Zurich Insurance Plc v Niramax Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Popplewell,Lord Justice David Richards,Lady Justice Elisabeth Laing |
| Judgment Date | 23 April 2021 |
| Neutral Citation | [2021] EWCA Civ 590 |
| Date | 23 April 2021 |
| Docket Number | Case No: A4/2020/0766 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 590
Lord Justice David Richards
Lord Justice Popplewell
and
Lady Justice Elisabeth Laing
Case No: A4/2020/0766
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
MRS JUSTICE COCKERILL
Royal Courts of Justice,
Strand, London, WC2A 2LL
Graham Eklund QC and Carl Troman (instructed by BLM) for the Defendant/Appellant
Ben Elkington QC and Ben Smiley (instructed by Edwin Coe LLP) for the Claimant/Respondent
Hearing date: 15 April 2021
Approved Judgment
Introduction
The Claimant (“Niramax”) is in the business of waste collection and waste recycling. On the night of 4 December 2015 a fire broke out at its main premises at Thomlinson Road in Hartlepool. The fire destroyed a number of items of mobile plant and a fixed shredding machine known as the Eggersmann plant. The mobile plant was covered by the Defendant (“Zurich”) under a policy of insurance renewed on 14 December 2014 (“the Policy”). The Eggersmann plant was insured with Zurich under an extension of the Policy added on 5 September 2015. Zurich declined the claim on the grounds of non-disclosure of material facts at the renewal in December 2014, and separately when the Eggersmann plant was added to the Policy in September 2015. By the time of the trial, the principal allegation of non-disclosure related to Niramax's failure to comply with a number of risk requirements which had been imposed by its property insurer, Millennium Insurance, which had resulted in Millennium imposing special terms requiring Niramax to self-insure for 35 per cent of any loss and in any event to bear the first £250,000 of any loss. There were other allegations of non-disclosure which the Judge rejected and with which this appeal is not concerned.
Zurich alleged that it was entitled to avoid the Policy from renewal on 14 December 2014; or in the alternative that it was entitled to avoid the extension of the Policy when the Eggersmann plant was added. Zurich further alleged that if the non-disclosed facts had been disclosed in September 2015 it would have cancelled the Policy. After a two-week trial in the Commercial Court, Cockerill J held that there was material non-disclosure of Millennium's risk requirements and special terms; that the non-disclosure did not induce Zurich to write the Policy on the terms on which it was written at renewal on 14 December 2015; and that had the material facts been disclosed at the time of the extension of the Policy to add the Eggersmann plant, Zurich would have declined to insure the Eggersmann plant, but would not have cancelled the Policy. Accordingly, Niramax's claim succeeded in part, namely for recovery of the value of the mobile plant, found to be £419,500 for Niramax's own plant and £82,350 for hired in plant, but not the Eggersmann plant.
On this appeal, Zurich contends that the Judge ought to have concluded that the material non-disclosure induced the underwriting of the Policy renewal on 14 December 2014, such that the claim in respect of the mobile plant should also have been dismissed.
Narrative
The trial involved a number of disputed facts and issues which are no longer in issue or relevant to the appeal. The following narrative is taken from the Judge's findings.
Niramax is a substantial concern, whose turnover in the last financial year before the fire was £36 million with a gross profit of £9.7 million. It had carried on business for a number of years from its main premises at Thomlinson Road in Hartlepool, and additionally at two other sites in Hartlepool and at a further site on an industrial estate in Washington, near Sunderland.
The buildings cover was provided by Millennium for the 2014/15 year, covering both the Thomlinson Road and Washington sites, subject to survey. The survey was undertaken on 14 February 2014 by consultants who recommended that a number of risk requirements should be imposed. The recommendations were accepted by Millennium, who imposed the requirements on 27 February 2014. There were three risk requirements for the Washington site and seven risk requirements for the Thomlinson Road site. One of the key requirements for the latter was that there should be installed an automatic fire suppression system to protect three of the fixed shredders in the building within 30 days of the survey. One of the difficulties with this requirement was that the nature of the fire suppression system required was imprecise, leaving Niramax somewhat uncertain about what was needed.
