Kosmar Villa Holidays Plc v The Trustees of Syndicate 1 2 4 3

Neutral Citation Number: [2007] EWHC 458 (Comm) IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION COMMERCIAL COURT Case No: 2006-281 Royal Courts of Justice Strand, London, WC2A 2LL 4 th April 2007 Before : THE HON MR JUSTICE GROSS - - - - - - - - - - - - - - - - - - - - - Between : Kosmar Villa Holidays plc - and - The Trustees of Syndicate 1 2 4 3 Claimant Defendant - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Graham Eklund QC (instructed by Kennedys) for the Claimant Richard Slade (instructed by Hextalls) for the Defendants Hearing dates: 23rd; 24th & 25th January 2007 - - - - - - - - - - - - - - - - - - - - - Judgment The Hon Mr Justice Gross : INTRODUCTION 1. 2. 3. The Claimant (“Kosmar”) commenced trading in 1982. Kosmar is a specialist tour operator, with a particular focus on Greek destinations. On the 22nd August, 2002, at about 04.00, James Evans, then aged 17 and on a Kosmar holiday, dived into a swimming pool at the Marina Beach Apartments, Kavos, in Corfu. Tragically, in doing so, he fractured his spine, resulting in incomplete tetraplegia. Kosmar had exclusive use of those apartments but did not own them. Subsequently, in an action ultimately before the High Court, number HQO5XO2787, Mr. Evans claimed damages against Kosmar (“the Evans claim”). As I understand it, this claim was founded on the Package Travel, Package Holiday and Package Tour Regulations 1992 (SI 1992/3288). Following a trial on liability alone, HHJ Thorn QC (sitting as a Judge of the High Court), on the 15th December, 2006, gave judgment for Mr. Evans, with contributory negligence assessed at 50%. For the purposes of this litigation, the learned Judge’s decision must be taken as correct. On the basis of that judgment, it is thought that Kosmar’s liability could amount to sums in the order of £1,000,000. 4. It is unnecessary, with respect, to say more of the judgment of HHJ Thorn QC, save to note that the learned Judge formed an extremely adverse impression of the truthfulness and reliability of the Kosmar employees who gave evidence before him. That is a matter to which it will be necessary to return. 5. In these proceedings, Kosmar seeks an indemnity in respect of the Evans claim from the Defendant insurers who are the successors to Euclidian Direct Limited (and to whom I shall refer as “Euclidian”), pursuant to a Combined Liability Policy No. L00155C01AC0-1415, which, as is common ground, incepted on the 10th December, 2001 (“the policy”). The period of insurance extended up until the 9 th December, 2002. The policy provided that “Insurers will indemnify the Insured against all sums which the Insured shall become legally liable to pay as damages consequent upon accidental injury to any person …occurring during the Period of Insurance, in connection with the Business….”. 6. Of the first importance for the present proceedings, the policy further provided as follows (sub-paragraph numbering added): “GENERAL CONDITIONS 7. It is a condition precedent to insurers’ liability under this insurance that: [1] The Insured shall immediately after the occurrence of any Injury or Damage give notice in writing with full particulars thereof to insurers. Every letter, claim, writ, summons or process shall be notified or forwarded to insurers immediately on receipt. Notice shall also be given in writing to insurers immediately the Insured shall have knowledge of any impending prosecution or inquest in connection with any accident for which there may be liability under this insurance. So far as is reasonably practicable no alteration or repair shall without the consent of insurers be made to any works, machinery, plant, commodities or goods which are directly or indirectly connected with the occurrence until insurers shall have had the opportunity of examining the same. [2] Upon receipt by or on behalf of the Insured of notice …of an intention by any person or body to make a claim against the Insured or of any allegation of negligence which might give rise to such a claim or on the discovery of any such act of negligence, the Insured shall notify insurers as soon as practicable and shall provide full information respecting it so far as such information is in the Insured’s possession….. ” 7. It was common ground before me: i) ii) That, without more, compliance with General Condition 7 (“the clause”) constituted a condition precedent to Euclidian’s liability under the policy. That Kosmar had failed to comply with the requirements of what might be termed “limb [1]” of the clause, in that notification of the occurrence, namely the 22nd August, 2002 incident in which Mr. Evans was gravely injured (“the occurrence”), was not given to Euclidian “immediately”; to the contrary, the first notice to Euclidian of the occurrence was given on the 4th September, 2003 – over a year later. 8. 9. 10. 11. 12. 13. However, as will be seen later, the consequences of Kosmar’s failure to comply with the requirements of limb [1] of the clause were anything but common ground; in particular, the question of whether there was scope for the doctrine of waiver by election was very much in issue. Euclidian denies liability to Kosmar on the straightforward ground that Kosmar has failed to satisfy a condition precedent to Euclidian’s liability under the policy, namely, that contained in limb [1] of the clause as to immediate notification of the occurrence. No complaint is made in respect of limb [2] of the clause, concerning notification of claims; Euclidian accepts that Kosmar gave prompt notice in that regard. For its part, Kosmar contends that the requirements of limb [1] of the clause have been waived by Euclidian or that Euclidian is estopped or precluded from relying thereupon. In this regard, Kosmar invites attention to (i) the history of the dealings between the key individuals, dating back to a time before the inception of the policy; (ii) to a meeting held on the 1st March, 2002; and (iii) to Euclidian’s subsequent treatment of claims, between March 2002 and September, 2003. Furthermore, Kosmar submits that Euclidian, by its conduct after receiving notice of the Evans claim, has waived its right to rely on Kosmar’s failure to comply with limb [1] of the clause or (in broad terms) has affirmed that it was not rejecting the claim because of such non-compliance. In a nutshell therefore, the dispute before me turned on Kosmar’s entitlement to an indemnity, notwithstanding its non-compliance with limb [1] of the clause, on the basis of various arguments as to waiver, estoppel and the like. For completeness, I should record that there was a subsidiary argument as to whether alterations to the swimming pool subsequent to the occurrence, furnished Euclidian with a further ground for denying liability. For reasons which will become apparent, this debate can be taken briefly and I say no more of it until later. Oral evidence was given by a number of witnesses. Kosmar called Ms. Souidhou, its customer relations and legal manager, Mr. Day, of Travel Protection Group Limited (“TPG”) its broker and Ms. Alliston, of the Travel Advice Centre (“TAC”) to whose claims handling role I shall come. Euclidian called Mr. Lumsden and Mr. Armstrong, both underwriters, though Mr. Armstrong also had some responsibility for claims handling. All the witnesses, from their respective vantage points, had experience of or of working with the travel industry and tour operators in particular. Save in one respect, to which I shall come in due course, where the evidence was unsatisfactory, all witnesses were doing their best to assist the Court. Indeed, it was a feature of this case that, notwithstanding the present dispute, the parties continue to do business with one another (or their successors). I commend, if I may, the realistic manner in which the hearing was conducted, without rancour, while recognising the issues which divided the parties; in this context, much credit must go to counsel, Mr. Eklund QC for Kosmar and Mr. Slade for Euclidian, to both of whom I was most grateful. THE FACTS 14. I turn to the facts. These are conveniently considered under the following “chapter” headings: i) Pre-contractual history; 15. 16. 