Bluebon Ltd ((in Liquidation)) v Ageas (UK) Ltd Formerly Known as Fortis Insurance Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Bryan |
| Judgment Date | 15 December 2017 |
| Neutral Citation | [2017] EWHC 3301 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2016-000119 |
| Date | 15 December 2017 |
[2017] EWHC 3301 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building, Fetter Lane
London EC4A 1NL
THE HONOURABLE Mr Justice Bryan
Case No: CL-2016-000119
Alex Hall Taylor (instructed by Stewarts Law LLP) for the Claimant
Graham Eklund QC and Nicholas Broomfield (instructed by Plexus Law) for the First and Second Defendants
Bob Moxon Browne QC and Lucas Fear-Segal (instructed by Kennedys) for the Third Defendant
Hearing dates: 9 and 10 October 2017
Judgment Approved
A. Introduction
The parties appear before the Court on the hearing of a preliminary issue as to the proper construction of a policy of insurance (the "Policy") taken out by the Claimant Bluebon Limited (the "Insured"), which is now in liquidation, pursuant to which the First and Second Defendants ("Insurers") provided insurance to the Insured in respect of the Star and Garter Hotel in Linlithgow West Lothian ("the Hotel") against various risks including Buildings (Section A), Contents (Section B), Business Interruption (Section C), Liability (Section D), Money (Section E), Frozen Food (Section F), Loss of Licence (Section G), Book Debts (Section H), as well as Commercial Legal Protection, Equipment Breakdown and Key Person Cover.
The insurance was arranged by the Third Defendant, the insurance brokers Towergate Underwriting Group Limited ("Towergate"). The period of insurance was from 3 December 2009 until 2 December 2010, "[a]nd any subsequent period for which the insurers shall accept a premium at renewal date" and so was a 12 month policy, albeit it contemplated the possibility that the Insurers, at Insurers' option (given the words " for which Insurers shall accept a premium") might agree to the Policy's renewal (assuming the Insured sought the same).
The Insured had purchased the Hotel in December 2007. Towergate had arranged the Insured's cover for the prior year. That cover was provided by Towergate Commercial Underwriting and underwritten by a consortium of leading insurers. The renewal premium had increased to £4,181.42, including IPT. Mr Phillips (of Towergate) had obtained an alternative quotation from Primary General of £3,600.53 including IPT and insurer fee, which he provided to Mr Bartlett of the Insured at a meeting on 20 November 2009. It was Primary General which provided the insurance from 3 December 2009, underwritten by the Insurers. The eventual premium was £3,239.80, a saving of £941.62.
There had been an inspection of the electrical installation at the Hotel in September 2003 and a Certificate entitled "Periodic Inspection Report for an Electrical Installation…requirements for electrical installations BS7671 IEE Wiring Regulations" was issued on or about 16 September 2003 by an electrician (the "Certificate"). The Certificate identified that the estimated age of the electrical installation was not known, but that there had been "alterations or additions" estimated at 6 years previously. The Certificate provided that the inspection had been carried out in accordance with BS7671 IEE Wiring Regulations as amended, and that, "Cables concealed within trunking and conduits or cables and conduits concealed under floors, in roof spaces and generally within the fabric of the building or underground [had] not been inspected." The Certificate recommended that the installation be further inspected and tested not more than 10 years hence (i.e. by September 2013).
In the Policy Schedule (at page 4 thereof) underneath the heading "Special Conditions and Endorsements" (which then stated as already quoted above), there were then stated five provisions, namely "DFF1—Deep Fat Frying Warranty", "MCR – Money Carrying Warranty", "PGO001 – Electrical Installation Inspection Warranty", "PGO002 – Daily Waste Warranty", "PGO003 – Portable Heating Warranty" and "PGO004 – Index Linking", below which it was stated, "Survey required within 30 days".
"PGO001 – Electrical Installation Inspection Warranty", which will be referred to, for ease of reference only, as the "Electrical Inspection Warranty", and which is at the heart of preliminary issue, provided as follows:
" PGO001 – Electrical Installation Inspection Warranty
It is warranted that the electrical installation be inspected and tested every five years by a contractor approved by the National Inspection Council for Electrical Installation Contracting (NICEIC) and that any defects be remedied forthwith in accordance with the Regulations of the Institute of Electrical Engineers."
