Daniel Shapiro KC, Michael Harper and Alethea Redfern acted for World Challenge Expeditions Ltd in its successful claim against Zurich Insurance Company Ltd
An insurer was estopped from altering its operation of a business travel insurance policy (the “Policy”) when Covid struck. Daniel Shapiro KC, Michael Harper and Alethea Redfern acted for World Challenge Expeditions Ltd (“WCE”) in its successful claim against Zurich Insurance Company Ltd (“Zurich”).
The Judgment of Dias J in World Challenge Expeditions Ltd v Zurich Insurance Company Ltd  EWHC 1696 (Comm) was handed down on Friday 7 July 2023.
WCE provides adventurous expeditions for secondary school children and their accompanying teachers. Although itself a travel business, since 2016 WCE had a business travel policy underwritten by Zurich which covered the student “Challengers” and their teachers for injury and medical assistance but also, subject to a very substantial deductible, for cancellation claims. In the earlier policy years 2016, 2017 and 2018 (the “Earlier Policies”) Zurich operated the cancellation cover so that, on identical wording, the Earlier Policies indemnified WCE for and in the amount of its refunds to Challengers of their deposits.
The indemnity was provided, subject to the deductible, to WCE and was consistently in the amount of the refund to the Challengers, being the amount of the deposit originally paid to WCE less than the amount of WCE’s administration fee. In practice there was a substantial deductible – reduced to £100,000 in the Policy year – which meant that Zurich did not actually effect payment, although Zurich approved the claims under the policy and monitored the erosion of the deductible. The purpose of the Policy was to protect WCE in the event of a ‘black swan’ event where a large number of expeditions might have to be cancelled, e.g. if ash from Icelandic Volcanoes caused a large number of trip cancellations.
Covid was just such a black swan event, but when Covid struck, Zurich sought to change position. Initially Zurich confirmed that WCE would be indemnified in the amount of its refunds to Challengers. In March 2020 Zurich asked WCE to hold off cancelling the expeditions planned for June, July and August 2020, to see whether cancellation was really required. Then, coincident with discovering the potential size of the claim in mid-April, Zurich sought to change its position, contending that the Policy did not indemnify WCE’s refunds of deposits to Challengers but only irrecoverable costs that WCE paid out to third party service providers (airlines, hotels, etc) for flights, accommodation and the like.
In a detailed and careful Judgment, Dias J held that: (1) on the proper meaning and effect of the Policy it only indemnified WCE for irrecoverable third party costs but (2) Zurich having operated the Earlier Policies (and the Policy prior to Covid) so as to indemnify WCE for and in the amount of WCE’s refunds to Challengers of their deposits, and WCE having relied upon such a convention, Zurich was estopped from altering that convention in respect of the expeditions planned for June, July and August 2020.
Dias J held that: “by agreeing claims in the amount of the refunds and setting them against the deductible, Zurich clearly conveyed to WCE that they shared WCE’s assumption as to the scope of cover and WCE was strengthened and confirmed in its own reliance on that assumption.” She further held that the delay in cancellation had caused WCE to lose the opportunity to explore other options to preserve goodwill with Challengers and that: “it would be inequitable for Zurich now to resile from the common assumption”.
Dias J also considered aggregation under an event-based aggregation clause, albeit on bespoke wording, narrowing the meaning of an occurrence. That, and the particular circumstances, mean that the aggregation decision is more specific to WCE than general, but the Judgment contains a clear statement of the applicable principles to event-based aggregation and in the context of Covid.
A copy of the judgment may be found here.
Daniel Shapiro KC, Michael Harper and Alethea Redfern were instructed by Joanna Grant, Rob Goodship and Chloe Franklin of Fenchurch Law Ltd.