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A
representation with regard to the estimated number of travel days was
a representation of expectation or belief pursuant to Section 20(3)
of the MIA 1906 which, having been made in good faith, was deemed by
Section 20(5) to be true. There arose no scope for enquiry as to whether
there were objectively reasonable grounds for the expectation or belief.
Combined Insurance Company of America ("Combined"), a wholly
owned subsidiary of Aon Corporation, provided business travel accident
insurance cover to Aon Group Companies. Combined obtained reinsurance
cover from certain London underwriters ("Reinsurers").
Combined was not provided with any historical travel data and in order
to rate the risk estimated the likely amount of travel in terms of employee
travel days. In seeking reinsurance cover Combined put forward "Estimated
travel data" and also stated "Estimated days of travel"
of 160,000 for relevant employees.
Cover provided by Combined included "24 Hour All Risk Hazard"
which covered employee losses whilst on an "authorised business
trip". Authorised business trips were defined as trips Aon authorised
for the purpose of furthering Aon's business. Such authorised business
trip started when the employee left their residence or place of employment
and ended when they returned to their residence or regular place of
employment. Finally, "regular place of employment" was defined
as meaning the business premises at which the employee spent at least
50% of their working hours and which was located within 50 miles of
the employee's primary residence.
A total of 176 Aon Group employees were killed after the second aircraft
collided with the south tower of the World Trade Center in New York
on 11 September 2001. It was common ground that the deaths of the 176
Aon Group employees were caused by an act of terrorism as defined in
the Terrorism Hazard of Combined's cover and that Combined was bound
to indemnify, and had indemnified, the families of all the Aon employees
who had perished. It was also common ground that reinsurers did not
reinsure Combined under the Terrorism Hazard but did reinsurer Combined's
exposure under the 24 Hour All Risk Hazard section. Combined claimed
that reinsurers were liable to indemnify it under the 24 Hour All Risk
Hazard section in relation to the deaths of the 176 Aon Group employees.
Reinsurers sought declarations of non-liability on the grounds that
the reinsurance had been avoided for misrepresentation and non-disclosure.
This was on the basis that the estimate of 160,000 travel days included
a representation that it was based on historical information and experience.
Liability was also denied on the basis that most of the employees who
died were not covered by the 24 Hour All Risk Hazard section because,
as a matter of Illinois law which governed the policy, they were not
on an authorised business trip but were simply vacating their regular
place of employment.
Creswell J held that there was nothing in the words used "…
estimated travel data… estimated days of travel…" which
constituted an assertion of a specific fact that the estimate had been
based on Aon's historical information and experience. Accordingly Creswell
J concluded that the representation in question was as to a matter of
expectation or belief made in good faith and accordingly by section
20(5) of the Marine Insurance Act 1906, was deemed to be true. There
was accordingly no scope for enquiries to whether there were objectively
reasonable grounds for the expectation or belief. Nevertheless Creswell
J went on to hold that if it was necessary to consider that the estimate
was made on reasonable grounds, he would do so. It was further held
that the presentation was fair because reinsurers were specifically
told that the days of travel were estimated.
Reinsurers had in fact indemnified Combined in relation to 7 of the
176 Aon Employees who it was accepted were visiting the World Trade
Center premises from other Aon offices and accordingly were not at their
regular place of employment, were on authorised business trips and were
covered under the 24 Hour All Risk Hazard section. However, reinsurers
disputed that the remaining 169 Aon Group employees were on an authorised
business trip when they died. Creswell J concluded that both as a matter
of ordinary meaning and construction in accordance with Illinois law,
the 169 Aon Group employees concerned were not on a "trip…
for the purpose of furthering the business of an Aon Group company".
As to the question of whether employees had left their "regular
place of employment", Creswell J was of the opinion that the policy
provision was clear and unambiguous and should be given its plain and
ordinary meaning and that the parties' intent did not extend to include
as an "authorised business trip" an evacuation/attempted evacuation
of office premises. Accordingly, Creswell J held that the deaths of
the 169 Aon Group employees who were killed were not covered by the
24 Hour All Risk Hazard section and were thus outside the reinsurance.
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