17. ii) iii) iv) The meeting of 1st March, 2002; The treatment of other claims: 1st March, 2002 – 4th September, 2003; The events of 4th – 30th September, 2003. Pre-contractual history: The individuals who gave evidence were not new to one another when the policy was negotiated and agreed. Aside from a relatively brief period of absence, Ms. Souidhou has been employed by Kosmar since 1994. Since the mid-late 1990s, TPG (Mr. Day) has acted as Kosmar’s broker in respect of (inter alia) public liability insurance. Even then, Kosmar carried on a substantial business. In the years commencing December 1998 and December 1999, TPG placed Kosmar’s public liability insurance with the Independent Insurance Company (“Independent”), through a cover holder scheme operated by brokers Howson Devitts (“Devitts”). For at least some of the time when Kosmar’s public liability insurance was placed in this way, Mr. Lumsden and Mr. Armstrong were employed by Devitts – Mr. Lumsden solely on the underwriting side, Mr. Armstrong initially on claims but later succeeding Mr. Lumsden as underwriter. The Independent policy contained a clause (General Condition 6) in materially the same terms as the clause (i.e. General Condition 7) in the policy. However, on the evidence, there was no occasion on which, as between Kosmar and the Independent, a claim was rejected for failure to give immediate notice of an occurrence. Mr. Day said that he knew that clauses of this nature were contained in such policies but their terms were not “generally enforced”. Given the volume of such “occurrences” in the travel industry, especially with regard to tour operators of a substantial size, Mr. Day spoke of “the industry” turning a blind eye to provisions requiring immediate notification of incidents or occurrences (as distinct from claims). By “the industry”, Mr. Day, as I understood him, was referring to tour operators and insurers providing liability cover to tour operators. With respect to Mr. Day, he was not in a position to give evidence as to usage (strictly so called) – and Mr. Eklund made it plain that he did not contend for any such usage. That said, Mr. Armstrong agreed that while at Devitts, the provisions of General Condition 6 had not been enforced, at least in his dealings with Mr. Day (acting on behalf of Kosmar). Furthermore, on the evidence of both Mr. Day and Mr. Armstrong, there was a period in the Kosmar – Devitts/Independent relationship when claims handling was dealt with by Mr. Day bringing in a bundle of files and going through them with Mr. Armstrong. That was the first that Mr. Armstrong knew of claims and, for that matter, the underlying incidents. Mr. Armstrong regarded this as an acceptable procedure, even though at least a good number of the claims (and incidents) were not trivial. Pausing there, notwithstanding the evidence I have so far summarised, it was a feature of the evidence of both Mr. Lumsden and Mr. Armstrong, that, throughout, when challenged directly about the notification of incidents or occurrences, each was adamant that he did want to be notified. They maintained that their interest did not solely lie in the notification of claims; Mr. Lumsden, especially, stressed that he insisted on the inclusion of clauses such as the clause, so that he could consider instances of late notice of incidents on a case by case basis. As Mr. Lumsden explained it, regardless of the procedure in place for claims handling, he did not wish to be deprived of the opportunity of investigating an incident promptly (without waiting for any claim). The requirement to notify major incidents promptly was in any event good practice and something he (and Mr. Armstrong) expected substantial tour operators (such as Kosmar) to know. 18. 19. 20. For the year commencing December 2000, Kosmar’s liability cover was placed with the St. Paul Insurance Company (“St. Paul’s”). By this time, there was some dissatisfaction within Kosmar as to the claims handling procedures, involving as they then appear to have done, all of Kosmar, TAC, TPG and Devitts. It is unnecessary to take time with the details. Suffice to say that in the course of this (St. Paul’s) policy year, the procedures were streamlined, essentially by out-sourcing Kosmar’s claims handling to Ms. Alliston. For this purpose, Ms. Alliston was given authority by Devitts (still acting as cover holders) to decline liability on Kosmar’s behalf, without reference to insurers, if she thought Kosmar had sufficient grounds for doing so. In cases where Ms. Alliston denied liability, she was to forward her letter (doing so) and the file to TPG, for onward transmission to Devitts, within 6 weeks of doing so. I shall return in due course to the ramifications of these claims handling arrangements involving Ms. Alliston, together with their later evolution. Before leaving the St. Paul’s policy year, it may be noted that the St. Paul’s policy likewise contained provisions for the prompt notification of incidents. As already foreshadowed, for the year commencing December 2001, Kosmar’s liability cover was placed with Euclidian. Even before inception, it was made clear that Euclidian was content to honour the existing claims handling arrangements involving Ms. Alliston, described above. In late 2001, Kosmar had a turnover of approximately £80,000,000, providing essentially package holidays to about 250,000 passengers annually. In the event, probably initiated by Kosmar but with the willing agreement of Euclidian, a meeting was arranged and took place on the 1st March 2002. The meeting of 1st March, 2002 (“the 1st March meeting”): As is common ground, the meeting was attended by Ms. Souidhou, Ms. Alliston, Mr. Day, Mr. Lumsden and Mr. Armstrong. To the extent that it assists, the motivation for holding the meeting, included the following: i) ii) iii) iv) v) The individuals concerned had all worked together when the Kosmar cover was placed with Independent. It was time to reintroduce themselves. Kosmar, for obvious commercial reasons, was anxious to speed up the turnaround time in dealing with claims and, as did others, had an interest in streamlining the claims handling procedure. Further, at least on Kosmar’s part, there was a desire to improve its claims record, with a view to containing any increases in premium. In this regard, an arrangement with insurers whereby rejected claims were not sent to Euclidian had much to commend it. There was too, it would appear, an interest in identifying the system Kosmar had in place to obtain contemporaneous evidence of an incident. For that reason, perhaps amongst others, it appears that a variety of draft standard forms were considered at the meeting. The current dispute should not obscure the fact that Euclidian itself was eager for Kosmar’s business. If all occurrences, trivial or not, were notified, the result would be burdensome for Euclidian and would reflect itself in increased premium as a result of the need to process the information in question; such increases, might make Euclidean less competitive. Mr. Armstrong fairly accepted that such considerations were in his mind. Inevitably, not all the participants had all these objectives in mind; instead, they approached the meeting from their own or their company’s particular perspective. 21. The upshot of the 1st March meeting is best summarised in an e-mail of Mr. Day’s, of the 7th March, 2002, sent to a broking colleague; in so far as relevant, Mr. Day said this: “I am delighted to confirm that following the meeting….the following changes have been agreed.  All claims will be sent to Euclidian directly  TAC [i.e. Ms Alliston’s company] DO NOT need to send files to “Euclidian” if they deny liability…. We agreed Kosmar can deal direct with Euclidean on claims (which will have a positive effect on your department’s workload)….” 22. Accordingly, with regard to Ms. Alliston’s claims handling, in cases where she denied liability on behalf of Kosmar, the St. Paul’s requirement - that she forward her files to the brokers for onward transmission to insurers within 6 weeks – had gone. In such cases, therefore, those files would never be forwarded to “Euclidean”. As summarised by Mr. Day in evidence, Ms. Alliston’s authority had remained the same but the procedure for exercising it had been streamlined, in cases where liability was denied. 23. Whatever else may be in dispute, there can be no doubt at all that the foundation of Messrs. Lumsden’s and Armstrong’s agreement to these claims handling arrangements rested on their confidence in Ms. Alliston’s speed and ability in dealing with letters of complaint and claims. For her part, Ms. Alliston said in evidence that she treated personal injury claims as a priority and added that if she received a file with inadequate information, that might itself be a reason for immediately notifying insurers, rather than denying liability. The sense of Ms. Alliston’s evidence was that, in practice, she would deny liability in cases she regarded as clearcut and would promptly refer to “Euclidean” any others, where there was or might be liability on Kosmar’s part. 24. There were a number of noteworthy features as to the preparation for the 1st March meeting and the meeting itself: i) ii) iii) iv) v) There was no suggestion prior to the meeting of any intention to vary the terms of the policy. As to Ms. Souidhou, she prepared for the meeting without regard to the policy terms. For that matter, she said that she could not remember receiving the policy or reading it. Indeed, it was not, as she explained, until Euclidian first reserved its rights in connection with the Evans claim (in September 2003), that she came to learn of the clause and its provisions dealing with the notification of occurrences. No agenda was circulated before the meeting. Ms. Souidhou had her own “aide-memoire” but no more. No minutes were taken at the meeting or circulated afterwards. Discussion at the meeting was confined to complaints and claims; there was no mention of occurrences at all. 25. 26. 27. 