Mulchrone v Swiss Life (UK) Plc [2005] EWHC 1808 (Comm)

Case No 2004 Folio 413[2005] EWHC 1808 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 20 th July 2005
Before
GAVIN KEALEY Q.C.
Between
CHRISTINA MULCHRONEClaimantSWISS LIFE (UK) PLCDefendant
Mr. Donald Broatch (instructed by Messrs. L.E. Law) for ClaimantMs. Jess Connors (instructed by Davies Lavery) for DefendantHearing Hearing dates : 8 th and 9 th June 2005
JudgmentGAVIN KEALEY Q.C. sitting as a Deputy High Court Judge :INTRODUCTION
[1]In these proceedings, the Claimant, Christina Mulchrone, seeks declaratory relief against the Defendant, Swiss Life (U.K.) Plc (“Swiss Life”). If granted, the effect of the declaratory relief will be to enable the Claimant to bring an arbitration in her own name against Swiss Life in accordance with the provisions of the Contracts (Rights of Third Parties) Act 1999 notwithstanding that she was not an original party to the arbitration agreement which she seeks to enforce. That arbitration agreement formed part of a substantive contract or contracts of insurance entered into between Norton Rose and Swiss Life, of which it is common ground the Claimant is and was a beneficiary.

BACKGROUND FACTS

[2]The Claimant is an employee of Norton Rose, solicitors in London. She has been employed by Norton Rose since 1984 as an expenses assistant and, as such, was engaged principally in the task of entering data onto computer records with the use of a keyboard and a mouse. It was a term of the Claimant’s contract of employment by Norton Rose that she should benefit from its Permanent Health Insurance Scheme.[3]The Defendant, Swiss Life, is an insurance company which, since 20th January 2000, has provided Norton Rose with what is described as Group Income Protection Insurance. This provides insurance by which Swiss Life undertakes to pay benefits in respect of Norton Rose’s Permanent Health Insurance Scheme at agreed rates in respect of eligible employees in the event that such employees suffer disablement within the terms and conditions of the insurance. In the case of eligible employees who become disabled within the meaning of the insurance, benefits become payable only at the expiry of what is described in the insurance as the Deferment Period: namely for present purposes, a continuous period of 26 weeks from the date of the commencement of the disablement. In that event, the benefit payable by Swiss Life in respect of employees such as the Claimant equates to 70% of basic annual salary at the date of commencement of disablement.[4]In the course of her employment by Norton Rose, the Claimant apparently experienced pain and discomfort in her hands, wrists and arms which developed to such a degree that, in May 2000, she was obliged to desist from working. On account, she says, of her physical condition, she has been unable to resume her work at Norton Rose and, while she remains employed by Norton Rose, she remains off work to date.[5]On 22nd September 2000, Norton Rose’ brokers, William M. Mercer Limited (“Mercer”) notified Swiss Life of a potential claim under the insurance in connection with the Claimant’s physical condition. On 5th October 2000, the Claimant completed a claim form to receive benefits pursuant to the insurance. In that form, she declared 11th May 2000 as the date of her first day of absence from the office on account of her disablement. Therefore, the Deferment Period of 26 weeks ended on 9th November 2000.[6]Swiss Life accepted the claim on 9th January 2001 and made payments to Norton Rose in accordance with the insurance, back-dated to 9th November 2000. However, by letter dated 8th November 2001, Swiss Life informed Mercer that, based on a review of the claim, a functional capacity evaluation to which the Claimant had agreed to submit herself, and material obtained as a result of surveillance of the Claimant, it considered that the Claimant no longer met the definition of disablement within the meaning of the insurance. Swiss Life stated that it would (and did) cease payment of benefits in respect of the Claimant with effect from 31st January 2002.[7]Following the cessation of benefit payments, the Claimant lodged an appeal with Swiss Life in accordance with the Claims Appeal Procedure set out in Swiss Life’s policy wording. She did so with the support of Norton Rose in circumstances where Swiss Life had stated that she could not institute an appeal on her own because the insurance was with Norton Rose. The Claimant’s appeal was unsuccessful and in June 2002, with the permission of Norton Rose, she referred the question of whether she was disabled within the meaning of the insurance to the Financial Ombudsman Service. On about 30th December 2003, the Financial Ombudsman determined that the Claimant was capable of resuming her work at Norton Rose, and so found against the Claimant.[8]That determination does not, of course, prejudice the Claimant’s legal rights (if any) to benefit payments. In 2003, the Claimant called upon Swiss Life to agree a sole arbitrator to resolve the issue of her disablement in accordance with the arbitration agreement in the insurance which, in part, provided as follows:
“In the event of disagreement, following an appeal between Swiss Life and the Employer’s medical adviser as to whether the Member, in respect of whom the Employer has made a claim, is disabled for the purposes of this policy, and if so as to the extent of his Disablement, such disagreement shall be referred to and be determined by a sole arbitrator (“the Arbitrator”).”
[9]However, Swiss Life declined to arbitrate with the Claimant. Swiss Life claimed that the only parties to the insurance (and presumably the arbitration agreement also) were itself and Norton Rose and that, since (it said) the insurance in question pre-dated the coming into force of the Contracts (Rights of Third Parties) Act 1999, the Claimant lacked any cause of action or rights against Swiss Life.[10]Following Swiss Life’s declinature to arbitrate, the Claimant invited Norton Rose to lend her its name for the purposes of bringing the arbitration against Swiss Life. Norton Rose, having supported the Claimant both in the original claim and internal Swiss Life appeal process and also in her reference to the Financial Ombudsman Service, and having taken the view that there was no basis upon which to criticise the assessments and decisions that had been made, refused the Claimant permission to bring an arbitration in its name.

