Friends Provident Life and Pensions Ltd v Sirius International Insurance
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mance,Sir William Aldous,Lord Justice Waller |
| Judgment Date | 24 May 2005 |
| Neutral Citation | [2005] EWCA Civ 601 |
| Docket Number | Case No: A3/2004/1974 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 May 2005 |
[2005] EWCA Civ 601
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr Justice Moore-Bick
Lord Justice Waller
Lord Justice Mance and
Sir William Aldous
Case No: A3/2004/1974
Mr Christopher Hancock QC (instructed by Messrs Morgan Lewis & Bockius) for the Appellant
Mr Tom Weitzman QC (instructed by Messrs Herbert Smith Llp) for the Respondent
This is an appeal from the determination by Moore-Bick J by judgment dated 22 nd July 2004 of preliminary issues directed to be tried in proceedings brought by the respondents, Friends Provident Life and Pensions Ltd., against the appellant insurers. The respondents are successors to London & Manchester Assurance Co. Ltd. ("LMA"), to whom the appellants provided excess layer professional indemnity insurance cover on a claims made basis for the period 1 st February 1993 to 31 st January 1994. The preliminary issues relate to the incorporation, nature and effect of notification provisions in the insurance, the respondents' compliance with them and the consequences of any non-compliance.
The background giving rise to the issues, the relevant terms of the policies and the preliminary issues are as set out in the following paragraphs taken from the judge's judgment:
"2. LMA's professional indemnity insurance for the 1993–94 year took the form of a primary layer providing cover in respect of losses of up to £1 million any one claim and in the aggregate (subject to various deductibles) and an excess layer providing cover of £4 million in excess of £1 million any one claim and in the aggregate. The primary layer was underwritten by Syndicate No. 657 at Lloyd's through an agent, Resource Underwriting Ltd. The first excess layer was underwritten in part by a group of Lloyd's Syndicates, including Syndicate 657, and in part by the defendants, all of whom were members of the London companies' market. Both layers were placed by the brokers Bowring Marsh & McLennan Ltd ("Bowrings") and were written on a "claims made" basis, that is, the policies were expressed to provide an indemnity against losses arising from claims made against the insured during the period of the policy.
3. The business of LMA included giving financial advice to individuals in relation to personal pension plans. On 28 th January 1994 in the context of negotiations for the renewal of cover for the year beginning 1 st February 1994 Mr. Harvey, the Legal Services Manager of LMA, wrote to Lloyd's underwriters at the address of Bowrings in Exeter in the following terms:
"I confirm that after due enquiry I know of no circumstances likely to give rise to a claim under the Group's Professional Indemnity Policy save as follows:—
1. Matters which are currently under investigation but are not likely to exceed the deductible under the policy.
2. Pensions Transfers and Opt Outs which are a matter of public record and relate to all pensions providers. Detailed investigation will be conducted into pensions related transactions in accordance with any SIB/LAUTRO guidelines and notification of any potential claims given to underwriters in the usual way."
4. The reference to "pensions transfers and opt-outs" was a general reference to LMA's involvement in giving financial advice to employees who were considering whether to transfer from, (or, in the case of new employees, opt out of), private pension schemes run by their employers in favour of personal pension plans available in the market. By the latter part of 1993 the regulatory bodies had expressed concern that the advice given to many clients by their financial advisers was inadequate and had led to what was later to become known as "pension mis-selling". They had already indicated their intention to conduct an investigation, but its precise nature and scope had yet to be determined. In the event, as a result of those investigations LMA was required to pay sums totalling over £9 million to various clients by way of compensation.
5. Clause 2 of the General Conditions forming part of the primary layer policy obliged the insured to notify the underwriters as soon as possible of any circumstances that might give rise to a claim. It also provided that any claim arising from circumstances notified to the insurers in accordance with that clause should be deemed to have been made during the period of the policy. Accordingly, the claimant sought to recover its loss from the underwriters for the 1993–94 year on the grounds that, although the claims themselves had not been made during that year, they arose out of the circumstances described in Mr. Harvey's letter of 28 th January 1994 and were therefore to be treated as having occurred during the period of cover. The Lloyd's Syndicates have accepted liability in respect of those claims, both under the primary and excess layer policies, but the defendants have declined to do so on the grounds (among others) that their policies only cover claims actually made within the policy period and that even if they do extend to claims arising out of circumstances notified during the policy period, LMA failed to notify them of any such circumstances within that time.
