William Francis Rendall and Combined Insurance Company of America
| Jurisdiction | England & Wales |
| Judge | Cresswell J. |
| Judgment Date | 21 April 2005 |
| Neutral Citation | [2005] EWHC 678 (Comm) |
| Date | 21 April 2005 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2001 FOLIO 1264 |
[2005] EWHC 678 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Cresswell
Case No: 2001 FOLIO 1264
Mr. Colin Edelman QC and Mr. Colin Wynter (instructed by LeBoeuf, Lamb, Greene & MacRae) for the claimant
Mr. George Leggatt QC and Mr. Tom Adam (instructed by CMS Cameron McKenna) for the defendant
Hearing dates:
Judgment Approved by the court
for handing down
INTRODUCTION paragraphs 1 to 51
THE COMBINED WORDING paragraph 52
WITNESSES paragraphs 53 to 69
(1) AVOIDANCE ISSUES paragraphs 70 to 108
(2) CONSTRUCTION/COVERAGE ISSUES paragraphs 109 to 188
Mr. Justice Cresswell:
INTRODUCTION
The following introduction to this judgment (paragraphs 1 to 51) is agreed between the parties.
On 11 September 2001, two hijacked commercial airliners were deliberately flown by terrorists into the North and South Towers ("the Twin Towers") of the World Trade Centre in New York. The North Tower was struck at approximately 8.46 am and the South Tower at approximately 9.03 am. Several thousand people working in or visiting the Twin Towers were killed, either by the impacts of the aircraft or from the subsequent collapse of the Towers.
Various companies in the Aon Group, pursuant to the terms of leases with the Port Authority of New York and a sub-lease with Shearson Lehman Brothers Inc., occupied floors 92, 93, 98 to 103, 104 (part only) and 105 of the South Tower, which was 110 floors high. Because the South Tower was the second tower to be struck, Aon employees had the opportunity to evacuate their offices in the South Tower. Some did so pursuant to express instructions at that time and others pursuant to standing instructions from Aon on safety procedures.
The impact of the second aircraft was to the 78 th to 84 th floors of the South Tower, below the floors occupied by the Aon Group companies. (The 78 th floor contained what was known as the "Sky Lobby", a concourse to which express elevators travelled directly from the ground floor main lobby, and from which local elevators served the upper floors.) By the time the second aircraft struck, many Aon employees had either escaped from the South Tower altogether, or had got sufficiently far down the South Tower to enable them to continue their evacuation even after the impact of the second plane and reach safety.
The lives of about 400 Aon employees were saved by the evacuation. But a total of 176 Aon Group employees were killed after the second aircraft collided with the South Tower. Those employees died either as a direct result of the impact of the second aircraft with the South Tower, or as a result of debris falling from the South Tower, or as a result of the subsequent collapse of the South Tower. Their precise locations at the time of their deaths are not known (and the issue of where they died is not for decision in this trial: by order dated 26 November 2004, the Court ordered that the trial "shall not include the issue of the probable locations of death of the 176 Aon employees who died on 11 September 2001'). However, it seems that most were in the process of leaving the South Tower by staircases or elevators, or waiting for elevators in the Sky Lobby.
It is from those tragic factual circumstances that the dispute between the parties in this case has arisen.
This case concerns a dispute that has arisen between the defendant, Combined Insurance Company of America ("the defendant"/'Combined") and its London reinsurers, represented by the claimant ("the claimant"/'Reinsurers"). Combined is an insurance company organised under the laws of the State of Illinois, United States, and with its principal place of business in Chicago, Illinois. Combined is wholly owned by Aon Corporation.
The families of all of the victims of the attacks have been paid their due entitlements under the terms of the insurance that was provided by Combined, and the matters in dispute in this action concern only the respective rights and obligations under the Reinsurance as between Combined and the claimant. The rights of Combined against the claimant are in practice governed by the rights which the insured persons had against Combined as a matter of Illinois law.
The claimant Reinsurers, who have brought these proceedings for negative declaratory relief, seek declarations:
i) that they have validly avoided the contract of facultative reinsurance with Combined, by reason of the non-disclosure and/or misrepresentation by Combined and/or its agents, of matters material to the risk. This issue is to be determined pursuant to English Law;
ii) that, on a true and proper construction of the relevant, reinsured parts of the underlying insurance provided by Combined, the deaths of almost all the Aon employees who were killed were not covered by the Insurance and were thus also outside the Reinsurance. This issue is to be determined pursuant to the law of the US state of Illinois.
