World Challenge Expeditions Limited v Zurich Insurance Company Ltd

An insurance policy is construed objectively according to its natural and ordinary meaning, read in context. A standard-form cancellation clause covering forfeited or irrecoverable deposits, advance payments and charges did not indemnify a tour operator for customer refunds exceeding its irrecoverable third-party costs.

However, a clear and consistently operated course of claims handling may establish an estoppel by convention. Here, the insurer was estopped from denying cover for customer refunds where the insured had relied on the shared assumption by delaying cancellations and losing other opportunities. The estoppel was subject to credit for third-party recoveries. Aggregation did not apply because the losses arose from an overall state of affairs rather than a sudden, unforeseen and identifiable occurrence.

The claimant organised overseas expeditions for school students and held a personal accident and business travel policy with the defendant. Following the COVID-19 pandemic, the claimant cancelled expeditions and refunded customers.

The policy covered cancellation expenses, including deposits, advance payments and other charges which became forfeit or payable under contract or could not be recovered elsewhere. The defendant contended that this covered only irrecoverable third-party costs. The claimant relied alternatively on the policy’s claims history, estoppel, and alleged agreements concerning cancellation and cover.

The court also considered aggregation, claims relating to associated entities, and refunds effected through credit notes, deferrals or other non-cash arrangements.

1. Construction. Section 8 of the policy covered WCE’s irrecoverable third-party costs, up to the amount of customer refunds which WCE was obliged to make. The wording could not be construed by combining deposits paid by Challengers with losses allegedly suffered by WCE. The policy was a standard-form wording, and neither the factual matrix nor the historic handling of claims altered its natural and ordinary meaning.
2. Estoppel by convention. The parties shared a sufficiently clear assumption that WCE was covered for the amount of its customer refunds. Zurich’s claims handlers repeatedly validated refunds, checked them against WCE’s terms and conditions, and set them against the policy deductible. That conduct crossed the line between the parties and conveyed that Zurich accepted the assumed scope of cover.
3. WCE did not establish reliance by entering the 2019 policy or failing to seek alternative insurance. It did establish detrimental reliance concerning trips due to depart after 31 May 2020. WCE had delayed cancellation while seeking clarification from Zurich and thereby lost a real opportunity to pursue alternatives and preserve customer goodwill. It would be inequitable for Zurich to resile. The estoppel operated in principle to prevent Zurich denying cover for the refunds, subject to credit for recoveries.
4. The 27 February 2020 communications did not contain an unequivocal representation that refunds were covered. The 9 April 2020 call conveyed that impression, but did not establish promissory estoppel or a collateral contract because WCE did not understand Zurich to be relinquishing rights which WCE believed it did not possess.
5. Aggregation. The cancellations covered by the estoppel did not arise from a sudden, unforeseen and identifiable occurrence. They resulted from the overall pandemic-related situation, including interrelated restrictions, practical considerations and customer pressure. Neither restrictions in departure or destination countries nor WCE’s own cancellation decision constituted an aggregating event under the policy.
6. WCE could claim in its own name for refunds paid by associated WCE entities on behalf of Challengers. No indemnity was payable for refunds merely committed to but not yet paid, redeemed credit notes, or completed deferrals, although future cash refunds could be indemnified when paid. Credit had to be given for third-party recoveries in money or money’s worth.
7. The claim succeeded for refunds actually paid, or subsequently paid, concerning expeditions due to depart between 1 June and 31 August 2020 and cancelled on or after 20 April 2020, subject to recoveries. Quantum was left for the parties to determine.

First-instance judgment. No prior appellate decision was stated in the judgment.