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Ted Baker Plc & Another v AXA Insurance UK

25 February 2014

On Wednesday, the Court of Appeal rejected insurance group AXA’s application to appeal an earlier High Court ruling in a multi-million pound dispute over coverage with clothing retailer Ted Baker.

Through their appeal AXA sought to challenge Eder J’s decision on the issues of estoppel, and, in the case of the co-insurers, misrepresentation. AXA did not seek permission to appeal Eder J’s findings on construction and rectification.

Background

In December 2008 an employee working at one of Ted Baker’s warehouses in London, together with two accomplices, were arrested, charged and later convicted of stealing stock from the retailer’s premises between 2004 and 2008. As a result of the theft Ted Baker suffered a significant loss running into seven figures.

Ted Baker was insured by AXA along with two co-insurers, Fusion and Tokio Marine, under a commercial combined insurance policy. Ted Baker sought to bring an insurance claim for £1m for the loss of stock and £3m for consequential loss and business interruption. AXA declined cover arguing that the terms of its policy did not cover claims for employee theft. AXA claimed that Ted Baker would have needed to take out fidelity cover in line with market practice had it wanted to be covered for such losses.

In 2010 Ted Baker commenced action in the High Court challenging AXA’s decision. In these proceedings, as well as claiming that Ted Baker should have taken out fidelity cover, AXA argued for rectification of the policy on the grounds that neither party had intended the insurance cover to extend to employee theft and accordingly claimed that Ted Baker should be estopped from relying on the policy wording. AXA, along with the co-insurers, also alleged that non-disclosure and misrepresentation on behalf of Ted Baker’s brokers rendered any cover void.

In 2012 Eder J rejected AXA’s arguments on rectification and estoppel and found that on the true and proper construction of the policy wording Ted Baker was covered for its direct losses. He also confirmed that Ted Baker could claim for loss of profits under the Business Interruption section of the policy.

Court of Appeal’s ruling

In April 2012 AXA sought permission to appeal Eder J’s decision, continuing its estoppel argument, however the Court of Appeal reasserted Eder J’s earlier judgment.

In their judgment the appeal judges rejected AXA’s attempt to avoid the policy in question through reliance on ‘standard practice’ and the ‘normal’ extent of cover offered by policies of this nature. The judges held that AXA could not rely on silence as conveying a shared assumption as to what a policy meant according they considered AXA’s position on estoppel to be unsustainable given that it had earlier been found that on the construction of the policy there was cover.

Wider implications

Through this decision, the Court of Appeal has given a clear message to insurers that the courts may take a literal approach when considering policy wording and express policy wording will not be overridden on the grounds that coverage is either not what was intended by one or more parties or goes against asserted market practices.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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