Insurance and Reinsurance on i-lawAugust 2017 highlights – the best of i-law.com

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ContentsWritten by experts in insurance, professional negligence and liability, Insurance & Reinsurance on i-law.com contains an unrivalled collection of news, analysis and international and English law case reports – a must-read for legal practitioners, brokers and compliance officers.

This booklet of extracts combines recent articles from Lloyd’s Law Reports: Insurance & Reinsurance and Insurance Law Monthly, as well as other sources on i-law.com, to provide a round-up of our must-see content from August 2017.

3 UK Insurance Ltd v R&S Pilling (Trading As Phoenix Engineering)Insurance (motor) – Assured setting fire to buildings while carrying out repairs on car – Whether policy covered liability – Whether assured using car by repairing it – Road Traffic Act 1988, section 145(3).Lloyd’s Law Reports: Insurance & Reinsurance Plus, [2017] Lloyd’s Rep IR Plus 29

Ted Baker plc and Another v AXA Insurance UK plc and OthersInsurance (business interruption) - Claims cooperation clause - Requirement for assured to submit proofs as might reasonably be required by insurers - Whether clause broken - Effect of breach - Burden of proof - Effect of per loss deductible - Calculation of loss of gross revenue.Lloyd’s Insurance Law Reporter, 14 August 2017

4 Presentation of the risk: non-disclosure and misrepresentationIn Dalecroft Properties Ltd v Underwriters [2017] EWHC 1263 (Comm) the insurers of a building sought to avoid the policy for non-disclosure and misrepresentation. There were also allegations of breach of warranty. The issues were largely factual.Insurance Law Monthly, (2017) 29 ILM 8 1

Employment tribunal fees scrapped after Supreme Court rules fees unlawful The Supreme Court has unanimously ruled that the government was acting unlawfully and unconstitutionally when it introduced employment tribunal fees four years ago. As a result employment tribunal fees will now be scrapped, and those who have paid will be refunded. Liability, Risk and Insurance, Issue 324

5 Leeds Beckett University v Travelers Insurance Co LtdInsurance (property) – All risks cover – Building demolished – Foundations disintegrated by reason of flowing water – Whether damage accidental and inevitable – Exclusion for gradual deterioration – Exclusion for faulty or defective design – Exclusion for contamination – Whether subsequent damage.Lloyd’s Law Reports: Insurance & Reinsurance Plus, [2017] Lloyd’s Rep IR Plus 30

Cyber insurers must address the specific risks faced by the buyer The first seven months of this year have seen an unprecedented number of cyber attacks, hitting major companies, airports and government departments around the world.Insurance Day, 23 August 2017

Mr Holden’s policy stated that it was made up of the policy booklet and the Certificate of Motor Insurance. The policy provided that: “We will cover you for your legal responsibility if you have an accident in your vehicle and: you kill or injure someone; you damage their property; or you damage their vehicle”. The certificate stated, on behalf of the insurers, that: “I hereby certify that the Policy to which this Certificate relates satisfies the requirements of the relevant law applicable in Great Britain …”

HHJ Waksman QC held that UK Insurance was not liable. The judge ruled that section 145(3)(a) of the Road Traffic Act 1988 had no application. Phoenix appealed. UK Insurance argued that the judge’s ruling should be upheld The Court of Appeal allowed the appeal.

This is an extract of the original Report headnote. To access the full headnote and Report, please visit Lloyd’s Law Reports: Insurance & Reinsurance Plus on www.i-law.com.

UK Insurance Ltd v R&S Pilling (Trading As Phoenix Engineering)[2017] EWCA Civ 259, Sir Terence Etherton MR, Beatson and Henderson LJJ

Insurance (motor) – Assured setting fire to buildings while carrying out repairs on car – Whether policy covered liability – Whether assured using car by repairing it – Road Traffic Act 1988, section 145(3).

This was an appeal by Phoenix against the decision of HHJ Waksman QC, [2016] Lloyd’s Rep IR 349, holding that motor insurers, UK Insurance, were not liable to meet claims against their assured, Mr Holden, for damage to property caused by him.

On Saturday 12 June 2010 Mr Holden, a mechanical fitter employed by Phoenix, obtained permission from Phoenix to use the loading bay at its premises to carry out welding work on his car, which had failed its MOT test the previous day. While he was welding, sparks from the welding ignited flammable material inside the car including the seat covers. The fire spread and set alight some rubber mats lying close to the car. The fire then took hold in Phoenix’s premises and the adjoining premises and substantial damage was caused before it was extinguished.

