Ted Baker v AXA and Others

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.

The Facts

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.

The Judgement

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

Comment

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.

You can read this case study in full here:

High Court Decisions - Baker v Axa


*We’d like to offer a special thank you to Nichola Evans at Browne & Jacobsen for providing a summary of this legal case study. 

Information flow between parties is critical

Ground Gilbey v Jardine Lloyd Thompson UK Limited [2011]

Over the past few years we have seen a number of important decisions involving the role of insurance brokers and how critical it is that there is a flow of information between the parties. This case emphasises that and the consequences when people get it wrong.

Fact

This claim relates to a fire at Camden Market and was brought by the owner of Camden Market.

A survey of the premises was carried out in 2005 and identified the use of LPG portable heating appliances. The Claimant duly banned their use but stallholders continued to use them. On the renewal of the insurance policy in 2007 the policy contained a new endorsement – a survey condition requiring completion of all risk improvements. The Claimant alleged that this condition was not brought to their attention.

On 9 February 2008 a fire broke out at Camden Market. The owners made a claim under the terms of the insurance policy. The policy condition was raised by the insurers. The owners settled their insurance claim for £3.825M which represented approximately 70% of the claim leaving a shortfall of approximately £1.7M. The Claimant sought to recover the shortfall from their insurance brokers.

Findings

The court found that the brokers had acted in breach of duty in three respects:

• A failure to find a policy allowing the use of portable heaters.
• Failure to give advice on the policy condition.
• A failure to pass on a critical email in relation to the removal of portable heaters to the owners.

The Claimant was able to recover its losses in full and the court would not entertain an allegation that there had been any contributory negligence by the owners before the fire.

Comment

This case again shows the importance of essential information being passed between insureds and insurers and that this duty extends to the parties’ agents. When difficulties emerge in the context of a claim, it is important to investigate every angle, consider the documentation and investigate as to whether all information has been communicated to the parties.