The Hotel was destroyed by fire on 15 October 2010 (i.e. during the currency of the Policy). The losses claimed total just under £1,750,000 made up of the full Policy indemnity for buildings cover of £1.3 million, business interruption losses, the full Policy indemnity for contents of £118,750 and expenses associated with the liquidation, together with a claim for interest of over £750,000.
There is no evidence that the electrical installation of the Hotel had been inspected and tested within the 5 years preceding the commencement of the Policy (on 3 December 2009). Nor was it inspected at the time of inception of the Policy or at any time prior to the fire.
In a letter on 21 December 2010 (the "Letter") written by UK General on behalf of Insurers to the Insured, and after quoting the words of the Electrical Inspection Warranty, and referring to the fact that it appeared that during the 5 year period prior to the date of inception of 3 December 2009 no inspection of the electrical installation of the premises had been carried out, it was stated:-
"This means:-
1. You are therefore in breach of the Electrical Installation Inspection Warranty PG001. For that reason we hereby void the above policy from inception on 3 December 2009; and
2. Alternatively, cover under the policy was suspended from the date of inception of 3 December 2009 and accordingly the policy would not respond to this claim."
Consistent with their contention that the Policy was void, the Insurers stated that they were obliged to refund the premium of £3,239.80 and the Insured was obliged to refund a sum of £7,948.56 (which Insurers' had paid in respect of a burst pipe claim in January 2010). Although the Letter referred to Insurers "void[ing] the policy from inception", it is clear enough that what Insurers were asserting (as their primary position) was that the Policy was void ab initio from inception and that they had never come on risk on the basis of an allegation that the Electrical Inspection Warranty, on its proper construction, was a true warranty within the meaning of section 33 of the Marine Insurance Act 1906 and the Insured had allegedly breached that warranty. In the alternative Insurers were asserting that the Electrical Inspection Warranty was a suspensive warranty whereby all cover was suspended from date of breach (in the present case from inception) until the suspensive warranty was complied with (and regardless of whether the non-compliance with the suspensive warranty was causally linked to the loss) (which I shall refer to as a "Suspensive Warranty").
It is common ground between the parties that following breach of a true warranty (hereinafter a "Warranty") discharge of the insurer from any liability at all on the policy is automatic, and is not dependent upon a decision by the insurer to treat the contract as at an end – see section 33 of the Marine Insurance Act 1906 and The Good Luck [1992] 1 AC 233.
Towergate, and the Insured, also accept that it is possible that a provision in an insurance policy that is properly characterizable as a Suspensive Warranty will have the effect that all cover is suspended from date of breach until the Suspensive Warranty was complied with (and regardless of whether the non-compliance with the Suspensive Warranty was causally linked to the loss) but submit that the Electrical Inspection Warranty is neither a Warranty nor a Suspensive Warranty but was merely a term of the Policy requiring compliance as a condition precedent to Insurers' liability to provide cover in respect of risks to which the stipulation related with the effect of suspending such cover in the event of non-compliance for so long as such non-compliance subsisted. I shall refer to such construction as the "Risk Specific Condition Precedent". They say that there is no evidence that the fire was caused by the electrical installation (which they say was the risk to which the stipulation related) and so the Risk Specific Condition Precedent, even if it was breached/not complied with, is irrelevant and Insurers are liable to indemnify the Insured.
On 24 January 2011 the Insurers wrote to Towergate in response to a letter they had received from Towergate dated 11 January 2011, in which Towergate had asserted that the five year period referred to in the Electrical Inspection Warranty was five years from the inception of the Policy. In their letter in response the Insurers stated that "The interpretation which is placed on the Warranty [by the Insured] would in our view render the Warranty meaningless in annual policies."
No claim was initially pursued against Insurers. Following the liquidation of the Insured, Stewarts Law were instructed to act on behalf of the Joint Liquidators. On 24 July 2013 Stewarts Law wrote to Towergate asserting a claim on behalf of the Liquidators for breach of contract and negligence (in relation to the broking of the risk). Correspondence ensued between Stewarts Law and Kennedys (for Towergate) and on 10 November 2014 Stewarts Law wrote to Insurers advising them...
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Blog: High Court rules on the application of suspensive warranty provisions in insurance contracts
...v (1) Ageas (UK) Limited (formerly Fortis Insurance Limited) (2) Aviva Insurance Limited (3) Towergate Underwriting Group Limited [2017] EWHC 3301 (Comm), Mr Justice Bryan held that an electrical installation inspection warranty was a suspensive condition of the insurance policy, which cove......