Phoenix’s insurers AXA paid both Phoenix and the owner of the adjoining property a sum in excess of £2 million. AXA then exercised subrogation rights in the name of Phoenix against Mr Holden. Phoenix sought a declaration that Mr Holden’s motor insurers, UK Insurance, were liable to indemnify him. Mr Holden was not at personal risk as Phoenix had undertaken to recover only such sums as were payable by UK Insurance under the motor policy.

Ted Baker plc and Another v AXA Insurance UK plc and Others[2017] EWCA Civ 4097, Treacy and David Richards LJJ and Sir Christopher Clarke, 11 August 2017

Insurance (business interruption) - Claims cooperation clause - Requirement for assured to submit proofs as might reasonably be required by insurers - Whether clause broken - Effect of breach - Burden of proof - Effect of per loss deductible - Calculation of loss of gross revenue.

Ted Baker plc (TB) was insured against business interruption losses under a series of policies in the years 2004 to 2008. The policies covered loss of gross revenue in the indemnity period on an All Risks basis, subject to a per loss deductible of £5,000 and to an exclusion for mysterious disappearance of goods. Condition 2(b)(ii) provided that TB was to deliver to the insurers such financial information as might reasonably be requested by the insurers. Goods were stolen from TB’s London warehouse over the period 2004 to 2008. Claims for the years 2005 to 2008 were notified to the insurers in February 2009, and the assured was informed by the loss adjusters on 24 March 2009 that further instructions were awaited from the insurers. Liability was denied on 28 May 2009 on the basis that employee theft was excluded. At first instance ([2013] Lloyd’s Rep IR 174), Eder J ruled on a trial of preliminary issues that employee theft was within the scope of cover. In October 2012, TB added a claim for losses occurring in 2004. The insurers denied liability on two further grounds: breach of the claims condition, in that TB had failed to provide copies of its profit and loss accounts for 2005 to 2008 if available; and absence of proof of loss.

This article was published in the new Lloyd’s Insurance Law Reporter service, available via email and on www.i-law.com.

Lloyd’s Insurance Law Reporter

Lloyd’s Law Reports: Insurance & Reinsurance Plus, [2017] Lloyd’s Rep IR Plus 29

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Presentation of the risk: non-disclosure and misrepresentationIn Dalecroft Properties Ltd v Underwriters [2017] EWHC 1263 (Comm) the insurers of a building sought to avoid the policy for non-disclosure and misrepresentation. There were also allegations of breach of warranty. The issues were largely factual. Although the case was decided on the law as it was before the passing of the Insurance Act 2015, it was expressly stated by Richard Salter QC, sitting as a Deputy High Court Judge, that the outcome would have been no different under the new regime.

In August 2007 the assured, Dalecroft, a property investment vehicle controlled by Mr Horowitz, acquired the property concerned in Margate, Kent for £1,100,000. When it was purchased, the property extended over five floors.

The ground floor consisted of a restaurant, an amusement arcade, a shop and a hotel entrance. The first, second and third floors had at one time been a hotel, but it was later converted into a hostel. The first floor consisted of communal areas and a flat occupied by the manager. The second and third floors had 27 residential rooms. The basement was primarily a storage and residential area. On completion of the purchase the property was leased to Allford, another company controlled by Mr Horowitz.

The property was insured under a policy with the defendant underwriters, syndicates at Lloyd’s represented by an underwriting agency, JR Clare, which had in turn issued a binding authority to Tristar Underwriting. Any broker wishing to obtain cover would log in to Tristar’s online underwriting system, the Platform, to secure a quotation by means of an application form. The Platform was programmed with underwriting criteria agreed between Clare and Tristar. If the answers given on the application form satisfied the underwriting criteria, the Platform would

automatically generate a quotation for the broker. If the underwriting criteria were not satisfied, the Platform would refer the application to Tristar for a manual decision.

Dalecroft acted through its brokers, Oster. The policy was initially taken out in July 2007, and covered both material damage and loss of rent. The proposal made for the July 2007 policy consisted of documents containing a series of questions to

which answers were given by Oster, and a statement of fact by Oster.

On 16 May 2009 there was a disastrous fire at the property. The damage was such that the property had to be demolished and rebuilt.

This is an extract of the original article. To access the full analysis, please visit Insurance Law Monthly at www.insurancelawmonthly.com and www.i-law.com.

Insurance Law Monthly, (2017) 29 ILM 8 1

Employment tribunal fees scrapped after Supreme Court rules fees unlawfulThe Supreme Court has unanimously ruled that the government was acting unlawfully and unconstitutionally when it introduced employment tribunal fees four years ago. As a result employment tribunal fees will now be scrapped, and those who have paid will be refunded. However, this may not be the end of a fees regime as the government will “consider the detail of the judgment”.

Fees were introduced on 29 July 2013 and UNISON immediately sought permission in the High Court to bring judicial review proceedings. After losing in the High Court, and then unsuccessfully appealing the decision in the Court of Appeal, UNISON took its appeal to the Supreme Court.