Combined counterclaims for a declaration that it is entitled to be indemnified by the claimant, and also counterclaims for damages.
THE INSURANCE AND THE REINSURANCE
The Aon Group and the Requests for Proposal
In early 2000, the Aon group of companies (which is described in more detail below) was seeking new group insurance of three types: Life, Accidental Death & Dismemberment ("AD&D"), Business Travel Accident ("BTA"). To this end, in late January/early February 2000 Aon Consulting, an Aon Group broking company, sent out to various insurers, on behalf of Aon Corporation, two "Request for Proposal" ("RFP") documents. One of these related to the prospective group life cover and is not relevant to this dispute. The other related to the prospective AD&D and BTA insurance, and sought the prospective insurers' proposals as to the provision of certain insurance cover for (principally) the domestic employees of the Aon Group.
The Aon group consisted of a holding company, Aon Corporation, and its subsidiaries. In 1999, Aon Corporation had 1,571 worldwide subsidiaries, of which 382 were incorporated in the United States. The operating subsidiaries of Aon Corporation carried on business in three distinct segments: (a) insurance brokerage and other services; (b) consulting; and (c) insurance underwriting. The insurance brokerage and other services segment consisted principally of direct and reinsurance brokerage operations, including specialty and wholesale activity. The consulting segment provided a range of consulting services including employee benefits, human resources, compensation and change management. The insurance underwriting segment wrote direct life and accident/health insurance, extended warranty, specialty and other insurance products. The revenue generated by these three segments for the United States in 1999 was split as follows: 53% insurance brokerage and other services; 10% consulting; and 37% insurance underwriting. In 1999, the Aon group of companies had about 25,500 domestic employees.
The AD&D/BTA RFP ("the RFP") stated in its Introduction Section that: —
"This Request for Proposal (RFP) has been prepared to achieve the following objectives:
Provide a proposal on a fully insured/pooled basis for Aon's existing Basic and Supplemental AD&D Plan at the existing terms and conditions to be effective April 1, 2000.
Provide a proposal on a fully insured /pooled basis for a new Aon Business Travel Accident Insurance Plan as described herein to be effective April 1, 2000.
Provide a proposal on a fully insured/pooled basis for a new Aon Basic & Supplemental AD&D Plan and Travel Assistance Program as described herein to be effective January 1, 2001 with an open enrolment period during November 2000.
…
Please provide a three-year policy provision and rate guarantee on a non-cancellable basis for each of the plans being quoted.
Your written proposals are due in this office February 15, 2000'
The RFP set out what was requested in respect of BTA coverage in Section II. It set out those who were to be eligible to become insured, Class 1 of which was described as "All domestic employees including US employees employed outside the US". It then stated, in relation to the requested BTA coverage, as follows: —
"A benefit is payable if an insured suffers a loss as defined in the plan as a direct result of an "accident" which occurs while travelling on the business of Aon.
Coverage starts when an insured begins a trip—either from home or the place they normally work (whichever occurs later) and stays in force until they return to either of these locations (whichever is first).
…
While travelling on the business of Aon means while an insured is carrying out authorized activities for the furthering of Aon's business.
Coverage is worldwide and includes commutation, sojourn and personal deviations (side trips incidental to a business trip)……."
Other important elements of the RFP were that the benefit which was sought for each Class 1 employee was 6 times annual income, with a maximum benefit of $1m; and that there was to be an aggregate limit (air only) of $20m.
Section V of the RFP listed data "contained in the RFP package to enable you to price the programs and features contained herein." This data included two "diskettes" (floppy disks) containing Microsoft Excel spreadsheets of two categories of Aon group employees: the "1999 Field Life Census" and the "1999 Staff Life Census". These spreadsheets were the primary source of data about the Aon Group's domestic employees. Nowhere in the Section V data was there any historical information from the Aon Group quantifying the amount of travel which its domestic employees had undertaken.
Combined's assessment of the RFP
Combined...
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