Judge takes hard line against insurers' drafting
"… if the underwriters had intended "combustible" to have a meaning other than that understood by a layperson interpreting the Policy, it was for underwriters to make that express in the Policy."
In a recent High Court judgement, which will be welcomed by policyholders, Mr Jonathan Acton Davis QC adopted a robust approach against arguments raised by an insurer that the policyholder had not complied with various policy conditions.
Following a fire at its premises in June 2014, Wheeldon Brothers Waste Limited ("Wheeldon") claimed under its insurance policy with Millennium Insurance Company ("Millennium"). Millennium declined the claim alleging various breaches of condition/warranty, as follows:
- Breach of Clause WA2A (storage of gas cylinders);
- Breach of Memorandum 6 (storage of combustible materials less than 6m of fixed plant);
- Breach of Memorandum 9 (storage of baled materials); and
- Breach of Memorandum 11 (removal of combustible stock and/or waste).
The Judge found in favour of Wheeldon on all points.
Of particular note was the robust approach adopted in relation to interpretation of the Policy. The judgment makes clear that if underwriters intend words to have a meaning different to that which would be understood by a layperson, they should make that clear in the Policy. In the present case, the word "combustible" was held to have an "ordinary" meaning that would be understood by a layperson, as well as a technical meaning that would be understood by an expert. The term was undefined in the Policy, however, meaning that it was to be given its ordinary meaning.
Additionally, insurers had sought to argue that the policyholder had failed to keep "formal records" recording the maintenance of machinery. The policyholder kept daily and weekly checklists in a works diary, which the Judge held to be sufficiently "formal"; he said:
"If Insurers have required records to be kept in some particular format, it was for them to prescribe that format in the draftsmanship of the Policy."
The judgment and in particular the court's approach to policy interpretation is to be welcomed. All too often insurers assert that words and phrases in an insurance policy were intended by the underwriter to have some special meaning unknown to the policyholder. Whilst English law has long-held that words in contracts are to be given their ordinary and natural meaning, it is helpful to see this approach adopted specifically in the context of insurance policies.
Wheeldon Brothers Waste Limited v Millenium Insurance Company Limited  EWHC 834 (TCC)