Midland Mainline Ltd and Others v Commercial Union Assurance Company Ltd and Others
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice David Steel,Mr Justice David Steel |
| Judgment Date | 17 July 2003 |
| Neutral Citation | [2003] EWHC 1771 (Comm) |
| Docket Number | Case Nos: 2001 Folios 1062 and 1219 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 17 July 2003 |
[2003] EWHC 1771 (Comm)
The Honourable Mr Justice David Steel
Case Nos: 2001 Folios 1062 and 1219
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEENS BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr J Flaux QC and Mr T Kenefick (instructed by Barlow, Lyde & Gilbert for the Claimants)
Mr S Ruttle QC and Mr T Weitzman (instructed by Herbert Smith for the Defendants other than Eagle Star)
Mr M Harvey QC, Mr J Field and Mr D Shapiro (instructed by Davies Arnold Cooper for Eagle Star)
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice David Steel
Introduction
In these proceedings, the Court is being asked to resolve a number of issues of construction which have arisen under insurance policies in connection with claims for business interruption losses resulting from the Hatfield rail disaster which occurred on 17 th October 2000.
The Claimants in both actions are train-operating companies ("TOCs") owned by National Express Group plc. They each operate passenger rail services on various parts of the UK mainland railway network ("the network"). The network was owned and operated by Railtrack plc ("Railtrack").
The Defendants are six insurance companies which insured the Claimants against, amongst other risks, loss of revenue and increased costs of working caused by interruptions to and/or interferences with the Claimants' business, as follows: -
(a) in Folio 1062 ("the CGNU action"), the Defendants, together with Independent Insurance Company Ltd (which is in provisional liquidation), insured the Claimants against business interruptions in the period from 1 st November 1997 to 31 st October 2000 under a Property Damage and Business Interruption policy number FX954P12555 ("the CGNU Policy"); and
(b) in Folio 1219 ("the St Paul action"), the Defendant insured the Claimants against business interruptions in the period from 1 st August 2000 to 31 st October 2000 under a Public Services Insurance Agreement number UCPOP 3252462 ("the St Paul Policy").
With the exception of the Third Defendant in Folio No. 1062, the Defendants are all represented by Messrs. Herbert Smith. They are referred to as the Herbert Smith Defendants. The Third Defendant in Folio No. 1062 is referred to as Eagle Star.
On 17 th October 2000 at about 12.23 pm, a Kings Cross to Leeds passenger train derailed on a curved section of the Down Fast line on the East Coast Main Line ("ECML") between Welham Green and Hatfield, approximately half a mile south of Hatfield junction. Four passengers were killed and a number of others were seriously injured. The train, track and other infrastructure in the immediate vicinity of the derailment suffered extensive damage.
The derailment was caused by a broken rail, which in turn was caused by gauge corner cracking ("GCC"), a type of rolling contact fatigue ("RCF") which can occur in the head section of rails. The existence (albeit not the extent) of the cracking was known to Railtrack and re-railing was scheduled to start only six weeks later.
A section of the ECML between Alexandra Palace and Stevenage was closed immediately following the derailment. Trains scheduled to run on that section of line were diverted via an alternative route, known as the Hertford Loop, and operated on a reduced service. The section of the line remained closed until mid-November 2000, while the damaged train and accident debris were removed, the accident was investigated and the damaged track and other infrastructure were repaired.
In the immediate aftermath of the derailment, on 17 th and 18 th October 2000 Railtrack imposed emergency speed restrictions ("ESR"s), or reduced the maximum permitted line speed, on all sites across the network where GCC was known to exist and which had previously been identified for renewal. On 19 th and/or 23 rd October Railtrack issued further instructions requiring inspections of all known GCC sites and specifying a number of mandatory actions to be taken where cracking or spalling was found. The particular actions, which depended generally upon the degree of cracking found, included speed restrictions, ultrasonic examinations, rail grinding and rail renewal.