The trade union argued that the making of the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013, SI 2013/1893 (Fees Order) was not a lawful exercise of the Lord Chancellor’s statutory powers, because the prescribed fees interfere unjustifiably with the right of access to justice under both the common law and EU law, frustrate the operation of Parliamentary legislation granting employment rights, and discriminate unlawfully against women and other protected groups.

The Supreme Court unanimously allowed the appeal. “The Fees Order is unlawful under both domestic and EU law because it has the effect of preventing access to justice. Since it had that effect as soon as it was made, it was therefore unlawful and must be quashed,” said the court in its judgment.

This is an extract of the original article, published in Liability, Risk and Insurance, Issue 324. For the full piece, visit www.i-law.com.

Liability, Risk and Insurance

4 / Business Intelligence | informa

Leeds Beckett University v Travelers Insurance Co Ltd

Between 1993 and 1996 the University carried out an ambitious building project on the site of the former Kirkstall Brewery, on both sides of the Leeds-Liverpool canal in north-west Leeds. The project involved the refurbishment of the existing brewery buildings, and the design and construction of several new accommodation blocks. The largest of these buildings, the F1/F2 Building was located adjacent to the western bank of the canal. Because it was built on a slope, the F1/F2 Building was designed and built with an undercroft a few inches high on the western side but about 5 ft high on the eastern canal side. The eastern wall consisted of a concrete beam laid across pile caps, with courses of concrete blockwork on top of the beam to support the inner and the outer leaves of the wall. The blockwork of the inner leaf was exposed inside the undercroft, although on the outer leaf the ground level was higher and covered it up.

The F1/F2 Building was completed in 1996. In December 2011 large cracks appeared on some of its internal walls and ceilings on the eastern (canal) side. Investigations revealed that an area of concrete blockwork below ground level, which supported the inner leaf, had “turned into mush”. It was common ground that the problem was due to the effects of flowing water.

The University insured its buildings with the defendant insurers for

the period 1 August 2011 to 31 July 2012. The insurance covered property damage – defined as meaning “accidental loss or destruction of or damage” – from any defined peril, including flood, but subject to exclusions.

The University’s claim under the policy was declined on 31 May 2012, that claim was declined. Later in 2012, the University decided to demolish the F1/F2 Building. In these

proceedings, the University sought declarations to the effect that the defendant was liable to pay for the damage. The insurers argued that the damage was not accidental and also relied upon the exclusions in the insurance policy.

This is an extract of the original Report headnote. To access the full headnote and Report, please visit Lloyd’s Law Reports: Insurance & Reinsurance Plus on www.i-law.com.

Cyber insurers must address the specific risks faced by the buyerThe first seven months of this year have seen an unprecedented number of cyber attacks, hitting major companies, airports and government departments around the world.

Earlier this month Lloyd’s published a 56-page report warning a serious cyber attack could cost the global economy as much as a catastrophic natural disaster such as Hurricane Katrina.

Cyber attacks can have a severe impact on a business, locking up computers or data and bringing operations to a halt. Hackers look for organisations that have the most to lose from loss of critical client data or having operations shut down. Yet, according to the 2016 cyber security breaches survey undertaken by the Department for Digital, Culture, Media & Sport, only 29 per cent of surveyed companies have cyber security policies and just 10 per cent have formal incident management processes.

The escalation in frequency and complexity of cyber attacks has rendered this a far more prevalent risk. It is often thought losses stemming from cyber liability could be covered by another form of insurance, such as professional indemnity. However, coverage for cyber attacks under more traditional policies is still largely untested and insurers and brokers should stress to policyholders they should not assume they will be covered by their existing insurance programme in the event of a cyber incident.

Cyber security policies often contain gaps, leaving both the insurer and the policyholder exposed. It is vital for insurers to understand the evolving needs of those they are insuring. A common misapprehension is cyber policies provide cover for any type of cyber incident. In fact, some cyber policies only cover “threats” to security systems. In the event that there is an actual system invasion, a company may find themselves unprotected.

This is an extract of the original article, published in Insurance Day. For the full piece, visit www.insuranceday.com and www.i-law.com.

[2017] EWHC 558 (TCC), Queen’s Bench Division (Technology and Construction Court), Coulson J

Insurance (property) – All risks cover – Building demolished – Foundations disintegrated by reason of flowing water – Whether damage accidental and inevitable – Exclusion for gradual deterioration – Exclusion for faulty or defective design – Exclusion for contamination – Whether subsequent damage.

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Lloyd’s Law Reports: Insurance & Reinsurance Plus, [2017] Lloyd’s Rep IR Plus 30

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