Loyaltrend v Brit (March 2010): Implications for brokers and underwriters. Victoria Sherratt Partner Barlow Lyde & Gilbert LLP Presentation to LBIA - 1 November 2010. Factual Background . Insured – Clothing business. Shop in Notting Hill – occupies as a tenant.
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Barlow Lyde & Gilbert LLP
Presentation to LBIA - 1 November 2010
“In the event of Damage for which the Insurers are liable under Sub-Section 1 of this [policy]… the Insurers will indemnify the Insured against any loss of Gross Profit due to (1) reduction in takings and (2) additional expenditure.”
“The Insurers shall indemnify the Insured as a result of Damage by any peril defined herein… to stock, Tenants Improvements, Trade Contents… whilst within or attached to any building at the Premises used in connection with the Business [during the Period of Insurance.]”
BI insuring clause read:
“In the event of Damage for which the Insurers are liable under Sub Section 1 of this [policy], the Insurers will indemnify the Insured against any loss of Gross Profit due to (1) reduction in Takings and (2) additional expenditure calculated as follows:
(1) In respect of reduction in Takings – the sum produced by applying the Rate of Gross Profit to the amount by which the Takings during the Indemnity Period shall in consequence of Damage fall short of the Standard Takings
(2) In respect of additional expenditure – the additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the reduction in Takings which but for that expenditure would have taken place during the Indemnity Period in consequence of Damage but not exceeding the sum produced by applying the Rate of Gross Profit to the amount of the reduction thereby avoided
less any sum saved during the Indemnity Period in respect of charges and expenses payable out of Gross Profit as may reduce in consequence of Damage.”
(1) at the time of the happening of the loss, destruction or damage there shall be in force an insurance covering the interest of the Insured in the property at the Premises against such loss, destruction or damage; and that
(i) payment should have been made but liability admitted therefor,
(ii) payment would have been made or liability admitted therefor but for the operation of a proviso in such insurance excluding liability for losses below a specified amount…
“The trigger for business interruption loss is not the subsidence but the material damage.”
(see paragraph 33 of the Judgment)
“period beginning with the occurrence of Damage and ending not later than  months thereafter, during which the results of the Business shall be affected in consequence of Damage”
“period commencing with the date of Damage or interference” as per Coromin v Axa Re. .
The insurance provided under the policy was extended to include:-
“Loss resulting from interruption of or interference with the Business as a consequence of Damage as insured by this Sub Section to property in the vicinity of the Premises which shall prevent or hinder the use thereof or access thereto whether the Premises or the property of the Insured therein shall be damaged or not”.
“Premises” was defined as 227/229 Westbourne Grove.
This address relates to the shop only not the building as a whole.
“It is argued that since there was also damage to the flat above the shop, this affects “property in the vicinity of the Premises” and gives the Claimants the right to recover all the damage which they claim. This argument … does not survive even a literal reading of the clause, let alone a proper construction of it.”
“The fact that that is how they usually apply does not mean on their proper construction that they do not cover something else.”
Transcript Day 4
“The Insured shall give immediate notice to the Insurers on the happening of any Damage in consequence of which a claim is or may be made under this Policy … and shall, at their own expense, within 30 days after the happening of such: Damage deliver to the Insurers in writing such details or particulars and proofs as the Insurers may reasonably require.”
“The observance and fulfilment of the terms and conditions of this Policy by the insured insofar as they relate to anything to be done or complied with by the Insured shall be a condition precedent to any liability of the Insurers to make any payment under this Policy.”
“Notting Hill – they are still having problems here with the possible subsidence claim on the buildings which Mr U has told you about previously. If you need any of your adjusters to look at the building then let me know but, obviously, this will mainly affect the landlord’s insurance.”
“No previous mention with Claims or me. Action? Is there a claim or not?”
“Subsidence issue at Notting Hill – what is this all about?”
“As regards the client’s Notting Hill premises, he is currently involving solicitors as there would appear to be subsidence problems which he has asked his solicitors to pursue with the landlords.
The question I have at this stage is if the situation deteriorates to such an extent that he is unable to trade, please confirm any loss of gross profit would be covered under the policy subject to production of relevant accounts, etc.
Could you please confirm and advise if, at this stage, you wish the Insured to complete a Claim Form. But, in any event, note your file (although I seem to recall I mentioned this to you way back when so you may already have made a note).”
“I note what you say and agree that the schedule does show that there is subsidence cover in force. However, this does not alter the fact that for a valid claim to exist under the Business Interruption section of the policy, we need to have accepted a claim under the Material Damage section of the policy first.
With this in mind, as we are not actually insuring the Buildings, I fail to see how the subsidence at the property would affect the Insured’s contents or stock.
As such, and in the absence of a valid claim under the Material Damage section of the policy, I regret to advise that we are unable to consider any claim for loss of gross profit in this instance.”
“If there had been any doubt about the position I would have weighed heavily against the Claimants [on the basis that] what they are claiming now about the date of notice and about when the damage was sustained is not what they claimed when their advisers thought that the path to payment was different. When the Claimants and their advisers believed that they would be looking at one Insurer and gave consideration to their claim, they saw the Spring of 2005 as the point at which the damage really occurred and August 2005 as the moment when notice was given. The Court only knows this because the Defendants served a document summons on Mr T. The Claimants’ failure to give disclosure of their copies of the relevant documents when asked seems deplorable. The Court would have been entitled to be very cautious about accepting a new revised version of events from the Claimants.”
“This Court deals with brokers, not every week but almost every week … The idea that a broker would not record in writing a notification for the purpose of a policy is absurd. Your clients are relying on what, all of a sudden, Mr C seems to remember about what the late Mr U told him in September or, he said later, August of that particular year. If there was some meaningful notification being given, why on earth is it not in writing … so if you are going to start making submissions to me about the veracity of Mr C and how I should place reliance on his recollection, I should make it clear now that this would be a waste of breath, unless you have a startling submission to make.” [Transcript day 4]
Insurer’s Position – January 2004.
“objectively evaluated, creates a reasonable and appreciable possibility that it will give rise to a loss or claim against the Insured …
There need not be a certainty that it will do so; there need not be a probability or likelihood that it will do so. All that need exist is a state of affairs from which the prospects of a claim (whether good or bad) or loss emerging in the future are “real” as opposed to false, fanciful or imaginary. And that is what has to be notified.”
- they attempted to make the wording fit the facts rather than applying the facts to the wording.
- the Insured changed how it put its claim.