UK: Insurance And Reinsurance Update - 5th June 2012

Last Updated: 21 June 2012
Article by Nigel Brook

Ted Baker Plc v Axa Insurance UK

Whether theft by employee fell within scope of an insurance policy/construction of insurance policies

The insured discovered that one of its employees had been stealing stock from its warehouse and sought an indemnity from its insurers. The relevant insurance policy had a number of discrete sections including a Theft section which contained an endorsement providing that "the insurance by this Section extends to cover loss...resulting from theft or any attempt thereat but the Insured shall be responsible for the first Ł1,000...which does not involve entry to or exit from the Premises by forcible and violent means".

One of the sections of the insurer's standard wording - the Theft by Employees Section ("TES") - was not selected by the insured and did not form part of the policy issued to the insured. Nevertheless, Eder J held that there was cover under the Theft section of the Policy "and the wording should be given its plain meaning, namely that theft means theft, including theft by employees as this is not otherwise excluded".

The judge further held that there was no customary usage of the expression "theft or any attempt thereat" and underwriters' subjective views as to how cover should work were inadmissible. He also rejected an argument that something had gone wrong with the wording because the insured's construction was contrary to business commonsense or that market practice assisted the insurers' arguments. He held thatRainy Sky v Kookmin (see Weekly Update 39/11) did not apply to this case because there were not two competing constructions of the words used.

The judge acknowledged that inMopani Copper Mines v Millennium Underwriting (see Weekly Update 25/08) Clarke J had held that it was possible to look at deleted words in a policy in certain circumstances. However, he concluded that in this case the policy was clear and so it was not permissible to take into account the insured's non-selection of the TES as an aid to construction of the Theft section of the policy. In any event, the TES could not have been selected without amendment in this case and so, even if the non-selection was taken into account, it would not have helped insurers.

Elafonissos Fishing v Aigaion

Whether insured had proved its claim/breach of warranty allegation

Clyde & Co for defendant

The insured sought to claim for damage which it said its fishing vessel had suffered in a port when a cyclone struck the port. Shortly before trial, the insurer confirmed that it would not be putting forward a positive case but that, instead, the insured should be put to "strict proof".

Blair J acknowledged that certain issues could not be clarified at trial by oral evidence and cross-examination because all the insured's factual evidence was tendered under the Civil Evidence Act. However, he held that limited (rather than no) weight should be given to the Civil Evidence Act statements. He concluded that the insured had succeeded in proving its case (except in relation to a salvage claim - see below).

As part of his judgment, the judge found that an amount paid for wages and maintenance of crew should be allowed even though the insured had to have crew on board anyway (because the payment was allowable pursuant to the Rules of Practice of the Association of Average Adjusters).

However, the insured had not proved its claim for salvage by another vessel. Unlike the rest of its claim, this part of the claim had not been intermediated through a third party and so there had been no element of outside scrutiny. Furthermore, there had been no explanation as to why insurers had not been asked in advance to agree a payment to the vessel owners. In any event, taking into account Greek law on the point, the amount paid had not been reasonable.

Insurers had also sought to rely on a breach of warranty. The relevant warranty was "Warranted laid the Port of Mahajanga". Insurers were unable to prove a breach on the facts, but Blair J held, in any event that there was no basis for implying into the warranty further requirements on the insured to comply with the port regulations: "because of the potentially draconian effects of the breach of promissory warranties (ie that breach discharges the insurer as from the moment of breach regardless of whether the breach causes or contributes to the loss), they will be construed narrowly".

RBS v Highland Financial Partners

Whether clause was an exclusive jurisdiction clause and whether it bound assignee/anti-suit injunction

The claimant sought an anti-suit injunction restraining the pursuit of proceedings in the US. Several issues fell to be considered by Burton J, including the following:

1) Was the relevant jurisdiction clause an exclusive jurisdiction agreement? The clause provided that "the courts of England shall have jurisdiction". Burton J held that it did, in context, amount to an exclusive jurisdiction clause especially since the next clause in the agreement was entitled "Non Exclusive Jurisdiction". The express word "exclusive" did not need to be used.

