Insured by any other name – Commercial Court finds a business not named as an insured is covered

The Commercial Court found that an entity was covered under a Property Damage and Business Interruption (PDBI) policy despite not being named as an insured. In George on High Limited and George on Rye Limited v Alan Boswell Insurance Brokers Limited and New India Assurance Company Limited [2023] EWHC 1963 (Comm), the Commercial Court considered issues of policy construction, rectification, and estoppel in a judgment which broadly favours policyholders.

BACKGROUND

The 16th century George Hotel in Rye, Sussex was largely destroyed by fire in 2019. The building was owned by George on High Limited (GOH), whereas the business was operated by George on Rye Limited (GOR). Both entities were ultimately owned by the same couple.

The relevant 'Insured' on the policy was listed as "The George on High Limited t/a The George in Rye". Insurers paid GOH for property damage losses due to the fire, but declined cover for BI losses on the basis that GOR was not an insured. The Claimants brought proceedings against their insurance brokers for negligently failing to organise insurance for GOR. The brokers joined insurers as defendants on the basis that GOR should be covered, but admitted they were liable to the Claimants to the extent that insurers were not liable.

The Claimants established at trial that insurers had been aware of GOR since 2014 and had dealt with claims in relation to it, including a third party claims' handler not challenging the description of GOR as 'policyholder'. The Court found that, through the history of previous dealing and claims, insurers were aware (including through their third party claims' handlers) of GOR's existence; the business structure; and had settled GOR's claims on the basis it was covered under the policy. Finally, it was noted in evidence that GOR paid the insurance premiums.

DECISION

Policy construction

As a matter of construction, the Court applied the well-known principles of policy construction that it must ascertain the objective meaning of the language used considering the contract as a whole. Where there are rival meanings, the Court can consider which is more consistent with business common sense.

The Court found that the description of the Insured as "The George on High Limited t/a The George in Rye" was not on its face clearly wrong or nonsensical, but it needed to ascertain the meaning of those words to a person who had all the background knowledge reasonably available to the parties at the time of the contract. Part of insurers' knowledge was the actual knowledge of its third party claims' handlers who had previously dealt with GOR on the basis that it was an insured.

Taking the history of dealings between the parties into account, the Court concluded that the insurers knew at the time of entering into the Policy that the business was operated by GOR. A reasonable person would, therefore, have appreciated that "The George on High Limited t/a The George in Rye" was plainly wrong and did not identify what was meant. In the Court's judgement, a reasonable person would conclude that the meaning of "Insured" was "The George on High Limited and the business operated by GOR t/a The George in Rye". Thus, as a matter of construction, GOR was an insured under the policy.

Rectification

Although he did not need to, the judge concluded that he would have ordered rectification of the policy to say "The George on High Limited and the business operated by GOR t/a The George in Rye". The test for rectification is well-known: there must be a common continuing intention, an outward expression of accord, the intention must continue at the time of execution, and by mistake the contract must not reflect that common intention.

On the facts, the judge held that this would have applied here. In particular, the common intention of the parties was that the business of the hotel would be insured and this was particularly evident from the fact that GOR paid the premiums.

Estoppel

Finally, the Court considered the argument that insurers were estopped by convention from denying cover to GOR. Estoppel by convention is difficult to demonstrate. What is required is:

1. a common assumption expressly shared between the parties;
2. the party expressing the assumption must have conveyed an expectation of reliance;
3. there must in fact have been reliance on the common assumption;
4. the reliance must have occurred in connection with some subsequent mutual dealing; and,
5. the person alleging estoppel must have suffered detriment, or the person being estopped must have had some benefit.

(HM Revenue & Customs v Benchdollar Ltd & Ors [2010] 1 All ER 174, per Briggs J)

The Court found that these elements were satisfied on the facts and was particularly drawn to that conclusion by the history of dealings between the parties, the fact that the business was explained to insurers and their claims' handlers, and that GOR paid the premiums. Both parties, therefore, proceeded on the basis that GOR was an insured and the business of the hotel was covered.

COMMENT

This case is highly fact-specific and rather unusual. It is, as a result, unlikely to be a case on which many policyholders need to rely in future coverage disputes.

However, it is useful in demonstrating the importance that a Court will place on previous dealings and claims, particularly in the context of a party's knowledge. The fact that the Court readily accepted that the knowledge of a third party claims' handler engaged by insurers comes within the ambit of what insurers know is important and could have wider implications (such as in breach of fair presentation cases).

Finally, the payment of premium and, in particular, the entity which was responsible for those payments, weighed heavily on the Court's reasoning and demonstrates the sort of considerations a Court will take into account when considering wider commercial context and business common sense as part of an exercise in construction.

For policyholders and their brokers, whilst the Claimants in this case were able to recover their losses, the case is a timely reminder to ensure at the time a policy is placed and at renewal that the details of the entities insured are accurately captured and described.