28. vi) vii) To the extent that it was in dispute, I am satisfied that in the discussion of complaints and claims, neither Mr. Lumsden nor Mr. Armstrong differentiated between trivial and non-trivial claims. There was no discussion as to how the notice requirements of the clause were to be treated in the event that Ms. Alliston initially denied liability on the part of Kosmar but subsequently changed her mind. The treatment of other claims: 1st March, 2002 – 4th September, 2003: I was supplied with a helpful (essentially agreed) schedule (“the schedule”), which showed that between the 1st March meeting and the 4th September, 2003, at least 16 other claims had been notified by Kosmar to Euclidian, in circumstances where there had been, at least prima facie, a failure to comply with the provisions of the clause as to immediate notification of the occurrence. In none of these cases had Euclidian rejected the claim. On the material available to me, at least 4 of these claims (Giblin/Machin, Hall, Davies, Myatt) involved fractures of some sort and so, plainly, could not be described as trivial – although none, thankfully, even began to approach the catastrophic injuries sustained by Mr. Evans. Further, at least 3 other claims (Weatherburn, Killeen and Taylor) appear from the schedule to be non-trivial, though not involving fractures. As to these claims, the periods of time between Kosmar’s first knowledge of the incident and notification to Euclidian, range from (very approximately) some 2 to 5 months. In short summary, Mr. Armstrong explained Euclidian’s response to these (non- trivial) claims on the basis of a “practical and pragmatic” approach and also made the point that the claims were not anything like as substantial as the Evans claim. Mr. Armstrong confirmed that between the 1st March meeting and the 4th September, 2003, Euclidian had not rejected any Kosmar claims on the ground of late notification of the occurrence. The events of 4th – 30th September, 2003: On the 4th September, 2003, Ms. Souidhou received a letter, dated 14th August, 2003, from Hugh James Solicitors (“Hugh James”) indicating that a claim for damages was to be made by Mr. Evans against Kosmar. Ms. Souidhou said and I accept that that was the first she knew of the incident of the 22nd August, 2002 and the injuries to Mr. Evans. On the same day, as became common ground at the trial, Ms. Souidhou telephoned Mr. Armstrong, whom she regarded as “the claims department” or, at least, the right point of contact for dealing with claims. To save time, she had not contacted Ms. Alliston; her immediate reaction was to notify Euclidian of the claim as soon as possible. A copy of the Hugh James letter was sent to Euclidian on the same day. There was some debate as to what was said in the conversation between Ms. Souidhou and Mr. Armstrong; I doubt that it matters. It is likely that Mr. Armstrong, who was not surprised at having been Kosmar’s port of call, asked why it had taken so long to notify him and likely that Ms. Souidhou answered because she (herself or personally) had only just received the claim. It was at once apparent to Mr. Armstrong that this was a serious incident; it had happened in August 2002; it had first been notified to Euclidian in September 2003. On any view, enough was said in that conversation for Mr. Armstrong to realise immediately that there had been a breach of limb [1] of the clause. 29. On or about the 5th September, Kosmar sent to Euclidian copies of various reports completed by its local representatives on the day of the accident, together with other contemporaneous documentation. 30. On the 17th September, Ms. Souidhou e-mailed Mr. Armstrong, providing further information about the swimming pool and the (assumed) state of Mr. Evans’ knowledge of the depths. She also pointed out that alterations had now been made to the swimming pool “due to the owners wanting it bigger”. 31. On the same day, Mr. Armstrong e-mailed Ms. Souidhou, sending a copy to a junior colleague in Euclidian’s claims department, Ms. Kerry Rodgers. The e-mail said this: “ I have read through the file and have asked Kerry to write to you with my comments and requests for information. We have taken the view, given the possible size of the claim, not to deny liability yet and will await your reply to our various requests. I am of the opinion that whilst we should probably win this case I think that the claimant may want his day in court. There does not appear to be a CFA in place at present and therefore as a tactic once we have gathered our evidence if we disclose this this should paint such a picture that he has no hope of winning and he should then be unable to obtain insurance to cover his CFA and then he would be forced to withdraw his action. This is a very simple view and there are other aspects to consider but for now I hope that this assists.” In his evidence, Mr. Armstrong agreed that there had been no reservation of rights in this e-mail (a topic to which I return); he accepted too that the e-mail gave the appearance that Euclidian was dealing with the claim. I am satisfied, insofar as there was any doubt about it, that the reference to “we” and denying liability, was a reference to the combined position of Euclidian and Kosmar vis-à-vis Mr. Evans, rather than to the position as between Euclidian and Kosmar. 32. On the 19th September, Euclidian (Ms. Rogers) wrote directly to Hugh James asking them to “note our interest in this matter and ensure that all future correspondence is sent direct to us….”. This letter explained that Euclidian was making inquiries with its insured and would revert as soon as possible. With an eye to the provisions of the CPR, Euclidian indicated that it had six months to investigate and to provide its views on liability. The letter went on to address various documentary requests and concluded as follows: “ What is Mr. Evans current position? Please provide details of any special damages claim. Are you able to provide witness statements? We note that you [intend] to instruct a consultant to examine your client and prepare a report and we require a copy of the expert’s CV. Please also confirm your client’s DOB and NI number, in order that we may notify the CRU of his claim for injury, as is our statutory duty.” Mr. Armstrong accepted that at this stage, Euclidian was not reserving its rights and that the letter would have suggested to Hugh James that Euclidian was dealing with the claim on behalf of Kosmar. He accepted further that the letter would likely have conveyed the same impression to Kosmar, to whom it was copied on the 22 nd September. He agreed that as at the 22nd September, it would have been clear to the Euclidian claims department – as it was to him – that Kosmar had not complied with the provisions of the clause as to the immediate notification of occurrences. 33. 34. Reverting to the 19th September, on that day Ms. Rogers had written Ms. Souidhou, asking some 25 questions as to Mr. Evans and his claim. The letter was based on notes prepared by Mr. Armstrong. He accepted that it would likely have given the impression that Euclidian was dealing with the claim. The letter concluded by stating that Ms. Rogers had written to Hugh James “noting o[u]r interest” and that she awaited hearing from them. On the 4th September, 2003, Hugh James had also written to the owner of the Marina Beach Apartments seeking access to the swimming pool to take photographs and measurements. On the 22nd September, Euclidian (Ms. Rogers) e-mailed Kosmar advising that it did not see the point of Hugh James going to see the swimming pool as it had been refurbished. The e-mail continued: “ We would suggest that the hotel writes back to the solicitors stating they have no objection to them having access to the pool, however they would advise them that the whole hotel including the pool have been re-furbished. The hotel should also mention that a copy of the solicitor’s correspondence has been sent to Kosmar.” On the same day, Ms. Souidhou responded to Euclidian, asking whether it was possible for Euclidian to write to Hugh James about the pool being refurbished. In reply, Ms. Rogers said this: “Although it is not good practice for us to do this as the letter as addressed to the hotel we are willing to do so if the hotel are not happy to correspond direct with the solicitors.” 35. Still on the 22nd September, Euclidian duly wrote to Hugh James, copying the letter to Kosmar; the letter read as follows: “ Your Client: Mr. James Evans Our Insured: Kosmar We refer to the above matter and to our correspondence of 19 th September 03. As you are aware we are the liability insurers of the above named tour operator. We have recently been passed by our Insured your letter of 4th September 03 addressed to the Marina Beach Hotel. They have asked that we reply to this letter on their behalf. The hotel have no objection to you having access to the pool to conduct your own investigations, however we would advise that the hotel including the swimming pool have been re- furbished since your client’s accident.” 36. 37. Subsequent internal Kosmar communications, dated 24th September, 2003, showed that Kosmar was in the process of compiling the answers to the 25 questions posed in Euclidian’s letter of 19th September. Pausing there, Mr. Armstrong agreed that at this point in time and up until the 30th September, Euclidian’s treatment of the Evans claim was consistent with it not requiring notification of the underlying incident – in the same manner as it had dealt with other claims in the schedule. As of (say) the 29th September, it would, he said, have been a “fair assumption” that Euclidian was not concerned with late notification of the occurrence. 38. On the 30th September, however, Mr. Armstrong sent the following e-mail to Ms. Souidhou, for the first time reserving Euclidian’s rights in the matter. “With reference to the above claim as you are aware it is a condition precedent to the acceptance of liability you must notify us of any letter of claim, writ etc. Obviously, you complied with this condition but you are also obliged to notify us of any occurrence of injury. Given the nature of this injury I will require from you a brief statement confirming why this was not raised previously. Whilst we shall continue to deal with this matter we must reserve our position until such time as you have replied and we have had the opportunity to consider your comments.” 