CL-2023-000064 - [2025] EWHC 1870 (Comm)

As one might expect, there was limited disagreement between the parties as to the approach to construction generally. I was referred to the helpful summary set out by Jacobs J following the first trial (i.e. Gatwick Investment(supra) at [103]-[105]). This was in entirely orthodox terms, putting at its heart the way the words would be understood by a reasonable policyholder and eschewing an overly textual approach, as had been explained by the Supreme Court in FCA v Arch (supra) at [77]:

“… the overriding question is how the words of the contract would be understood by a reasonable person. In the case of an insurance policy of the present kind, sold principally to SMEs, the person to whom the document should be taken to be addressed is not a pedantic lawyer who will subject the entire policy wording to a minute textual analysis … It is an ordinary policyholder who, on entering the contract, is taken to have read through the policy conscientiously in order to understand what cover they were getting.”

There was a slight difference between the parties as to what “specialist” knowledge that reasonable policyholder could be assumed to have. This difference was not about knowledge of the idiosyncrasies of English insurance law. Rather, the difference concerned whether the reasonable policyholder meant a buyer of this particular kind of cover, insuring racecourses and greyhound tracks and hence familiar with the operation of the BHA and the GBGB, or required one to assume a buyer of property and BI insurance more generally.

Mr Scorey’s submission was that the concept of the reasonable policyholder did not import the specialised knowledge of one of the parties. However, when I raised the question with him, he helpfully showed me the (published) arbitration award in China Taiping Insurance [2022] Lloyd’s Rep IR 379 at [16], which in turn quoted the Supreme Court in FCA v Arch at [47]:

“The core principle is that an insurance policy, like any other contract, must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean”.

That seems to me to answer the question. The background knowledge reasonably available to the parties includes all of the publicly available information about the BHA and the GBGB, but not anything which would only be available to the Cs.

The Cs suggested in their skeleton that, if I found there to be ambiguity, I should construe the relevant provision contra proferentem against insurers. They referred me, for example, to the decision of the Divisional Court in FCA v Arch [2020] EWHC 2448 (Comm) at [71]-[74] and [118]. I do not read those sections of the judgment as endorsing a general policy in favour of treating the insurer as the proferens of a policy wording in the event of ambiguity. Instead, the Divisional Court referred to cases such as Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2017] AC 73, in which the Supreme Court warned against equating exclusion clauses in an insurance policy (which define the extent of the agreed cover) with exemption clauses in a contract (which exclude a remedy which would otherwise exist). The Divisional Court then (at [74]) endorsed the decision of Peter MacDonald Eggers QC in Crowden v QBE Insurance (Europe) Ltd [2018] Lloyd’s Rep IR 83 to the effect that:

“…the court should not automatically apply a contra proferentem approach to construction. That said, there may be occasions, where there is a genuine ambiguity in the meaning of the provision, and the effect of one of those constructions is to exclude all or most of the insurance cover which was intended to be provided. In that event, the court would be entitled to opt for the narrower construction.”

That limited role for a contra proferentem approach was what I understand the Divisional Court to have been identifying at [118] when they said that “this would be one of the few cases in which it would be appropriate to apply a principle of contra proferentem”. That limited role is not available here. It does not seem to me that any of the possible constructions which were under discussion in the present trial could be said to have the effect of excluding “all or most of the insurance cover which was intended to be provided”.

Mr Scorey submitted that it would be wrong to assume that the Policy was drafted by the U/Ws. I agree and, if that was the thrust of the Cs’ argument, it lacks the required evidential basis. The contra proferentem principle seemed to me to be a red herring in the present case.