6. By orders made on 25 th February 2004 and 30 th April 2004 directions were given for the trial of a number of preliminary issues relating to the construction and effect of the excess layer policies. Before identifying those issues, however, it is necessary to set out the material terms of the various policies.
The policies
7. The material parts of the primary layer policy provided as follows:
"Now we, the underwriters, to the extent and in the manner hereinafter provided, hereby agree:—
1. To indemnify THE ASSURED against any claim or claims first made against them during the period of insurance set forth in the First Schedule in respect of any Civil Liability whatsoever or whensoever arising …….
………………..
EXCLUSIONS
The Policy shall not indemnify THE ASSURED against any claim or loss:—
………………..
2. Arising out of any circumstances or occurrence …….. which were known to THE ASSURED prior to the inception of this Policy
………………..
GENERAL CONDITIONS
………………..
2. THE ASSURED shall as a CONDITION PRECEDENT to their right to be indemnified under this Policy give to the Underwriters notice as soon as possible during the period of this policy as set forth in the Schedule:—
2.1 Of any circumstance of which THE ASSURED shall become aware which may give rise to a claim or loss against them or any of them.
2.2 Of the receipt of notice from any person whether written or oral of an intention to make a claim against them or any of them.
………………..
Such notice having been given to Underwriters THE ASSURED shall give to the Underwriters as soon as possible full details in writing of the circumstances which may give rise to a claim or loss against them or any of them. Any claim or loss to which that circumstance has given rise which is subsequently made after the expiration of the period specified in the First Schedule shall be deemed for the purposes of this Policy to have been made during the subsistence hereof."
8. The leading excess layer policy was underwritten by the Lloyd's Syndicates and was known as the 'Co-insurance policy' because it was referred to by that name in each of the other excess layer policies. It incorporated a set of clauses known as the A W G S Excess Wording which provided as follows:
"To indemnify the Assured for claim or claims which may be made against the Assured during the period of insurance ….."
and contained the following clauses:
"1. Liability to pay under this Policy shall not attach unless and until the Underwriters of the Underlying Policy/ies shall have paid or have admitted liability or have been held liable to pay, the full amount of their indemnity.
2. It is a condition of this Policy that the Underlying Policy/ies shall be maintained in full effect during the currency of this Policy.
3. If by reason of the payment of any claim or claims by the Underwriters of the Underlying Policy/ies during the period of this Insurance the amount of indemnity provided by such Underlying Policy/ies is:—
(a) Partially reduced, then this Policy shall apply in excess of the reduced amount of the Underlying Policy/ies for the remainder of the period of insurance;
(b) Totally exhausted, then this Policy shall continue in force as Underlying Policy until expiry hereof.
………………..
5. Any claim(s) made against the Assured or the discovery by the Assured of any loss(es), or any circumstances of which the Assured becomes aware during the subsistence hereof which are likely to give rise to such a claim or loss, shall, if it appears likely that such claim(s) or loss(es) may exceed the indemnity available under the Policy/ies of the primary and Underlying excess Insurers, be notified immediately by the Assured in writing to the Underwriters hereon.
………………..
7. Except as otherwise provided herein this policy is subject to the same terms, exclusions, conditions and definitions as the Policy of the primary Insurers. No amendment to the Policy of the primary during the period of this Policy in respect of which the primary Insurers require an additional premium or a deductible shall be effective in extending the scope of this Policy until agreed in writing by the Underwriters."
9. The first to fourth defendants' proportions of the excess layer cover was written on the policy form issued by the London Insurance & Reinsurance Market Association Ltd ("LIRMA"). It described the interest insured as
"Excess...
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