THESE PROCEEDINGS

[11]The Claimant commenced these proceedings by a Claim Form issued on 18th May 2004. In them, she does not seek to enforce any rights to benefit payments accruing to her under any substantive contract or contracts of insurance between Swiss Life and Norton Rose on the basis either that Norton Rose entered into the insurance as her agent, or that Norton Rose is a trustee for her of the promises made for her benefit by Swiss Life under the insurance (as to which, the decisions in such cases as Les Affreteurs Reunis SA v Leopold Walford (London) Limited [1919] A.C. 801 and Nisshin Shipping Co. Ltd. v Cleaves & Company Ltd. [2004] 1 Lloyd’s Rep. 38 might be of relevance). Rather, she concentrates on such rights as she might derive as a result of the enactment on 11th November 1999 of the Contracts (Rights of Third Parties) Act 1999.[12]The relevant sections of the Act are as follows: 1 Right of third party to enforce contractual term(1) Subject to the provisions of this Act, a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if - (a) the contract expressly provides that he may, or (b) subject to subsection (2), the term purports to confer a benefit on him. ………… (5) For the purpose of exercising his right to enforce a term of the contract, there shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly). 8 Arbitration provisions (1) Where - (a) a right under section 1 to enforce a term (“the substantive term”) is subject to a term providing for the submission of disputes to arbitration (“the arbitration agreement”), and (b) the arbitration agreement is an agreement in writing for the purposes of Part I of the Arbitration Act 1996 the third party shall be treated for the purposes of that Act as a party to the arbitration agreement as regards disputes between himself and the promisor relating to the enforcement of the substantive term by the third party. ……….. 9 Short title, commencement and extent(2) This Act comes into force on the day on which it is passed but, subject to subsection (3), does not apply in relation to a contract entered into before the end of six months beginning with that day.[13]The Contracts (Rights of Third Parties) Act was passed on 11th November 1999. Thus, subject to section 2 subsection (3) which is of no relevance in the context of the instant case, the Act does not apply to a contract entered into before the end of the period of six months beginning with that day. The end of the period of six months beginning with 11th November 1999 fell on 11th May 2000 (coincidentally the same day as that when the Claimant says her disablement began).[14]It is common ground between the parties that, if the Claimant can establish that a cause of action for benefits payable in respect of her claimed disablement has accrued under a contract of insurance entered into between Norton Rose and Swiss Life after 11th May 2000, she comes within the definition of a qualifying third party in section 1 of the Act. In such event, not only may the Claimant seek to establish that cause of action in her own right (and therefore exclusively in her own name) against Swiss Life; but also, if she chooses to do so, she is obliged to have recourse to arbitration in accordance with the arbitration agreement in that contract by virtue of section 8 of the Act (Nisshin Shipping Co. Ltd. v Cleaves & Company Ltd. loc. cit.). Likewise, it is common ground between the parties that, if the only cause of action for benefits payable in respect of the Claimant’s claimed disablement accrued under a contract of insurance entered into between Norton Rose and Swiss Life before 11th May 2000, then the Act does not enable the Claimant to seek to enforce that cause of action in her own right.[15]Thus the essential issue that arises between the parties is whether the Claimant can establish that a cause of action for benefits payable in respect of her claimed disablement has accrued under a contract of insurance entered into between Norton Rose and Swiss Life after 11th May 2000.

