Quantum Processing Services Company v Axa Insurance UK Plc

Where a consumer travel insurer is told about a hazardous activity and accepts it as covered, the policy should be construed as covering that activity unless the insurer has expressly limited the cover or a general exclusion applies.

The insurer cannot restrict cover by relying on an uncommunicated distinction between safer and more hazardous forms of the accepted activity. Cave diving was a form of scuba diving and was not excluded by references to potholing or needless danger on the facts. A post-treatment assurance could not create an estoppel without reliance before its withdrawal.

Calum Fraser obtained travel insurance through Trailfinders, acting for AXA Insurance UK Plc, before travelling to Mexico. He disclosed that he would be diving. After he became ill with decompression sickness following a cave dive, Quantum Processing Services Company provided medical treatment and took an assignment of the policy benefits.

AXA refused payment, contending that solo diving and cave diving were outside the policy. Norwich County Court, before His Honour Judge Darroch, dismissed Quantum’s claim on 18 April 2008. Quantum appealed with permission.

The appeal concerned whether the policy covered scuba and cave diving after the disclosure of diving, whether the policy wording excluded the activity, and whether a later assurance gave rise to an estoppel.

Lord Justice Waller gave the judgment of the court. Lord Justices Thomas and Aikens agreed. The appeal was allowed and Quantum succeeded in its claim for the medical expenses.

1. Estoppel. The judge’s findings were that any relevant representation was made only after most of the treatment had taken place and that Quantum did not rely on it before it was withdrawn. Those findings could not be disturbed on appeal. The alleged estoppel therefore failed independently and could not rescue the claim if the coverage arguments failed.
2. Construction of the policy. The policy was issued to ordinary consumers and had to be read with the accompanying advice. That advice required disclosure of hazardous activities and contemplated that such activities might be covered, sometimes on payment of an additional premium. Once diving had been disclosed and accepted by the insurers as covered, the general condition excluding hazardous activity had to be read in that context as preserving the accepted scuba-diving cover.
3. Once an activity has been accepted as covered, any particular form of that activity which is to be excluded must be expressly excluded, or must fall within a general exclusion. It was impermissible to construe the policy as covering only the less hazardous form of scuba diving that the insurers might have had in mind. The proper starting point for any limitation was the policy’s exclusions.
4. Application. Cave diving was a form of scuba diving because the diver carried self-contained breathing apparatus. Cave diving was not expressly excluded. The reference to potholing did not sensibly exclude scuba diving in caves. Although the exclusion for wilful exposure to needless danger showed that the cover had limits, AXA had not alleged that Mr Fraser needlessly exposed himself to danger. The exclusion did not apply.

Order: appeal allowed.

• Court of Appeal (Civil Division) — On 15 December 2008, the appeal was allowed and Quantum succeeded in its claim for the medical expenses: [2008] EWCA Civ 1640.
• Norwich County Court — His Honour Judge Darroch dismissed Quantum’s claim in favour of AXA by judgment dated 18 April 2008.