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Case
turns on definition of "authorised business trip" clause
The
Aon WTC personal accident dispute has been settled in favour of the
London Market reinsurers, according to a judgement released this morning.
As reported
in the March edition of The Insurance Insider, the case came
to the Royal Courts of Justice after London reinsurers, led by Kiln
Syndicate 510 and St Paul Syndicate 582, sought to avoid paying out
on a personal accident reinsurance treaty on the 169 Aon employees who
died in the World Trade Center attacks on 11 September 2001.
The treaty
provided cover of six times annual salary up to $1mn for “Class
I” employees, $500,000 for “Class II” employees as well
as various levels of cover for other employees, dependants and spouses.
In particular,
it provided personal accident cover for employees while they were on
an “authorised business trip” – and it was on the two
parties’ differing interpretation of this phrase that the case
turned.
Combined
Insurance Company, the Aon-owned insurance company that wrote the cover,
argued that, in essence, its employees were on a business trip while
they were evacuating the Twin Towers and that they were therefore covered
under the terms of the "authorised business trip" clause as
they left their offices.
However,
in their submissions, the reinsurers countered that they had grounds
to avoid payment of the claim because: 1) the construction of the reinsurance
treaty covered business travel but not actual evacuation of the WTC
building; and 2) there was misrepresentation/non-disclosure of the risk.
In his
judgement, presiding judge Justice Cresswell said that he disagreed
with the London reinsurers on the issue of misrepresentation or non-disclosure,
finding that the risk had been presented “on reasonable grounds”.
However,
on the first issue of the construction of the contract he came down
on the side of the reinsurers, observing: “I do not consider the
word ‘trip’ is ambiguous in the sense that it is subject to
more than one reasonable interpretation… I do not consider that
the usual and ordinary meaning of the word ‘trip’ would include
an evacuation/attempted evacuation… If the popular mind/most people/the
average, ordinary, normal person/a lay person were asked – were
the 169 Aon Group employees on a ‘trip when they died? – the
answer would be no.”
Justice
Cresswell gave Combined Insurance leave to appeal the judgement, although
sources close to the case said a decision as to whether or not to appeal
was yet to be taken.
Quantum
is expected to be in the region of $90mn.
Combined
was unavailable for comment as The Insurance Insider went to
press.
A more
in depth report on the judgement will appear on 25 April in issue No
170 of Insider Week.
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