In Ted Baker plc v AXA Insurance UK plc, the Insured appealed Mr Justice Eder’s findings at first instance ( EWHC 3548 (Comm)) that it (1) had breached a claims co-operation clause, compliance with which was a condition precedent to Insurers’ liability, and (2) had failed to prove that its claimed loss of profit exceeded the deductible. The Court of Appeal’s decision addressed the circumstances in which an estoppel might arise from silence, and is considered by David Turner QC of 4 New Square.
Between 2004 and 2008, an employee of Ted Baker carried out some 500 different acts of theft of stock. Insurers provided Business Interruption cover to Ted Baker which was subject to an excess of £5,000 for each and every loss. The policies included a Professional Accountants Clause by which Insurers agreed that they would pay “the reasonable charges payable by the Insured to their professional accountants for producing such particulars or details or any other proofs information or evidence as may be required by [Insurers]”. The policies also included the following claims condition:
“2. Claims Condition
a) In the event of any loss destruction or damage in consequence of which a claim is or may be made under this Section the Insured shall
– notify the Company immediately
– deliver to the Company at the Insureds expense within 7 days of its happening full details of loss destruction or damage caused by riot civil commotion strikers locked-out workers persons taking part in labour disturbances or malicious persons
– with due diligence carry out and permit to be taken any action which may be reasonably practicable to minimise or check any interruption of or interference with the Business or to avoid or diminish the loss
b) In the event of a claim being made under this Section the Insured at their own expense shall
i) – (not later than 30 days after the expiry of the Indemnity Period or within such further time as the Company may allow) deliver to the Company in writing particulars of their claim together with details of all other insurances covering property used by the Insured at the Premises for the purpose of the Business or any part of it or any resulting consequential loss …
ii) – deliver to the Company such books of account and other business books vouchers invoices balance sheets and other documents proofs information explanation and other evidence as may be reasonably required by the Company for the purpose of investigating or verifying the claim …
c) If the terms of this condition have not been complied with
– no claims under this Section shall be payable …”
Following discovery of the employee’s thefts, Ted Baker notified claims on the policies in force throughout the period in question. In December 2008 Woodgate Clark (who had been appointed as loss adjusters) sent an email to Ted Baker’s insurance broker requesting the provision of seven different classes of documentation/information. The final class was “Copies of your clients’ profit and loss accounts for 2005, 2006, 2007 and if available 2008 together with management accounts for the same period” – this final class of documentation/information is referred to as the “category 7 documentation/information”.
On 1 January 2009, Bluefin took over responsibility for Ted Baker’s insurances (including the handling of the claims relating to the employee’s thefts). Bluefin was aware that compliance with the claims condition was a condition precedent to liability. In February 2009, Bluefin sent Woodgate Clark an email setting out details of the claim being advanced; this was followed by a meeting in early March 2009 at which Ted Baker’s finance director suggested that the provision of quantum information should follow confirmation that liability was accepted.
Following the meeting, loss adjusters confirmed that Insurers’ instructions were awaited. Thereafter, Insurers denied liability on the basis that loss due to employee theft was not within the scope of cover. Proceedings were issued in 2010 and in 2012 Eder J decided that employee theft was within the scope of cover.
However, Insurers also contended that Ted Baker had breached claims condition 2 by reason of its failure to provide the information requested by loss adjusters. Ted Baker disputed that its failure to provide the information amounted to a breach of the condition, either because the information was not reasonably required or because Insurers had agreed that the provision of the information be “parked”. In the alternative, Ted Baker contended that Insurers were estopped from relying on the breach by reason of their failure to make clear that the information needed to be provided at a time when they knew that the Insured was proposing to provide the information only after a decision had been made as to policy liability.
In a further judgment handed down in 2014, Eder J:
- Concluded that Ted Baker was entitled to defer provision of categories 1-6 of the information requested by loss adjusters, but there was no such justification with respect to the category 7 documentation/information since it could have been provided at immaterial cost and with little effort;
- Rejected the suggestion that Insurers had agreed to “park” the provision of the information requested by loss adjusters;
- Also rejected the suggestion that Insurers were estopped from relying on the breach of the claims condition;
- Found that Ted Baker had failed to prove that any individual loss had exceeded the excess of £5,000.
Ted Baker appealed.
THE COURT OF APPEAL’S DECISION
The first judgment in the Court of Appeal was delivered by Sir Christopher Clarke. He upheld the judge’s decision as to whether Insurers (1) were entitled to request the provision of the category 7 documents and (2) had agreed to “park” the provision of such information. He then went on to consider the argument as to estoppel. In his view:
- In circumstances where an insured had objected to the wholesale provision of information until such time as insurers had made a decision on policy liability, it was incumbent on insurers to tell the insured if they still required the insured to provide a limited category of information which should have been readily available to the insured;
- This conclusion was based largely on a line of authority concerning the “duty to speak” in commercial cases (including The ‘Lutetian’  2 Lloyd’s Rep 140, ING Bank NV v Ros Roca SA  EWCA Civ 252, Starbev GP Ltd v Interbrew Central European Holdings BV  EWHC 1311 and Kaupthing Singer & Friedlander Ltd v UBS AG  EWHC 2450 (Comm)), rather than on the fact that a contract of insurance was uberrimae fidei, although a “duty to speak” might more readily be inferred in the latter case;
- Such a duty would arise where a reasonable in the position of the person asserting the estoppel would expect the other party, acting honestly and reasonably, to take steps to make his position plain.
In the light of these conclusions, Sir Christopher held that Insurers should have reminded the broker that the category 7 documentation/information needed to be provided. Accordingly, they were estopped from relying on Ted Baker’s failure to provide that category of material.
Despite Sir Christopher’s findings in relation to estoppel, Ted Baker’s appeal failed: for reasons set out in the judgment of David Richards LJ, the Court of Appeal upheld the judge’s finding that Ted Baker had failed to demonstrate that it had suffered a loss of gross profit exceeding the £5,000 excess in respect of any of the incidents of theft perpetrated by the dishonest employee. In David Richards LJ’s view, that was a finding which the judge had been perfectly entitled to make given the weaknesses inherent in a case on causation and quantum based largely on assumptions (as to the quantity of garments stolen in each theft) which were inherently no more likely than alternative assumptions which would have resulted in no losses being recoverable under the policy.
While David Richard LJ’s judgment on the quantum and causation issues should be read carefully by all practitioners, the real interest in the Court of Appeal’s decision lies in Sir Christopher Clarke’s obiter finding that Insurers were estopped from relying on Ted Baker’s failure to provide the category 7 documentation/information. Before Sir Christopher’s judgment, there had been little judicial consideration of the circumstances in which Insurers might be estopped as a result of their own silence. His analysis sits awkwardly with earlier insurance cases (particularly concerning limitation) in which arguments based on estoppel had been rejected such as Seechurn v ACE Insurance SA  2 Lloyd’s Rep. 390 and Fortis Bank SA v Trenwick International Insurance  Lloyd’s Rep. IR 464. It is therefore to be anticipated that his judgment may not represent the last word on this contentious subject!