THE INSURANCE

[16]The parties are agreed that Swiss Life provided Group Income Protection Insurance for Norton Rose from 20th January 2000. It is apparent from the documents that the origin of this cover was a decision by Norton Rose to change its existing insurers which had covered its Permanent Health Insurance Scheme in previous years, and a request made on 7th October 1999 by Mercer for a quotation from a variety of potential replacement insurers, including Swiss Life. Mercer included with its request a specification which gave details of the Scheme in respect of which insurance was required. Those details included the dates of the Scheme’s previous policy years running in each year from 1st October until 30th September; an assumed commencement date of 1st November 1999; and a renewal date of 1st October. No year was identified in relation to the renewal date. A synoptic underwriting history was also provided, including details of members of the Scheme who had not been accepted in the past at ordinary rates of premium and a Claims History. The specification sought quotes in respect of a benefit basis for staff of 70% of salary (as defined by reference to basic annual salary immediately prior to commencement of incapacity) less the long-term rate of the single person’s basic State Incapacity Benefit (SPSIB); and a benefit basis for partners of 55% of earnings (as defined by reference to the average of the last three years’ earnings) less SPSIB. The Deferred Period was set at 26 weeks and the annual rate of benefit payment escalation was 5%.[17]Swiss Life responded with a detailed quotation guaranteed for three months from 19th October 1999, subject to attached terms and conditions. The quotation provided for a free cover limit (i.e. cover given without any evidence of health) of £75,000 and stipulated a main benefit escalation rate of 5% per annum compounded. The unit rate per mille, by reference to which premium was calculated, was proposed to be guaranteed for two years.[18]Following discussions between Mercer and Swiss Life, on 10th December 1999 Swiss Life produced a revised quotation bearing number 920389. In so far as relevant, this differed from the previous quotation only in that certain of the attached specific and standard terms and conditions were changed, as were the amounts of aggregate initial benefit and the unit rate per mille. Among the terms and conditions attached to the quotation was one headed “Term of the Policy”. This provided that “the policy term is the period rates are guaranteed (usually two years). At the end of the policy term cover may be continued if the policyholder agrees any revised terms.” Among the Standard terms and conditions for Income Protection were the following further provisions:
“Actively at work requirements All members who are actively at work on the last working day prior to the date of commencement of cover with Swiss Life (UK) plc will be covered for their benefit from the date of commencement of cover. Members absent through illness or injury on the last working day prior to commencement of cover must return to full time work before cover can commence, …… Simplified administration …… At anniversaries without a rate review, all we require are the total number of members to be insured together with their total benefit or salaries. Only if the free cover limit is exceeded .. are individual details required.”