39. On the 2nd October, 2003, Ms. Souidhou replied to Euclidian. In her evidence, she said that, on the basis of legal advice, she did not go into detail. Her reply read as follows: “…please be advised that it is impractical to notify yourselves of each and every injury that occurs, however if it is apparent that an injury could give rise to a claim we would do so. It was apparent at the time from the information gathered that our client was under the influence of alcohol, therefore was the author of his own misfortune. Furthermore as soon as we were aware we had a claim we notified you.” 40. On the 21st October, 2003 (“the 21st October letter”), Hill Dickinson, the then solicitors for Euclidian wrote to Kosmar, underlining that the incident and the injury had occurred on the 22nd August, 2002; that Kosmar had become aware of it at about the same time; that about 12 months had elapsed between the date of the incident and the first notification to Euclidian. Placing reliance on the clause, Hill Dickinson went on to say this: “There is an obligation upon you to notify insurers immediately after the occurrence of any injury. The injury occurred on 22 August. It should have been reported immediately. An expiry of 12 months does not fall within that definition and we therefore advise that you are in breach of the condition precedent. Furthermore, you are also in breach of that condition precedent because we understand that the pool area has now been modified or altered. Insurers are therefore unable to inspect the location as it appeared at the time of loss and Insurers have been prejudiced as a result. In the event that you contend that you were only aware of this claim following receipt of the letter from Hugh James solicitors, we refer you again to the policy wording. The obligation is to notify immediately any occurrence of any injury. Once that has been complied with, there is then an additional duty to notify insurers of any oral or written intention to make a claim arising out of an act of negligence. That has to be dealt with as soon as reasonably practicable. Due to the fact that you have not notified the injury immediately, that second duty of notifying a claim does not trigger because you are already in breach of the condition precedent. We regret to advise that insurers are left with no option but to repudiate the claim under the policy. Policy cover does remain in force and the premium will be retained. For the avoidance of any doubt, we confirm that in the event of any liability for damages and costs against you arising out of this incident, that is not covered by Insurers due to the breach of the condition precedent to liability.” 41. 42. 43. In essence, Euclidian’s position has remained unchanged since the 21st October letter. For completeness, as already noted, the parties have continued to do business with one another – though, subsequent to October 2003, on the basis of Kosmar using a spreadsheet to give daily notifications of occurrences. Two matters remain to be considered in this factual summary. The first is as to why Kosmar did not notify Euclidian promptly of the occurrence (in which Mr. Evans was injured). In her evidence, Ms. Souidhou maintained that Kosmar’s resort representatives had notified Kosmar’s Overseas Department (“OD”) in London. The OD did not at that time react to accidents but only to claims, at least unless there was a continuing problem – such as an outbreak of Legionnaires’ Disease. It was not for the OD to notify insurers when an incident had been reported; that was for Ms. Souidhou to do or consider doing, once she had been advised of an incident. In connection with the Evans claim, Ms. Souidhou was adamant that the OD took the view that given the (alleged) involvement of alcohol, it was up to Mr. Evans to make a claim and there was no reason to think of telling Ms. Souidhou. I regret to say that in this respect I did not find Ms. Souidhou’s evidence credible; I fear she maintained it out of a misguided sense of loyalty to Kosmar or her colleagues. Given the position held by Ms. Souidhou within Kosmar, I find it difficult to accept that had the OD in London been informed of so serious an accident, she would not have been promptly informed. At all events, I do not accept that the OD did not do so because of confidence in resisting liability. To have informed Ms. Souidhou promptly would have been the obvious thing to do; it would have been bold and foolhardy simply to have awaited the bringing of any claim. By contrast, the general approach correctly adopted by both Ms. Souidhou and Ms. Alliston was to notify insurers unless confident that liability could be denied. In a matter of this magnitude, no such confidence could sensibly have existed; it would have been obvious good practice to have notified Euclidian. It is noteworthy that both Ms. Souidhou and Ms. Alliston made it clear that they would have notified Euclidian immediately on learning of this occurrence – as indeed Ms. Souidhou did on the 4 th September, 2003. Quite why there was a breakdown in communications, so that this matter did not come to Ms. Souidhou’s attention for a little over 12 months, did not emerge at trial and I make no finding in that regard. It may be that this failing was not unconnected with the unsatisfactory evidence given by the Kosmar employees at the trial before HHJ Thorn QC but it would be too speculative to come to any such conclusion. For the avoidance of doubt, I should reiterate that I accepted Ms. Souidhou’s evidence that she personally had not been apprised of the incident and the injuries to Mr. Evans until the 4th September, 2003. Accordingly, in my judgment, 44. there had been some, unexplained, failure within Kosmar to bring this matter to Ms. Souidhou’s attention before then. The second matter goes to Euclidian not reserving its rights before the 30th September, 2003, some 26 days after being notified of the Evans claim. On the evidence, Mr. Lumsden was not involved with claims handling and hence with this decision. The only witness who could deal with it was Mr. Armstrong. As already foreshadowed, he made it clear that he knew immediately (i.e., on the 4 th September, 2003) that Euclidian could reject the claim; he said, however, that he (personally) could not do so; he was an underwriter at the time; a Mr. Holmes was in charge of the claims department. For Euclidian to reserve its rights, a directive from Mr. Holmes was required. Mr. Armstrong, for his part, made no recommendation that Euclidian’s rights should be reserved. His first instinct was to assist his insured (Kosmar); he said that he liked to consider his insured’s position and was against knee jerk reactions. There was no doubt that Mr. Armstrong was in close contact with the claims department throughout this time – as is apparent from the involvement of Ms. Rogers in the correspondence and communications set out above. Mr. Armstrong’s evidence left unexplained which individual(s) had taken the decision to reserve Euclidian’s rights on the 30th September and what had caused Euclidian then to do so. Neither Mr. Holmes nor any employee from the claims department was called by Euclidian to give evidence. It may be that this somewhat curious state of the evidence is attributable to there having been some unease within Euclidian as to whether to reject the claim or not – possibly reflecting a division of opinion between those more concerned with the bottom line and those more involved with the relationship with Kosmar. Again, that is all too speculative to permit of any firm conclusion. I approach the matter therefore on the basis that Euclidian had all the information it needed to reserve its rights from the time of the first telephone conversation between Ms. Souidhou and Mr. Armstrong on the 4th September, 2003 but that it did not in fact do so until the 30th September, 2003. DISCUSSION 45. 46. In considering the rival arguments it is convenient to follow the same chapter headings used when summarising the facts, save that the pre-contractual history is best considered together with the 1st March meeting. (I) The pre-contractual history and the 1st March meeting: The pre-contractual history formed the starting point for Mr. Eklund’s arguments on various forms of estoppel and election. Beginning with estoppel by convention and relying on Amalgamated Property Co. v Texas Bank [1982] 1 QB 84 and The “Vistafjord” [1988] 2 Lloyd’s Rep. 343, he submitted that the parties came to the 1st March meeting with the common or agreed assumption that the clause would not be enforced insofar as it required the immediate notification of occurrences; alternatively, arising from the previous dealings of the relevant individuals (summarised earlier) there was a representation broadly to like effect, so giving rise to a promissory estoppel or an estoppel by representation or an election. Even if the pre-contractual history did not, by itself, suffice for Kosmar to succeed, it formed the background against which to consider the scope of the discussions at the 1st March meeting. The fact that the notification of occurrences was not discussed at that meeting was because there was no need to discuss such notification. Moreover, it followed from the claims handling arrangements involving Ms. Alliston, that Euclidian could hardly be interested in the notification of occurrences. The working assumption, reflecting industry reality, was that underwriters were interested in the notification of claims not occurrences. The 12 month delay in notification of the occurrence was neither here nor there, given the procedure agreed with Ms. Alliston; Euclidian received notification of the claim as 47. 48. 49. 