2) Was an assignee of the defendants bound by the clause? The defendants sought to rely onThrough Transport Mutual v New India [2005] but Burton J referred to caselaw and textbook commentary which have criticised the decision. The judge held that the assignee was bound by the exclusive jurisdiction clause (the point, in any event, having been eventually conceded by the assignee, it seems).

3) Could the claimant obtain an anti-suit injunction to restrain proceedings which were being brought in the US not just against itself but also against two of its employees (who had been joined to the US proceedings as personal defendants). There is conflicting caselaw on the issue of whether an anti-suit injunction can be ordered to restrain proceedings against a non-party. However, Burton J concluded that "the obvious reputational damage for [the claimant] resulting from the making of a claim as to what [the employees] have allegedly done during their employment, in itself gives [the claimant] a sufficient interest" for the court to grant an anti-suit injunction restraining the US proceedings against the employees.

Ambra Borgognoni Vimercati v BV Trustco

Expert determination and the rights of one of the parties/whether the court should intervene

The parties entered into an agreement which provided that, should the claimant dispute the price obtained by the defendant, she would be entitled to request the defendant "to obtain at her cost ...a market an expert to be appointed by the International Chamber of Arbitration in Milan". Following a subsequent dispute, the claimant did not accept the defendant's proposed approach to instructing the expert. She sought various orders from the court.

Hollander QC reviewed the relevant caselaw and dealt with the following issues:

1) Was the claimant entitled to be involved in instructing the expert? The expert determination clause did not provide that the parties should give joint instructions, nor that the claimant should be entitled to make representations (nor did it require the expert to have any particular expertise). Although there are remedies if an expert goes outside his mandate, in general the court will not interfere at a time when the expert has not yet been appointed. (However, the court can intervene to resolve a non-hypothetical dispute as to the mandate of the expert at the outset in certain circumstances).

2) Should the defendant be ordered to disclose certain documents to the claimant and the expert? The judge held that no such order should be made. It was for the expert to determine which documents he needed - the disclosure here was really required by the claimant and she would not be entitled to pass those documents to the expert (because the disclosure would be subject to a collateral undertaking in the usual way).

3) It was up to the International Chamber of Arbitration in Milan to specify the expertise or profession of the expert. Furthermore, it is up to the expert to decide the procedure for the determination.

COMMENT: Weekly Update 27/11 reported the decision in Barclays Bank v Nylon Capital, in which the Court of Appeal found that the court could decide any dispute as to the jurisdiction of an expert, even if a clause purported to confer that jurisdiction on the expert. The judge distinguished this case from Nylon Capital on the basis that there was no "well-defined dispute" here which would fall to be determined in advance of the expert's appointment.

WXY v Gewanter & Anor

Application to set aside judgment following non-attendance at trial

The defendant applied under CPR r39.3 for an order setting aside judgment against him. He had failed to attend trial - he claimed because of a threat to the life/safety of his wife and family. His wife had received a photograph of herself with the words "we know - you have been warned" and she made an association between this and a photograph which she understood had been sent to a man who was conducting litigation involving someone close to the Claimant. That person had been murdered.

Slade J noted prior caselaw which has held that the court no longer has a broad discretion under CPR r39.3. Instead, it must be shown that the applicant has acted promptly, had a good reason for not attending trial and had a reasonable prospect of success at trial.

Although she found that the applicant had acted promptly (a delay of 3 weeks "in the context of a complex case" not amounting to a failure to act promptly), she found that the defendant failed on the other two grounds.

In relation to the threat, she found that there had been no advice from the police not to travel and the defendant had known that he could apply to participate in the hearing by video link. He had also made numerous unsuccessful applications to adjourn the proceedings. She found his true reason for non-attendance had been his unwillingness to face the claims against him.

Other News

On 21 May 2012, the Insurance Fraud Bureau published a press release announcing that it has launched a new insurance fraud register. The register will help insurers to identify fraudsters at the point of purchase: pdfs/ifb_appoints_andrew_buck_to_roll-out_insurance_ fraud_register.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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