George on High Limited & Anor v Alan Boswell Insurance Brokers Limited & Anor

An insurance policy may provide cover to a company which is not the contracting policyholder. Construction is objective and requires consideration of the policy as a whole and the relevant background known, or reasonably available, to the parties. Where the wording is plainly insufficient in that context, the court may identify the meaning a reasonable person would attribute to it.

Rectification requires a common continuing intention, an outward expression of accord, continuation of that intention when the instrument was executed, and a mistaken failure of the instrument to reflect it. Estoppel by convention requires a shared assumption, responsibility for its adoption, reliance in subsequent mutual dealings, and detriment or benefit making it unjust to resile.

The claim arose after a fire substantially destroyed a hotel operated by George on Rye Limited (GOR) and owned by George on High Limited (GOH). The policy named the insured as George on High Limited trading as The George in Rye.

The insurer indemnified GOH for damage to the building but denied liability to GOR for business interruption, stock and contents. The insurance broker accepted responsibility to the claimants to the extent that the insurer was not liable. The issues were whether GOR was insured by construction, whether the policy should be rectified, and whether the insurer was estopped from denying cover. The court also determined the claim for rent allegedly payable by GOR to GOH during the closure.

1. Construction. A person need not be a party to the insurance contract to be a beneficiary under the policy. The policy was construed objectively, by reference to its wording, the policy as a whole, and the background knowledge reasonably available to the parties. The insurer’s knowledge included relevant knowledge held by its authorised claims handlers and agents.

2. By November 2018 the insurer and its claims handlers knew that GOH owned the building, that GOR operated the hotel and restaurant, and that GOR employed the staff. The description of the insured as George on High Limited trading as The George in Rye was therefore plainly insufficient to identify the intended cover. A reasonable person, knowing that the policy covered business interruption and employers’ liability and that GOR had paid the premiums, would understand the insured to include GOH and the business operated by GOR.

3. Rectification. The four requirements identified in Swainland Builders Ltd v Freehold Properties Ltd were satisfied. The parties shared a continuing intention to insure the hotel business, that intention was outwardly expressed by the payment and acceptance of premiums, it continued when the policy was made, and the wording failed by mistake to reflect it. The judge would therefore have rectified the policy to cover GOH and the business operated by GOR.

4. Estoppel by convention. The Benchdollar principles, as qualified by Blindley Heath, apply to contractual dealings. The parties shared the assumption that the hotel business was insured; the insurer conveyed responsibility for that assumption by handling and accepting liability for earlier claims; GOH and GOR relied on it in their dealings and payment of premiums; and the resulting benefit and detriment made it unconscionable for the insurer to deny cover.

5. The alternative agency argument did not require determination because GOR succeeded on construction, rectification and estoppel.

6. GOR was entitled to indemnity for business interruption of £892,520, stock of £23,833 and contents of £574,805. The material-damage limit did not prevent cover for contents owned by GOR as well as GOH.

7. No rent was payable by GOR to GOH while the hotel was closed and unusable. GOH therefore suffered uninsured rental loss of £776,000, for which the broker was liable.