Niramax did not comply with all the risk requirements within the timescale required. By mid-October 2014, following further correspondence with Millennium, there were four outstanding risk requirements which had not been complied with. These were:
(1) a requirement for the installation of the fire suppression equipment on the fixed shredders at the Hartlepool premises;
(2) a requirement for an inspection of the electrical appliances at the Hartlepool premises and provision of an Institute of Electrical Engineers Certificate as to their condition;
(3) a requirement that at the Washington site an automatic fire detection system be installed in areas where waste was stored;
(4) a requirement that CCTV cameras should be installed at the Washington site outside and inside areas of the process/storage building.
I shall refer to these as ‘the Outstanding Requirements’.
On 22 October 2014, in the light of Niramax's failure to meet the Outstanding Requirements, Millennium imposed special terms on Niramax, requiring Niramax to self-insure for 35 per cent of any loss and to bear the first £250,000 of any loss. I shall refer to these as ‘the Special Terms’.
At the renewal of the mobile plant Policy on 15 December 2014, all the Outstanding Requirements had been complied with by Niramax, save for that relating to the installation of the fire suppression equipment for the fixed shredders at the Hartlepool premises. The Special Terms remained in place.
The underwriting process at Zurich was not exhaustive. This was a type of insurance which was “commoditised and streamlined as a costs-saving exercise.” There was no proposal form. There were only three inputs into a calculation of premium, namely the amount of the cover, the nature of the trade and the claims experience. This was apparently a standard approach across the industry, at which the expert underwriters giving evidence on materiality did not cavil.
These criteria were applied by Zurich in a computerised ratings schedule into which each of these three variables was input. The result of the input of this data into the spreadsheet was a “technical price”, a “target price” and a “walkaway price”. The evidence of Mr Penny, the head underwriter in the Engineering Risk Division at Zurich, was that the latter was a minimum price below which Zurich would not write the risk.
At the 2014/15 renewal the risk was underwritten by a junior trainee, Ms Jones. The cover sought and granted was £812,000 any one occurrence for owned plant; £150,000 any one occurrence for legal liability for loss or damage to hired in plant; and £10,000 any one occurrence for legal liability for continuing hire charges for lost or damaged hired in plant, with an indemnity period of 3 months. A rating sheet was prepopulated by the back office and populated either by Ms Jones or by a colleague, Mr Smith, or both. It resulted in a technical price of £22,379.86, a target price of £23,498.65 and a walkaway price of £21,455.41. It was a so-called “mistake” in two of the inputs into this rating sheet which lies at the heart of the arguments on the appeal, to which I shall return. Ms Jones determined that the premium which should be charged was £23,714.40, which was not itself a figure generated by the rating sheet, but was simply mathematically a 20% increase on the previous year's premium. Nevertheless, it was in line with the rating sheet figure, being above the walkaway price and slightly above the target price. She sought and was given approval to charge a 20% increase by her immediate superior Mr Trinham.
In September 2015, the addition of the Eggersmann plant to the Policy was underwritten by Mr Hutchinson at Zurich. The Eggersmann plant was valued at £4.2 million. The owned plant cover was therefore increased to a total of £5,012,000. The premium for the extension was £32,782.62. The Outstanding Requirements and Special Terms were not disclosed to Zurich at the time of the September extension.
The case advanced by the parties at trial
In relation to non-disclosure of the Outstanding Requirements and Special Terms it was Zurich's case that had they been disclosed, the risk would have been referred to Mr Penny. He provided two witness statements and was cross-examined at length at the trial. He maintained that had the disclosure been made to him at renewal in December 2014, he would not have renewed the Policy at any price. He did not suggest by way of alternative that he would have done so but at a higher premium. Nor was any such alternative case advanced by Zurich in its written or oral closing submissions. By contrast, Niramax's case was that the Policy would have been renewed on exactly the same terms had the disclosure been made. Neither side, therefore, was focussing in its conduct of the case, or in the evidence which it called or challenged, on whether a third...
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