50. was to be expected. It was unconscionable for Euclidian now to call for strict compliance with the clause and no less unconscionable because the Evans claim had not been dealt with by Ms. Alliston; it had been a “trap” for Kosmar. For his part, Mr. Slade submitted that the history of dealings with different entities should be cleared away. It was of no assistance with regard to the policy, containing the clause as it did. There was no suggestion of any prior usage or trade custom. The past did not give any indication as to the future. In this regard, Mr. Slade relied on the authority of London and Manchester Plate Glass Company Limited v Heath [1913] 3 KB 411 (“the Suffragettes case”). In the Suffragettes case, the fact that the defendant had previously paid under another policy in the same words under similar circumstances did not estop him from raising the defence that the damage was not caused by civil commotion or rioting. There was no common assumption, still less justifiable common assumption, that prompt notification of occurrences was not required. The 1st March meeting was not designed to replace any conditions of the policy or to vary the clause. At the end of the meeting, there was no consensus that the clause or any part of it had been supplanted; the meeting had not dealt with the notification of occurrences at all. Euclidian had no duty to speak as to any difficulties which might occur. Although the meeting was considering Kosmar’s information gathering procedure, its scope was not all-encompassing; Ms. Alliston’s role did not displace limb [1] of the clause. The outcome of the meeting was as summarised in Mr. Day’s e-mail of the 7th March, 2002 (set out above); there was no longer a need for Ms. Alliston to notify Euclidian in respect of rejected claims. This outcome related only to Ms. Alliston’s specific role and to claims rejected by her; it had no bearing on the present case. I agree with Mr. Slade. I do not think there was an estoppel of any description or any election arising out of either the pre-contractual history or the 1st March meeting or the two considered together. My reasons follow. I start with the policy. It contained the clause, including the requirements of limb [1]. Those requirements are applicable unless Kosmar can justify displacing them. In a commercial transaction, freely entered into, Kosmar agreed to the policy containing that clause. Euclidian owed no duty to Kosmar to speak or to warn of the requirements of limb [1] of the clause. That would be to stand contractual dealings on their head. It was for Kosmar to inform itself, by whatever means it chose, what it was to which it had agreed. On the evidence, already summarised, the pre-contractual history does not take Kosmar far and certainly not nearly far enough for its purposes. It will be recollected that, rightly, no argument of trade usage was advanced. In my judgment, the furthest this history goes is that there had not been an instance when contractual provisions similar to the clause had been enforced, between Kosmar and different insurers, so as far as concerned the immediate notification of occurrences. Moreover, even if (absent any suggestion of a trade usage) Mr. Day could be heard to say that such contractual provisions were not “generally” enforced, that would not go far enough for Kosmar’s purposes. In the light of the fact that the (new) policy contained the clause, that history does not materially assist. While I do not think that the Suffragettes case is authority for any rule of law to the effect that dealings in respect of one contract cannot give rise to an estoppel in relation to another, it does highlight the difficulty of making good any such plea. Plainly, the history here, by itself, could not support an estoppel concerning the policy. Furthermore, absent a trade custom or usage, the mere fact that in other contracts, between different parties, there had not been an instance when prompt notification of occurrences had been insisted upon, appears to 51. 52. me to add but little to the relevant background when considering the 1st March meeting. I turn next to the 1st March meeting itself. It must be inherently improbable that a meeting held without any prior expressed intention of varying the policy terms and prepared for by a principal protagonist (Ms. Souidhou) without regard to or knowledge of those terms, could somehow come to preclude reliance on a term of that policy. It must be at least equally improbable that a meeting in which there was no discussion whatever of the notification of occurrences could produce the outcome contended for by Kosmar. Such considerations are reinforced by the absence of any agenda or minutes. To my mind, if Kosmar is to overcome such hurdles, critical reliance must be placed on the pre-contractual history; it would indeed be necessary to contend – as Mr. Eklund did – that there was no discussion of the notification of occurrences because of the agreed assumption that such notification was unnecessary; but that, for the reasons already indicated, is to place an unsustainable weight on such evidence as there is as to pre-contractual dealings. These intuitive misgivings are not in any sense put to rest when I turn to the oral evidence of the witnesses, so as to consider what light that might shed on any suggested agreed assumption. As already indicated, Messrs. Lumsden and Armstrong were adamant as to their wish for prompt notification of occurrences. Such subjective evidence cannot by itself be conclusive but it was supported by the cogent and logical reason they did not wish to be deprived of the opportunity of investigating an incident promptly, without waiting for notification of any claim. I accept that evidence and, on that ground alone, would be minded to conclude that there was no agreed assumption necessary for any estoppel by convention. Matters do not end there. I do not think that Ms. Souidhou’s evidence supports the case of an agreed assumption; quite simply, she did not at the time know what terms were contained in the policy. Additionally, Ms. Souidhou’s conduct as to an unrelated incident in Zante, pointed to her appreciation of, at least, the desirability of prompt notification to Euclidian. As already remarked, I have no doubt whatever that had Ms. Souidhou been informed in August 2002 of the incident concerning Mr. Evans, she would at once have notified Euclidian. It was obviously good practice to do so. All that remains is Mr. Day, whose evidence I have already summarised. Even assuming (without deciding) that Mr. Day’s assumptions could be taken as representing Kosmar’s assumptions, if, on the basis of his evidence, Mr. Day assumed that the clause in the policy could be ignored, then that was not an assumption that he could properly have made. If he was minded to proceed on the basis that limb [1] of the clause could be ignored, then, at the very least, he should have advised Kosmar as to the presence of the clause in the policy or raised the matter with Euclidian to ascertain its stance. 53. As it seems to me therefore, there was no common assumption necessary to found an estoppel by convention. If the matter is analysed in terms of any other estoppel requiring a representation, then I can discern none made by Euclidian at the 1 st March meeting, capable of giving rise to any such estoppel. It is therefore unnecessary to take time considering the other elements of all these estoppels. For the same reason, namely the want of any representation, any argument of election based on the 1 st March meeting must fail – so rendering it unnecessary at this stage to consider whether there is room for an election in circumstances where has been a breach of a condition precedent to liability; that, however, is a matter to which I shall have to return when addressing the events of the 4th – 30th September, 2003. 54. Before leaving the 1st March meeting, I must deal with the claims handling arrangements involving Ms. Alliston. I confess that, at first blush, I did wonder whether these arrangements served to displace the obligation on Kosmar to notify Euclidian immediately of any occurrence within the clause. On reflection, I was persuaded that they did not. i) ii) iii) Regardless of any arrangements for the handling of claims, there was great force in Mr. Lumsden’s evidence that he nonetheless wished to maintain his right to insist on compliance with limb [1] of the clause. An insurer might well wish to know of an incident immediately, so as to investigate it promptly, without waiting for a claim. The fact that Mr. Lumsden was content for Ms. Alliston to deal with claims, did not, therefore, as a matter of logic, make a nonsense of limb [1] of the clause. As to the argument that the agreed claims handling arrangements rendered such logic of theoretical interest only, I do not think that they did. In practical terms, all concerned at the 1st March meeting anticipated that Ms. Alliston would deal with personal injury matters as a matter of priority and would only deny liability in clearcut cases. Having heard the evidence in this trial, I do not think that any of the principal participants for a moment anticipated that a major incident or occurrence would be neither dealt with by Ms. Alliston nor immediately notified to Euclidian. The reality of course was that had either Ms. Souidhou or Ms. Alliston received the file here, Euclidian would have been notified at once. There was some discussion at trial as to the position which would have arisen had Ms. Alliston dealt with a letter of complaint or claim by initially denying liability on the part of Kosmar and then subsequently changed her mind. In such circumstances, Euclidian might not have been informed of the occurrence until a considerable period of time had elapsed. It is unnecessary to express any final view but my strong inclination is that in those circumstances, Euclidian would have faced an uphill task in seeking to rely on any failure to comply with either limb [1] or limb [2] of the clause; the alternative would, not least, leave Ms. Alliston potentially exposed. That, however, is not this case. Here, as I have already concluded, there was an unexplained and unfortunate internal failure on the part of Kosmar to bring the occurrence to the attention of Ms. Souidhou; that failure had nothing whatever to do with the claims handling arrangements involving Ms. Alliston. 