In the weeks and months following Hatfield, Railtrack issued a number of further instructions relating to RCF. Pursuant to these instructions and the instructions referred to in the previous paragraph, a large number of speed restrictions were imposed on numerous sections of track across the network and a considerable amount of re-railing or other remedial work was carried out (which in some instances required temporary closures of sections of track, or "possessions", while the work was carried out). The scale of the operation was such that it was later described as "a watershed for the industry" and "the biggest programme of work on the network for more than a century…".
These measures (the collective content of which are referred to for convenience as "the Railtrack Programme") caused disruption to the Claimants' services. The resultant losses of revenue and increased working costs that some of the Claimants have suffered are the subject of claims under the Policies.
The terms of the policies
(a) The CGNU Policy
The terms of the CGNU Policy are contained in: (a) a slip stamped and initialled on behalf of each of the Defendants on various dates between 29 th October 1997 and 4 th November 1997; (b) a Commercial Union policy wording dated 19 th May 1997; (c) an endorsement applying to the period from 1 st November 1999 to 31 st October 2000 dated 16 th February 2000; and (d) a further endorsement dated 13 th May 2000.
The slip provides as follows: -
TYPE: All Risks of physical loss, destruction or damage or interruption to the business by any cause
FORM: Commercial Union Wording as agreed
ASSURED: National Express Group PLC and/or Subsidiary Companies and/or Associated Companies as advised to Insurers
BUSINESS: All activities of the Insured as permitted by the Memorandum and Articles of Association.
INTEREST: …
Section Two– Business Interruption
The revenues derived by the Insured from the Business anywhere within the territorial limits, excluding Government Grants or Subsidies.
SUM INSURED: …
Section Two
… in respect of Train Operating Companies the following sub limits apply:
Gross Revenue
(24 month indemnity period) £50,000,000
DEDUCTIBLES: £5,000 each and every claim, combined for Sections One and Two, and increasing as follows:
…
B I —Gatwick Express £50,000 each and every
claim
B I – Other Train Operations £100,000 each and every
claim"
The Policy Wording provided as follows: -
"INTRODUCTION
The Insurers agree (subject to the terms definitions exclusions provisions and conditions of this Policy) that if after payment or agreement to pay the first premium any of the Property Insured as defined in the Policy be accidentally lost destroyed or damaged during the period of insurance (or any subsequent period for which the Insurers accept a renewal premium) the Insurers will insure in the manner provided in this Policy or any subsequent endorsement duly attached thereto…
…
SCHEDULE
…
DEDUCTIBLES
"In the event of loss destruction or damage involving Section 1 & or Section 2 arising out of a single event or series of losses arising from a single event the loss destruction or damage shall be regarded as one claim from which shall be deducted the following amount on a combined deductible basis (unless otherwise stated)…
In respect of: - …
Midland Main Line —Section 1 £5,000
—Section 2 £100,000
Gatwick Express —Section 2 £50,000
…
All other operations of the Insured… -All Sections £1,000
…
PART E
GENERAL EXCLUSIONS & EXCLUDED PROPERTY
This policy does not cover
DAMAGE or CONSEQUENTIAL LOSS caused by or consisting of:
inherent vice, latent defect, gradual deterioration, wear and tear, frost, change in water table level, its own faulty or defective design or materials
but this shall not exclude subsequent DAMAGE or CONSEQUENTIAL LOSS which itself results from a cause not otherwise excluded
PART J
SECTION 2 BUSINESS INTERRUPTION
THE COVER
The Insurers agree that if any Property Insured or any building or other property used by the Insured at the Premises for the purpose of the Business be accidentally lost destroyed or damaged during the period of insurance the Insurers will pay to the Insured the amount of the loss resulting from interruption of or interference with the Business of the Insured consequent upon such Incident…
DEFINITIONS
…
INCIDENT:
Loss or destruction of or damage to Property used by the Insured at the Premises for the purpose of the Business.
…
PREMISES EXTENSION
Any loss as insured by this section resulting from interruption of or interference with the Business in consequence of loss destruction or damage at the under noted situations or to property as under noted shall be deemed to be an Incident provided that after the application of all other terms conditions and provisions of the policy the liability under the following clauses in respect of any...
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