s Bakery provided the second invoice to them. It was held by Blair J that:

  1. the insurers were entitled to avoid the policy for non-disclosure of the fact that the assured had been prepared to use a false invoice to obtain finance; and
  2. the assured had forfeited all benefit under the policy by using fraudulent means and devices to support the claim.

For further information, Sharon's Bakery (Europe) Ltd v. AXA Insurance UK Plc & Anor [2011] EWHC 210 (Comm) (09 February 2011)

Aviva Insurance Ltd v Brown [2011] EWHC 362 (QB)

The assured, was the owner of 13 Friern Barnet Lane. He insured the property against various perils, including subsidence. In the event of an insured peril occurring, the policy covered rebuilding or repair costs, and also the cost of temporary accommodation if the premises became uninhabitable. The assured made a claim for subsidence in 1989, and a further claim was made in 1996. Liability was admitted, and the work was carried out in 2008 at a cost of £176,951.68, plus a further amount of £3,132.82 for damage to a skylight. The dispute arose in respect of the cost of alternative accommodation. The insurers, through their loss adjusters, refused to pay more than £3,000 per calendar month by way of rental. The matter was referred to the Financial Services Ombudsman Bureau which ruled in December 2003, that the assured was entitled to alternative accommodation for the full repair period and to the same standard as the insured property. The insurers still refused to meet the assured’s demands.

The assured considered whether he might use his mother’s old house, 38 Lyonsdown Avenue, which he owned. On 11 July 2007 he stated that he had found a house that he considered to be suitable as alternative accommodation and that he had spoken with agents who had been in touch with the owners. In the event this option was not pursued, and the assured decided to rent the neighbouring house, 15 Friern Barnet Lane. The house had belonged to him, but he had sold it to his own company, Northway. On 26 October 2007 Northway told the loss adjusters that it was willing to negotiate a tenancy with the assured at £7,366.67 per month, payable monthly in advance by bankers order and with one month’s rent deposit paid at the commencement of the tenancy. The tenancy was entered into on 1 December 2007, and a total of £58,500 was ultimately paid for accommodation. The insurers subsequently sought to recover all of their payments from the assured on the grounds of fraudulent claim, in that the assured was the owner of both 38 Lyonsdown Avenue and 15 Friern Barnet Lane, and that he fraudulently stated in his communications of 7 July 2007 and 26 October 2007 that the houses belonged to third parties.

Eder J found that the assured had, on 7 July 2007, fraudulently represented that 38 Lyonsdown Avenue was not his, and that his conduct amounted to the use of fraudulent means or devices. There was, however, no fraud in respect of 15 Friern Barnet Lane because the assured believed that the insurers were aware that he was the owner. Eder J held that there could be a finding of fraud only where it was established that the assured’s conduct was dishonest by the ordinary standards of reasonable and honest people and that he himself realised that by those standards his conduct was dishonest. The latter requirement was not satisfied with respect to 15 Friern Barnet Lane. The assured was ordered to repay the rebuilding and accommodation costs, but he was allowed to retain the cost of the broken skylight, which was a separate claim.

For further information, Aviva Insurance Ltd v Brown [2011] EWHC 362 (QB) (25 February 2011).

All Leisure Holidays Ltd v Europaische Reiseversicherung AG [2011] EWHC 2629 (Comm)

Hebridean International Cruises Ltd (HICL) owned the cruise ship, the Hebridean Princess. Under a Passenger Protection Insurance Policy HICL insured in its own name, but for the benefit of passengers, for loss as a result of the cancellation of any cruise. Loss had to be proved to the satisfaction of the insurers. On 8 April 2009 HICL entered administration, and on 22 April 2009 the vessel was sold to All Leisure Holidays Ltd (ALHL). ALHL took an assignment of the claims of the passengers and offered them the same cruises.

The insurers argued that: the cruises had not been cancelled; the passengers had not suffered any loss; and the passengers had failed to submit claim forms.

Teare J dismissed all three defences.