55. 56. 57. It follows that nothing in the 1st March meeting, even considered together with the pre-contractual history, precludes Euclidian, in law, from relying on limb [1] of the clause. Neither that meeting nor the history will bear the weight which Kosmar is driven to seek to place on them. The attractiveness of Euclidian’s decision to take the point is not a matter for me; but, in fairness to insurers, Kosmar’s own spectacular failure to deal properly with this occurrence for over a year was itself unattractive. (II) The treatment of other claims: 1st March, 2002 – 4th September, 2003: I can, in the event, take this chapter very briefly. Mr. Eklund submitted that Euclidian’s conduct in dealing with the claims in the schedule was such as to estop it from rejecting the Evans claim or to show an election that it would not enforce the provisions of the clause. Mr. Slade argued that Euclidian’s treatment of the claims in the schedule gave rise neither to an estoppel nor an election. To my mind it matters little whether the argument here is couched in terms of an estoppel by convention or an estoppel by representation; however formulated, Kosmar needs to establish a common assumption or representation (broadly) to the effect that by reason of paying the claims in the schedule, when it came to the Evans claim, Euclidian was precluded from relying on Kosmar’s failure to comply with limb [1] of the clause. In the event, I have not been persuaded that any such assumption or representation has been made good, so that once again it is unnecessary to spend time on the other ingredients of the estoppels in question. For like reasons, even if otherwise assumed to be sustainable, no argument on election could succeed. 58. In a nutshell: i) ii) iii) Mr. Slade was right, in my judgment, to say that Euclidian’s acceptance of the claims in the schedule, notwithstanding non-compliance with the clause, showed no more than that insurers were taking a case by case approach. What Euclidian’s conduct did not demonstrate, was that in all cases in the future, limb [1] of the clause could be ignored. There was simply no common assumption or representation to that effect. In this regard, I accept Mr. Armstrong’s evidence that the explanation for Euclidian’s conduct lies in having taken a “practical and pragmatic” approach to the claims in the schedule. The likely size of the Evans claim was noteworthy, by contrast with the other claims in the schedule, even those which were “non-trivial”; so too was the extent of the delay, before Euclidian was notified. These are not considerations which it is improper for insurers to take into account, unless of course a case has been made good that they are precluded from doing so. For completeness, I was not dissuaded from these conclusions by Mr. Armstrong’s perhaps generous answers in cross-examination as to what he – subjectively – thought Mr. Day might reasonably have assumed as to whether Euclidian would enforce the requirements of limb [1] of the clause. Even assuming the relevance of such answers, they are outweighed by an objective consideration of the material in question; the mere fact that some claims are paid notwithstanding non-compliance with the clause, does not show that Euclidian was giving Kosmar carte blanche for the future. 59. 60. 61. It follows that subject only to the events of September 2003, after Euclidian was notified by Kosmar of the Evans claim, there is nothing, in my judgment, to preclude Euclidian from relying on Kosmar’s failure to comply with limb [1] of the clause. (III) The events of 4th – 30th September, 2003: Given the view I take of the matter, it is convenient to start with the argument as to waiver by election (“election”). For present purposes, as expressed by Lord Goff of Chieveley in The Kanchenjunga [1990] 1 Lloyd’s Rep. 391, at p.398, election may arise in the context of a binding contract: “…when a state of affairs comes into existence in which one party becomes entitled….to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election.” So, faced with a choice between alternative and mutually exclusive courses of action, when the party in question speaks or acts in a manner consistent only with his having chosen one of them (for instance, whether or not to exercise a right) and communicates his choice unequivocally to the other party, the law will hold him to his election. Reliance by the other party is irrelevant. However, it is a requirement of election that the party in question must (or at least must generally) have made an informed choice, with knowledge of the facts giving rise to the right and, probably, knowledge of the right to choose. So much is clear from the authorities, including Peyman v Lanjani [1985] 1 Ch 457, esp. per Slade LJ at p.500; The Uhenbels [1986] 2 Lloyd’s Rep. 294, esp. at p.296 and The Kanchenjunga (supra), at pp. 397-400. More recently, in ICCI v Royal Hotel [1998] Lloyd’s Rep IR 151, Mance J (as he then was) summarised the relevant principles as follows (at p.161): “…the type of affirmation [or election, as he had already made clear] here in issue involves an informed choice (to treat the contract as continuing) made with knowledge of the facts giving rise to the right to avoid it. Provided that the party knows sufficient of the facts to know that he has that right, it is unnecessary that he should know all aspects or incidents of those facts….the party must generally also know that he has that right. The making of his choice must be communicated unequivocally to the other party before there can be a binding affirmation. ” Thus far there was no or no serious dispute between the parties in the present case but here the common ground ended. 62. Mr. Eklund submitted that this was indeed a case of election; faced with the choice of accepting or rejecting the Evans claim, Euclidian had elected to accept it, before purporting to reserve its rights on the 30th September, 2003. There was no doubt that Euclidian had knowledge of the relevant facts; following the initial telephone conversation between Ms Souidhou and Mr. Armstrong on the 4 th September, Euclidian knew all it needed to know; thereafter, it had no need to investigate either the facts or the contractual position. Accordingly, by the 17th, 19th or 22nd September when Euclidian sent the e-mails or letters already set out, it had had a reasonable time within which to decide on its stance in respect of the Evans claim. The Euclidian communications of the 17th, 19th and 22nd September were all inconsistent with rejecting Kosmar’s claim for the indemnity in respect of the Evans claim or even reserving its rights while considering it. Reliance was irrelevant. 63. Mr. Slade’s submissions proceeded as follows. i) ii) iii) Where an insured has failed to satisfy a condition precedent to cover or liability, an insurer is automatically absolved from any liability for a claim and has no choice to make. There is, accordingly, no scope for waiver by election. See: HIH v Axa [2002] EWCA Civ 1253; [2003] Lloyd’s Rep IR 1; Forrest v CGU Insurance [2006] Lloyd’s Rep IR 113. If there was scope for waiver by election, it was a requirement that any such election be unequivocally communicated. Either the communication itself or the surrounding circumstances, must demonstrate the making of an informed choice in clear and unequivocal terms: ICCI v Royal Hotel (supra). Here, although it was admitted that the communications of the 17 th, 19th and 22nd September were consistent with Euclidian dealing with the Evans claim, they showed no more than that the Evans claim was being handled in the ordinary way; there was no clear and unequivocal communication of the making of an informed choice. Even if wrong so far, Euclidian had been entitled to a reasonable time to decide what to do. There was no explanation from Ms Souidhou until the 2nd October as to why she had not been informed of the occurrence sooner. In any event, a reservation of rights on the 30th September was within the reasonable period available to Euclidian for considering its position. 64. 65. 66. 67. 68. 69. 