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This case demonstrates the importance of knowing exactly which insurance terms and condition are in place for a particular risk and the importance of brokers placing a client’s risk correctly.
Ted Baker pursued a claim against AXA asserting that they had cover for a claim under the terms and conditions of their commercial combined insurance policy. First they said that there was cover for the losses under the Theft section of the policy. They then argued that consequential losses were covered under the terms of the Business Interruption section of the policy.
Over a number of years the retailer had been the victim of thefts by one of its employees who acted in collusion with delivery drivers. The retailer asserted that by reason of a standard form theft extension clause, cover was in place for this type of theft.
The claim was resisted by AXA on several counts. They alleged that theft by an employee was not covered under the terms of the policy as a matter of construction and that if “surreptitious theft” by an employee were to be covered by an insurance policy then it would only to be covered under the terms of a fidelity policy.
Other defences were also raised relating to mistake, rectification and estoppel. There were also co-insurers involved and they ran parallel defences but also alleged non-disclosure by the broker of the fact that this was unusual cover and that it ought to have been disclosed by the broker.
Despite 21 witnesses being called, the vast majority by the Defendants, the court held that the plain and simple words used in the theft extension clause meant that non forcible and violent theft by an employee was covered under the terms of the insurance policy and that the retailer was covered for its direct losses. It did not go against business common sense as alleged by the Defendants.
Similarly the Defendants could not allege that market practice was to the effect that this kind of cover was not available. The Defendants had attempted to give such evidence both with lay witnesses and with their expert. The judge found that the words used in the policy could not be displaced by any such allegation.
Similarly the Defendants attempted to argue that the parties were trying to replicate the cover formerly given by the defunct Independent Insurance Company. Again the court held that this could not displace the actual terms and conditions of the policy.
On the basis of the policy terms it was therefore found that Business Interruption loss was similarly covered under the terms of the policy. An exclusion clause based on “fraud and dishonesty” was held not to apply.
The court held that there were no “shared assumptions” and therefore the Defendants plea of estoppel also failed.
The Defendant’s allegations of non-disclosure and misrepresentation on the part of the retailer’s brokers also failed
The Judgement demonstrates that an insurance company faces an uphill task in trying to persuade a court that despite what a policy says, the terms did not represent what the parties wanted. In this case the majority of the Defendants’ arguments were dismissed “in limine”, in effect the Defendants’ cases did not get over the first hurdle. Quite simply if the terms and conditions of a policy make it clear what is covered, the court will hold that to be the case.
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*We’d like to offer a special thank you to Nichola Evans at Browne & Jacobsen for providing a summary of this legal case study.