Case Alert -  EWHC 83 (TCC)
Judge comments on issues of proof and duty to warn in a property and BI insurance claim case
This case involved a claim under a combined insurance policy . The claimant insured sought payment under the physical damage and business interruption sections of the policy following the failure of a press at its print production facility. Much of the case turns on the particular factual circumstances but the judge made some comments which are of more general interest, including the following:
(1) Following a sale of the insured's business, the insured did not take steps to retain access to relevant historic data for the purpose of the claim. The judge concluded that "In those circumstances the view I take is that where the claimant might reasonably have been expected to provide more documentation in relation to a particular issue but has not done so I should not give it the benefit of the doubt in relation to that issue in circumstances where it has failed to take proper steps to ensure that relevant electronic information was preserved for the purposes of this claim". Similar issues arose because the insured did not call evidence from a number of witnesses who might have provided relevant evidence. Although he declined to draw an adverse inference about that (in part because the insurer had not notified the insured that it would raise this issue at trial), the judge held that he would not give the insured the benefit of the doubt where the insured might reasonably have been expected to at least take some steps to obtain a witness statement on a particular issue.
(2) One issue in the case was whether the claim was caused by subsidence (which was covered under the policy) or settlement (which was excluded). The policy contained no express definition of subsidence or settlement, so the judge considered the Oxford English Dictionary definitions for these words, as well as the experts' reports (which in turn referred to an Institution of Structural Engineers document) and the FOS's definitions. Referring to an argument raised by the insurer, the judge also commented that "An ordinary person would be surprised if the meaning of the same words in two clauses of the same insurance policy could differ significantly solely depending on whether the introductory “the” is present or absent".
(3) Given that the insured was seeking to argue that its claim fell within an exception to an exclusion, the judge held that it had the burden of proving that the damage resulted from a non-excluded cause. The claimant accepted that it was unable to adduce any direct evidence which conclusively proved the cause of the failure to be subsidence. The judge accepted, though, that he could here find the case proven on the basis of circumstantial evidence.
(4) Both sides criticised each other for failing to undertake further investigations of the cause of the damage. In relation to the insurer, the judge found that its advisers knew that these investigations could be carried out and might produce relevant information and that "The documents do not record why it chose not to undertake any further investigations or why it did not suggest to the claimant that since it was not going to do so the claimant might wish to do so". Although the judge thought that it was "deeply unattractive" for the insurer to now rely on the insured's lack of investigation and failure to prove an insured cause of the loss, he went on to observe that "The difficulty however in terms of the law is that it cannot be said that the defendant in its capacity as insurer owed some positive duty to investigate further or to warn the claimant that if it did not do so the defendant might seek to rely on the absence of material evidence should there be a subsequent dispute. There is no basis, pleaded or argued or otherwise, for treating the defendant as in some way estopped from relying on the absence of information in this respect. There is no basis for drawing adverse evidential inferences against the defendant".
Although the judge went on to find that the property damage claim succeeded in full, the business interruption claim largely failed, in part because the business had been in long-term decline for reasons unconnected to the failure of the press.
COMMENT: The judge's comments summarised in para (4) above might be contrasted with the recent decision of the Court of Appeal in Ted Baker v AXA, in which it was held that the insurer had been under a duty to warn in circumstances where it had led the insured to believe that there had been no breach of a condition precedent (at a time when the breach could have been rectified). However, there was no reference to Ted Baker in this case, and here the insurer was aware of a failure to investigate (and so a potential failure by the insured to prove a covered loss – although there ended up being no such failure), but had not done anything to give a misleading impression to the insured at the time that there was no problem. It is not clear whether Ted Baker was cited by the insured though – there is no discussion of it in this judgment.