Sehayek & Anor v Amtrust Europe Ltd

Insurance cover is construed principally from the language used by the parties. Commercial common sense and background circumstances cannot justify a strained construction or the insertion of words which the policy does not contain. A misnomer requires a clear mistake and a clear correction. An implied term requires necessity, or obviousness, and cannot contradict the express policy. Estoppel requires a clear and unequivocal representation, together with detrimental reliance. Waiver by election is not established merely because an insurer rejects a claim on one ground without relying on another. The court answered all preliminary issues against the policyholders.

The claim concerned alleged defects in a new-build property covered by an LABC warranty underwritten by Amtrust. The policy identified Dekra Developments Ltd as the Developer, while the property had been sold by Grove End Gardens London Ltd and constructed by another associated company. Amtrust rejected the claim on contractual and other grounds.

The trial of preliminary issues concerned incorporation and compliance with the scheme rules, the proper construction of the Developer definition, and alternative arguments based on estoppel and waiver. The court also considered whether the policy should be read as extending to associated companies.

1. Rules and condition of cover. The parties agreed that the Rules were not incorporated into the Policy and that cover was not conditional upon the Developer complying with them. Issues (a) and (b) were therefore answered “No”.
2. Construction and misnomer. The Policy and Certificate named Dekra Developments Ltd as Developer. Applying the principles in Arnold v Brittain [2015] AC 1619, the court treated the policy language as central. The policy was not commercially unworkable, and the background did not establish a clear mistake. Nor was there a clear correction. Reading “Dekra Developments Ltd” as including associated companies was not a simple or objectively justified correction.
3. Implied term. The proposed term extending the Developer definition to associated companies was unnecessary. The difficulty arose from the identity of the named Developer, not from any defect requiring correction. The test in Marks & Spencer v BNP Paribas Security Services Trust Co (Jersey) Ltd [2016] AC 742 was not satisfied.
4. Estoppel. The Certificate and Policy did not clearly and unequivocally represent that cover extended to associated companies or to defects for which such companies were responsible. Although the Claimants relied detrimentally on insurance being in place, there was no detrimental reliance on the necessary representation. The estoppel case therefore failed.
5. Waiver. Issuing the Certificate and Policy could not establish waiver for the same reasons. Nor did the 2018 claim correspondence show an explicit or implicit waiver of the right to reject cover on an additional ground. Following Bolton Metropolitan Borough Council v Municipal Mutual Insurance Ltd [2006] EWCA Civ 50, rejection on one ground did not itself waive other grounds. Waiver by estoppel also failed for want of pleaded and proved detrimental reliance.
6. Issues (c) and (d)(i)–(iv) were answered “No”. Consequential matters were left for further consideration if not agreed.

The judgment records that the preliminary issues had been ordered by Alexander Nissen QC sitting in the Technology and Construction Court on 9 October 2020. No earlier judgment citation or appeal is stated.