70. It is convenient to consider the argument as to election under the headings and in the order adopted by Mr. Slade. Scope for election: In my judgment and with respect to Mr. Slade’s argument to the contrary, there is scope for election here. My reasons follow. I readily accept that where, in a contract of insurance or reinsurance, there is a breach of a promissory warranty, as a matter of settled law, an insurer is automatically discharged from liability and has no choice to make; hence there is no room for any election: HIH v Axa, at [7]. The seminal modern authority in this regard is the decision of the House of Lords in Bank of Nova Scotia v Hellenic Mutual Ltd. (The Good Luck) [1992] 1 AC 233. Having regard to the wording of ss. 33 and 34 of the Marine Insurance Act 1906, Lord Goff explained (at p.262) that, in the case of a promissory warranty, an insurer is discharged from liability, as from the date of the breach of warranty; such discharge was automatic. Lord Goff continued as follows: (at pp. 262-3): “ …if a promissory warranty is not complied with, the insurer is discharged from liability as from the date of the breach of warranty, for the simple reason that fulfilment of the warranty is a condition precedent to the liability of the insurer. This moreover reflects the fact that the rationale of warranties in insurance law is that the insurer only accepts the risk provided that the warranty is fulfilled…. In the case of conditions precedent, the word ‘condition’ is being used in its classical sense in English law, under which the coming into existence of (for example) an obligation, or the duty or further duty to perform an obligation, is dependent upon the fulfilment of the specified condition. Here, where we are concerned with a promissory warranty, i.e. a promissory condition precedent, contained in an existing contract of insurance, non-fulfilment of the condition does not prevent the contract from coming into existence. What it does (as section 33(3) makes plain) is to discharge the insurer from liability as from the date of the breach….” By this authority I am of course bound. But, with respect, I am not at all persuaded that this compelling analysis as to the consequences of breach of a promissory warranty applies – still less is to be extended – to non-performance of obligations relating to the procedure for making claims, contained in a condition precedent such as the clause in this case. First, in the case of breach of a promissory warranty, cover as a whole ceases to be applicable. By contrast, in the event of Kosmar’s failure to comply with either limb of the clause, there is no question of Euclidian being discharged from liability under the policy as a whole. To the contrary, the policy as a whole is unaffected; Kosmar’s failure impacts and only impacts on the claim in question. Accordingly, the position with regard to breach of promissory warranties is distinguishable from that which arises in the event of non-compliance with either limb of the clause. Secondly, nothing in the wording of the clause requires the conclusion that, by reason of Kosmar’s failure to comply with either limb of the clause, Euclidian is “automatically discharged” from liability in respect of the particular claim. That fulfilment of a promissory warranty is a “condition precedent” to the insurer’s liability does not mean that the clause is a “condition precedent” in the same sense. The 71. 72. rationale of the rule relating to warranties (as explained in The Good Luck, supra) is not applicable here. The natural expression of the consequence of a failure on the part of Kosmar to comply with either limb of the clause is not that Euclidian is discharged from liability but that its duty to pay a claim (for which it otherwise would or might be liable under the policy) has not arisen; Kosmar has failed to satisfy a threshold procedural requirement. There is no reason why in such circumstances Euclidian should be other than free to choose whether to reject the claim or to accept it, notwithstanding Kosmar’s failure. There is nothing automatic about this. If so, there is room for the doctrine of election. For completeness, the clause remains of obvious value to Euclidian, not least in that as a condition precedent, Euclidian can rely on it, without needing to show prejudice flowing from Kosmar’s failure: Pioneer Concrete v National Employers [1985] 1 Lloyd’s Rep. 274, at pp. 279-281. Thirdly, I am unable to accept that authority requires me to conclude that there is no scope for election here. No textbook writing has been shown to me supporting Mr. Slade’s proposition; so far as I have seen extracts from both McGillivray on Insurance Law (10th ed.) and Clarke on The Law of Insurance Contracts (4th ed.), if anything, they go the other way. Both The Good Luck and HIH v Axa were cases dealing with breach of promissory warranties. Strikingly, in Diab v Regent Insurance (Belize) [2006] UKPC 29; [2006] 1 Lloyd’s Rep IR 779, esp. at [14] and [25], the Privy Council, while holding that no election had been made good on the facts, clearly contemplated that there was scope for election in a case concerning non-compliance with a procedural condition precedent dealing with the giving of notice on the happening of any loss and damage. I have not, in all this, overlooked the decision of HHJ Kershaw QC in Forrest v CGU Insurance (supra), relied on by Mr. Slade. In that case, Condition 3(b) of the policy provided in terms that the policy “shall be avoided with respect to any part thereof in regard to which there may be any alteration after the commencement of this insurance…(b) whereby the risk of loss, destruction, damage, accident or injury is increased…”. That was a case of a fire and business interruption policy; the assured operated an oven in the course of its business; the oven was defective and taken out of operation; thereafter it was put back into service and caused a fire. Insurers denied liability, relying, inter alia, on Condition 3(b). The claim was dismissed on a number of grounds. Ironically, in that case it was Mr. Eklund who submitted that, given a breach of Condition 3(b), there was no room for waiver by election because the cover was discharged automatically. Counsel for the assured accepted the correctness of that proposition, so the point does not appear to have been argued. I say nothing to call into question the correctness of the outcome in that case. Further, as it seems to me, that case is readily distinguishable from this; Condition 3(b) was a very different clause from the clause here, both in terms of its wording and its subject-matter; it had, for instance, nothing to do with the procedure for making claims and expressly legislated for avoidance of the policy. But if it be suggested that the decision of HHJ Kershaw in this respect is applicable here and requires the conclusion that there is no scope for election, then I would respectfully decline to follow it, for the reasons I have already sought to give. 73. Fourthly, for completeness though I do not rest my decision upon it, Euclidian’s own case by case approach to the other claims in the schedule goes some way to belying the notion that there is no room for election in this context. It would be artificial to require an analysis of Euclidian’s past conduct in terms of an agreed reinstatement of cover; the natural formulation of that conduct is in terms of election – albeit an election confined to the claim in question. 74. 75. Accordingly, I conclude that Kosmar’s failure to comply with limb [1] of the clause did not automatically discharge Euclidian from liability to accept the claim; there is room for the doctrine of election here. It is not necessary to require an analysis in terms of estoppel. Unequivocal communication: I turn to the communications, already set out, from Euclidian to Kosmar and Hugh James, of the 17th, 19th and 22nd September (“the September communications”). It will be recollected that the September communications followed the telephone conversation on the 4th September between Ms. Souidhou and Mr. Armstrong. These communications were therefore dispatched in the context of Mr. Armstrong’s awareness that Kosmar had not complied with limb [1] of the clause and, as was apparent throughout and never in dispute, his and Euclidian’s awareness that such non-compliance entitled Euclidian to decline the Evans claim. Nonetheless, the September communications dealt with the proposed joint Euclidian – Kosmar tactics in any dispute with Mr. Evans; they noted Euclidian’s continuing interest in the matter; they sought further information from Kosmar; they contained no reservation of rights. 76. Mr. Slade fairly conceded that the September communications were consistent with Euclidian dealing with the Evans claim; no other interpretation was indeed tenable. For that matter, I regard these communications as only consistent with Euclidian dealing with the Evans claim. But I can see no basis on which Euclidian would be dealing with the Evans claim unless it had chosen to accept liability in respect of it under the policy; the communications make no sense otherwise. If so, then, on the face of it (subject to the question of whether a reasonable time had elapsed, dealt with below), the September communications constitute, disclose and communicate an election to accept liability for the Evans claim – at least unless accompanied by a reservation of rights, which, as was common ground, those communications did not contain. See, in this regard, the analysis of Rix J (as he then was) in Svenska v Sun Alliance [1996] 1 Lloyd’s Rep. 519, esp. at pp. 567-569, together with the authorities there cited. 