Simplified administration

[19]It appears from references in other documents available to me that Mercer recommended to Norton Rose that it should replace its existing insurers with Swiss Life and that, on about 12th January 2000, Norton Rose accepted that recommendation. Accordingly, by fax dated 19th January 2000, Mercer formally notified Swiss Life that Norton Rose wished to place its Permanent Health Insurance Scheme with Swiss Life from midnight between 19th and 20th January 2000 and asked Swiss Life to confirm by return that it was on risk. In that fax, Mercer set out the scheme benefit basis “for [Swiss Life’s] information.” The only apparent difference between what Mercer set out and what Swiss Life had quoted in quotation number 920389 appears to be in relation to the main benefit rate of escalation: Mercer stated that the rate of escalation was limited to RPI subject to a maximum of 5% per annum in contrast with Swiss Life’s quoted fixed rate of 5% per annum compounded (and, in fact, in contrast also with Norton Rose’s original specification). At the end of its fax, Mercer indicated to Swiss Life that it would be requesting (inferentially from Norton Rose) “actively at work details”, the supply of full inception data, the necessary deposit premium and the completion of appropriate forms.[20]On the same day, 19th January 2000, Swiss Life faxed Mercer to confirm that it would assume risk as from 0001 hours on 20th January 2000 subject to the terms and conditions attached to quotation number 920389.[21]On 20th January 2000, Swiss Life wrote to Mercer and set out what it described as its requirements for assuming risk. There were four requirements in all: a completed Income Protection Proposal Form; Employee Declaration Forms in respect of all members with benefits exceeding the free cover limit of £75,000; a written confirmation from Norton Rose that all members were actively at work on 20 January 2000; and a deposit premium cheque. At the end of the letter, Swiss Life thanked Mercer for having placed the business with it.[22]All four of Swiss Life’s requirements were duly fulfilled. On 29th January 2000, Mercer forwarded to Swiss Life a cheque in respect of the deposit premium. On 25th February 2000, Mercer supplied Swiss Life with all “actively at work” details as at 19th January 2000. Norton Rose completed a Swiss Life Group Proposal Form in respect of Income Protection on 24th February 2000 and this was sent to Swiss Life by Mercer under cover a letter dated 1st March 2000. Finally, on 1st March 2000, Mercer confirmed to Swiss Life its receipt of the Employee Declaration Forms and, it is to be inferred, these were duly completed by those individuals at Norton Rose who wished the benefit of cover in excess of the free cover limit and forwarded to Swiss Life. It appears that there was nothing either exceptional or exceptionable in any of the material supplied by Mercer to Swiss Life, although it is to be noted that, in the Proposal Form, Norton Rose identified as one of the requested policy details that the benefit escalation rate during payment was to be limited to RPI subject to a maximum of 5%. This, of course, accorded with what Mercer had identified in its letter to Swiss Life dated 19th January 2000 in response to which Swiss Life had agreed to come on risk.[23]In its letter to Swiss Life of 1st March 2000, Mercer expressed the hope that all outstanding issues had been settled, and requested receipt of Inception Accounts (containing a statement of benefits and cost) as soon as possible. These Accounts were sent to Mercer by Swiss Life on 8th March 2000. They stated on their face that they applied to the period from 20 January 2000 to 19 January 2001.[24]The documents show that, on 29th March 2000, Belinda Noble of Mercer telephoned Swiss Life to say that the renewal date was 1 October and to ask for corrected Inception Accounts. These were sent out to Ms Noble of Mercer under cover of a letter dated 12th April 2000.[25]In the meantime on 10th March 2000, Swiss Life sent Mercer the Group Income Protection Insurance Policy with copies of relevant documents. I infer that, attached to the policy (which in the first place comprised the policy wording and schedule), was a Table dated 10th March 2000 in which were set out the particular details of the insurance of the scheme. Those details included a reference to benefits being paid as a proportion of salary, a benefit escalation rate of 5% per annum compounded and a renewal date of 20th January (without identification of any year). The Policy Date given in the Table was 10th March 2000 whilst the commencement date was given as 20th January 2000. In relation to premium, the Table provided:
“The premium payable in each Policy Year in respect of each Member shall be determined as at the first day thereof at the rate of £15.42 for each £1000 of Scheme Benefit per annum.”
[26]The policy Schedule provided, in material part, as follows:
“Commencement Date” shall mean the date specified in the Table annexed. “Deferment Period” shall mean the continuous period between the date of commencement of Disablement and the date on which the Scheme Benefit or Partial Scheme Benefit first becomes payable as specified in the Table annexed .. “Policy Year” shall mean the period commencing on the Commencement Date and on each anniversary of it or such other period as may be agreed in writing between Swiss Life and the Employer. “Renewal Date” an anniversary of the Commencement Date or such other date as may be specified in the Table. ………….. GENERAL CONDITIONS shall mean the date specified in the Table annexed. shall mean the continuous period between the date of commencement of Disablement and the date on which the Scheme Benefit or Partial Scheme Benefit first becomes payable as specified in the Table annexed .. shall mean the period commencing on the Commencement Date and on each anniversary of it or such other period as may be agreed in writing between Swiss Life and the Employer. an anniversary of the Commencement Date or such other date as may be specified in the Table. GENERAL CONDITIONS 8. …. Swiss Life reserves the right .. to alter the rates of premium at any time after the expiration of a period of two years from the Commencement Date and each subsequent period of two years thereafter or on or at any time after the expiration of such other period as may have been agreed in writing between Swiss Life and the Employer pursuant to the General Conditions relating to the determination of premiums, PREMIUMS The premium payable in each Policy Year in respect each Member .. shall be determined as at the first day of the Policy Year at the rates set out in the Table to this Schedule. Such rates shall apply from the Commencement Date for a period of two years or such other period as may be agreed in writing between Swiss Life and the Employer. …… TERMINATION OF INSURANCE Notwithstanding any other provision hereof the insurance hereunder of a Member including the payment of a Scheme Benefit or Partial Scheme Benefit shall terminate immediately upon: (v) termination of the insurance of the Scheme with Swiss Life other than Benefit that is being paid under this policy at the date of termination or Benefit becoming payable at the end of a Deferment Period that is current at the date of termination subject to notice of Disablement being provided to Swiss Life in accordance with the terms of this policy. ……………. NOTICE OF DISABLEMENT The Employer shall forward notice of Disablement together with a completed claim form to Swiss Life at least ten weeks before the expiry date of the Deferment Period. Benefit will not be payable in any event in respect of any period of Disablement that is earlier than the date of receipt by Swiss Life of such notice. No Benefit shall be payable in respect of any claims not notified to Swiss Life within ninety days following the end of the Deferment Period. PAYMENT OF BENEFIT Benefit shall be payable when Disablement of a Member has occurred for the Deferment Period and payment of the Benefit shall continue thereafter so long as the Disablement of the Member continues uninterrupted, provided that no Benefit shall be payable in respect of (i) the Deferment Period …… The amount of the Benefit payable in respect of a Member shall be the amount for which he was insured immediately prior to the commencement of the Deferment Period.”