  1. As soon as the vessel had been sold, the cruises had been cancelled, even though they had been replaced by the same cruise provided by a different operator.
  2. The passengers had suffered losses in that HICL had been required to provide cruises or repay deposits but could do neither, and the fact that the passengers had received the benefits from ALHL did not mean that they had not suffered any loss: they were not required to accept any offer from ALHL and in any event were not under a duty to mitigate.
  3. There was no requirement for claim forms under the policy, and the passengers had proved their losses.

For further information: All Leisure Holidays Ltd v. Europaische Reiseversicherung AG & Ors [2011] EWHC 2629 (Comm) (17 October 2011)

Sulamerica CIA Nacional De Seguros SA v. Enesa Engenharia SA [2012] EWCA Civ 638

The claimant was the insurer of hydro electric facilities in Brazil. Both parties were Brazilian, the risk was situated in Brazil and there was a dispute resolution clause which provided that the policy was governed by the law of Brazil and that all disputes were to be subject to the exclusive jurisdiction of the Brazilian courts. The policy also provided that the parties would seek to have any disputes resolved amicably by mediation and that if mediation failed then any disputes as to the amount payable under the policy were to be resolved by arbitration with its seat in England. A dispute arose as to alleged change of risk under the policy. The parties were unable to agree on a mediation procedure, and the defendant commenced judicial proceedings in Brazil. The Court of Appeal granted the claimant an anti-suit injunction so that the dispute could be referred to arbitration in London. 

The law applicable to the arbitration clause was English law. Moore-Bick and Hallett LJJ (Lord Neuberger MR leaving the point open) ruled that there was generally a link between the law applicable to the policy and the law applicable to the arbitration clause so that an express choice of substantive law would amount to an implied choice of the law of the arbitration clause, but on the facts there was a closer link between the seat of the arbitration and the law applicable to the arbitration clause.
The agreement to mediate did not constitute a legally binding obligation as the mediation clause did not specify a procedure for the mediation or for the appointment of a mediator, so there was no condition precedent of mediation pending the commencement of arbitration proceedings. 
The arbitration clause applied to disputes of both liability and quantum, and even if that was wrong then a dispute as to whether anything was payable at all was a dispute as to the amount payable. 
At first instance Cooke J held that in the case of a conflict between jurisdiction and arbitration provisions, arbitration prevailed and the jurisdiction clause was confined to enforcement of the award or cases in which the parties agreed to waive the arbitration clause. 
Permission to appeal against that ruling was refused.

For further information: Sulamerica CIA Nacional De Seguros SA v Enesa Engenharia SA [2012] EWCA Civ 638

European Group Ltd v Chartis Insurance UK Ltd [2012] EWHC 1245 (Comm)

Lakeside took delivery of sixteen economiser blocks for use in two boilers. The blocks consisted of a series of tubes, and were sent from Romania to England by road and sea. After delivery the tubes were found to be damaged by cracking. Lakeside had two policies: a marine policy which covered damage in transit, excluding inherent vice; and an Erection All Risks (EAR) policy which covered damage on site. It was common ground that the cause of the cracking was vibration, but each of the insurers argued that the loss was caused by the period covered by the other: the marine insurers said that the damage had been caused by wind on site, whereas the EAR insurers said that the loss was the result of vibration on the voyage. Popplewell J held that the marine insurers were liable.

  1. In the present case vibration damage by wind could be dismissed as a serious possibility, and that meant that vibration on the journey was the only cause for which there was any evidence in the form of the condition of the road surfaces and the lack of adequate packing. Transit vibration had been shown to be the proximate cause of the loss on the balance of probabilities.
  2. The exclusion for inherent vice did not apply. There was no inherent vice at all: the condition of the blocks when they left the factory was such that they could reasonably be expected to survive without cracking. That aside, once it had been established that the loss was proximately caused by insured peril and was fortuitous, there was no room for inherent vice to operate and it could not be treated as another proximate cause.

For further information: European Group Ltd v. Chartis Insurance UK Ltd [2012] EWHC 1245 (Comm).