77. Mr. Slade, however, sought to resist this conclusion. For this submission, he placed reliance on the judgment of Mance J in ICCI v Royal Hotel (supra), at pp. 162-3. In this passage in his judgment, Mance J considered the requirement of an “unequivocal communication to the other party of the making of the choice”. Where the circumstances justified an avoidance and the choice was to avoid, as Mance J observed, the requirement of an unequivocal communication did not give rise to difficulty; the claim to avoid demonstrated “at one and the same time awareness of the choice and its making”. Mance J then continued as follows: “Where it is said that there has been an election to affirm rather than to avoid, the position is more problematic. Is it sufficient for affirmation that there is knowledge and a communication… which, assuming such knowledge, demonstrates an unequivocal choice? Or must the communication itself or the surrounding circumstances demonstrate such knowledge to the other party? In principle, it seems to me that the latter approach is correct in the context of affirmation. The communication itself or the circumstances must demonstrate objectively or unequivocally that the party affirming is making an informed choice….. Whether conduct amounts to an unequivocal communication of a choice to affirm requires therefore, an objective assessment of the impact of the relevant conduct on a reasonable person in the position of the other party to the contract. A reasonable person in that position must….be treated as having a general understanding of the possibility of choice between affirmation and objection. In affirmation (as distinct from estoppel), the actual state of mind of the other party is not the test. Affirmation depends on the objective manifestation of a choice.” 78. 79. 80. 81. 82. Building on these passages, Mr. Slade advanced the submission already recorded, namely, that Euclidian had not demonstrated unequivocally that it was making an informed choice; it was doing no more than dealing with the Evans claim in the ordinary way. With respect, I am unable to accept this submission. First, for my part, I entertain no real doubt that the September communications, a fortiori in context, demonstrate objectively or unequivocally the making of an informed choice by Euclidian to deal with the Evans claim, notwithstanding Kosmar’s failure to comply with limb [1] of the clause. Having regard to the background of the 4th September telephone conversation (Souidhou – Armstrong), the September communications are otherwise inexplicable. There was no reason to lengthen the September communications so as to state the obvious in this regard. I am amply satisfied that the September communications would have objectively and unequivocally conveyed to a reasonable person in the position of the recipients (Kosmar and Hugh James), that Euclidian had made an informed choice to deal with the Evans claim on behalf of Kosmar. For his part, as noted earlier, Mr. Armstrong readily accepted in his evidence that it was likely that both Kosmar and Hugh James would have formed such an impression. Those answers cannot be decisive, both because it is not Kosmar’s or Hugh James’s subjective impression which matters and because I have some difficulty in seeing how Mr. Armstrong could speak to their subjective impressions. But Mr. Armstrong’s evidence does fortify me in the view to which I have come as to the objective impact of the September communications. Secondly, insofar as Mr. Slade sought to contrast (i) the unequivocal making of an informed choice by Euclidian with (ii) its dealing with the Evans claim in the ordinary way, I cannot agree. If, by this, Mr. Slade had in mind claims handling in general, then the argument founders on the conclusion to which I have already come; the September communications crossed the line and gave rise to an election. If, alternatively, Mr. Slade was alluding to the other claims in the schedule, then the argument does not assist him; Euclidian had in each such case made an informed choice not to take a point on Kosmar’s non-compliance with the clause. If anything, the fact that the September communications followed the general pattern of Euclidian’s treatment of the claims in the schedule, is an additional point in favour of Mr. Eklund’s submissions here – but I do not rest my judgment on that. A reasonable time: Mr. Slade’s final line of defence was that Euclidian must have been entitled to a reasonable time to consider its position; that time had not yet been elapsed when, on the 30th September, it reserved its rights. In principle, I have much sympathy with this stance. It would be undesirable to permit an unmeritorious insured to snatch at an unguarded act or communication on which to construct a case of election. Likewise, it would be undesirable to require a knee-jerk reservation of rights or rejection of a claim, immediately insurers became aware of it. Still further, when, as here, Kosmar had taken so long to communicate anything in respect of this matter to Euclidian, fairness requires that Euclidian should have an ample time to consider its position. All those points I readily accept and nothing which I say is intended to weaken them. 83. The difficulty for Euclidian here, however, is that on the perhaps unusual facts of this case, it knew all it needed to know on the 4 th September, to justify declining liability on the ground of a failure to comply with limb [1] of the clause, or, at the least, if minded to support Kosmar provisionally and for the time being, to reserve its rights while considering its position. There was of course no obligation on the part of Euclidian to reserve its rights; but it took the risk of being held to an election if it acted or communicated in a manner which would otherwise give rise to an election without doing so: Svenska v Sun Alliance, supra. 84. While Euclidian did not know why the matter had taken so long to come to Ms. Souidhou’s attention, it did know that Kosmar had singularly failed to give notice immediately after the occurrence. All this is abundantly clear from Mr. Armstrong’s evidence. The reason why Kosmar had failed to give immediate notice of the occurrence was neither here nor there so far as concerned the requirements of limb [1] of the clause. Whatever the position might have been had Euclidian done nothing and simply taken a longer time to consider its position, for whatever reason, Euclidian chose to communicate in the terms of the September communications already discussed and, having done so, not to reserve its rights until the 30 th September. Again, if Euclidian had been minded to support Kosmar provisionally, at least while awaiting an explanation for the late notification of the occurrence, the September communications could have been dispatched in the same terms with the obvious and elementary addition of a reservation of rights. 85. 86. 87. In my judgment, by the time of the 17th September communication, a fortiori by the time of the 19th or 22nd September communications, Euclidian had had a more than reasonable time to consider its position and to deny liability or to reserve its rights, if it so chose. Instead, it elected to proceed on a basis consistent only with accepting liability for the Evans claim and it is bound by that election. By the time that it did purport to reserve its rights on the 30th September, the pass had already been sold. The point will not benefit from elaboration. In my judgment, Kosmar is entitled to the indemnity it seeks on the ground that, following notification to Euclidian of the Evans claim, Euclidian elected to accept liability for it rather than to decline to pay it. Estoppel and affirmation: In the light of my view as to election, it is unnecessary to consider at any length, Kosmar’s submissions couched in terms of estoppel or affirmation. Without coming to any firm or final conclusion, my inclination is that Kosmar would have struggled to succeed, had it failed on election. In summary: i) ii) I very much doubt that there was sufficient reliance, still less detriment (if that is a separate requirement) for Kosmar to succeed on its estoppel argument as to the events of the 4th – 30th September, 2003. I would have been reluctant to conclude that Kosmar had made good any such requirement(s), merely by compiling the answers to the 25 questions posed in the Euclidian letter of the 19th September; putting its tackle in order in this regard was something Kosmar needed to do in any event, whether or not Euclidian was declining liability for the Evans claim. So far as concerns affirmation, I am minded to agree with Mr. Slade that the argument, put in these terms, takes the matter no further. For my part, affirmation is applicable, or naturally applicable, when the avoidance or termination of a contract as a whole is under consideration. I very much doubt that affirmation is applicable when the issue, as here, is whether there is or is not liability to meet a particular claim arising out of or under a contract. However that may be and in any event, the requirements for affirmation are the same as those for election – so that if Kosmar had failed in its contentions as to election it is not readily apparent how it could have succeeded by way of affirmation. 88. (IV) Alterations to the swimming pool: Realistically, Mr. Slade did not press this argument too hard as a separate ground for resisting liability. Aside from any other considerations, he faced the need to bring the swimming pool within the wording of limb [1] of the clause “works, machinery, plant, commodities or goods…directly or indirectly connected with the occurrence…”. In the event, Mr. Slade found himself driven to argue that the swimming pool came within this wording, as it was “a fixture used for leisure industry purposes”. Suffice to say, I cannot agree. For better or worse, the natural meaning of the clause does not assist Euclidian in this regard; there can be no proper basis for straining its construction so as to do so. To my mind, the point as to the swimming pool goes to underline why Mr. Lumsden and Mr. Armstrong regarded the notification of occurrences as of importance; but it does not here furnish Euclidian with a separate and self standing defence. 89. (V) Overall conclusion: Kosmar’s claim accordingly succeeds. I shall be grateful to counsel for their assistance in drawing up the order and on any questions as to costs.