The Commercial Court in Ted Baker plc v Axa Insurance UK Plc(2014) rejected the Claimants' insurance claim for losses caused by employee theft. Eder J held that the Claimants were in breach of a claims co-operation condition in failing to provide information reasonably requested by the Defendants' loss adjusters.
A substantial amount of stock held in the Claimants' storage warehouse had been stolen by an employee over a number of years stretching back to 2003. This was discovered as a result of an anonymous tip-off in December 2008. The employee would steal a number of boxes of Ted Baker merchandise at a time, although the total amount and extent of the theft was a matter of dispute in the case – the suggested value ranging from £900,000 to £5.3 million.
Originally, the Claimants' claim was for both loss of stock and business interruption ("BI") losses; but the claim for loss of stock was abandoned in January 2013. As amended, the Claimants' claim was limited to the BI losses covering a period of approximately 5 years under a series of insurance policies.
A condition precedent of the Claimants' insurance policy required the provision of certain information and documentation, which the insurers argued had not been provided. On this basis, the Defendants stated that the Claimants should be debarred from advancing any claim at all. This was disputed by the Claimants, who argued that there were a number of issues regarding the construction of the wording in the policy, which needed to be considered in court. Alternatively, the Claimants argued that the Defendants were themselves precluded from raising such complaints, relying on a range of arguments including contractual agreement, estoppel by convention and/or acquiescence and/or representation, waiver and bad faith.
Under a Special Claims Condition in the policy, the Claimants were required to deliver to the insurers such evidence "as may be reasonably required". The insurers requested seven categories of documents, the majority of which Eder J did not view as being "reasonable" for the Claimants to provide prior to the insurers confirming that 'employee theft' was an insured peril. The Judge had regard, in particular, to the time and expense that would have to be incurred by the Claimants in providing such documents. Eder J noted that generally it may be reasonable for insurers to reserve their position pending receipt of documents or information.
However, one of the categories of documents the Claimants were asked to provide was copies of profit and loss accounts, together with management accounts from 2005 – 2008. Eder J, in line with all of the expert witnesses' views, found that it was reasonable for the Claimants to provide these to the insurers, noting that this is routine for commercial claims, they would be easy to obtain and to provide them would not incur additional costs such as accountant's fees. The Claimants did not provide the profit and loss or management accounts for the requested period, and this constituted a breach of the relevant Special Claims Condition. Eder J therefore rejected the claim.
This case serves as a reminder to an insured to comply with conditions precedent and wider obligations within a policy. Insurance policies may contain general "sweep up" clauses which make all obligations a condition precedent on the insured. It also provides useful commentary on what might be reasonable for an insurer to request, with specific attention given to the time and cost in obtaining that information.