GENERAL CONDITIONS

[27]About five months later on 18th August 2000, Ms Noble of Mercer wrote to Swiss Life to state that it had been brought to her attention that a number of details in the policy schedule (by which, she must have been referring to the Table) were incorrect. She drew specific attention to the benefit escalation rate (which, she said, should “be limited to an increase of RPI, subject to a maximum of 5% per annum in course of payment”); to the fact that the renewal date should be 1st October and not 20th January; and, lastly, to the fact that the reference to salary in the equity partners’ policy document should be replaced by one to earnings (presumably because the reference to salary was inapposite in connection with the remuneration of equity partners). On 31st August 2000, Swiss Life responded to Ms Noble’s letter by supplying her with revised “policies” (in fact, a revised Table) showing the amendments that Ms Noble had requested. The policy date given in this new Table was 31st August 2000 while the commencement date remained 20th January 2000.[28]It is possible that Ms Noble’s attention was drawn to the inaccuracies in the earlier Table as a consequence of a letter to her from Swiss Life dated 12th August 2000 in which Swiss Life had stated that the Norton Rose Group Income Protection Scheme fell due for renewal on 1st October 2000 and had requested, so that the renewal might be processed, the completion and return to it of a Renewal Information Form. Be that as it may, the Renewal Information Form was a relatively simple document requiring only details of the total numbers of insured lives and benefits/salaries, of individuals with benefits over the free cover limit, and of late or discretionary entrants into the Scheme. The required information was provided to Swiss Life by Mercer in a letter dated 16th October 2000 and, in due course on 24th November 2000, Swiss Life issued renewal accounts for the period 1st October 2000 to 30th September 2001 based on that information.[29]It is common ground between the parties that the insurance was subsequently renewed with effect from 1st October 2001.

THE CLAIMANT’S CASE

[30]Whilst the Claimant accepts that a contract of insurance between Norton Rose and Swiss Life was entered into on 19th or 20th January 2000, she contends through her counsel, Mr. Donald Broatch, that this first contract was an interim contract which lasted until it was replaced or superseded by a new contract entered into by Norton Rose with Swiss Life on 31st August 2000. This is when, according to the Claimant, the policy was finally agreed. Thereafter, the Claimant contends, fresh contracts were entered into between Norton Rose and Swiss Life upon the first renewal on 1st October 2000 and subsequently upon the second renewal on 1st October 2001.[31]The Claimant submits that, by virtue of the Notice of Disablement and Payment of Benefit provisions in the policy Schedule, her cause of action for benefits payable in respect of her claimed disablement accrued at the end of the Deferment Period applicable to her disablement: namely, on 9th November 2000. She says that one must then identify the contract of insurance which was in existence at the end of the Deferment Period since it is under such a contract that her cause of action will have arisen. She proceeds to argue that, if that contract was entered into after 11th May 2000, then she is entitled to enforce the accrued cause of action in her own name and in her own right by virtue of the Contracts (Rights of Third Parties) Act 1999.[32]The Claimant’s primary case is that the contract of insurance that was in existence at the time when the Deferment Period in respect of her disablement ended was that entered into between Norton Rose and Swiss Life on 1st October 2000 when the insurance was first renewed. Her secondary case is that, if the renewal argument is rejected, then the applicable contract was that entered into when the policy was agreed on 31st August 2000. As an alternative case, the Claimant suggests that Swiss Life committed a breach of contract on 31st January 2002 when it first refused to continue paying benefits to her and that the contract in existence at the time when this occurred was that entered into upon renewal on 1st October 2001.[33]The Claimant completes her argument by saying that, since each of the three contracts of insurance that she has identified was entered into after 11th May 2000, she is entitled pursuant to the arbitration provisions in the policy wording to bring an arbitration against Swiss Life in her own name for substantial damages on account of breach.

SWISS LIFE’S CASE

[34]Swiss Life denies that the contract of insurance entered into between itself and Norton Rose on 19th/20th January 2000 was provisional but, if it was, it contends that it ceased to be so on 10th March 2000 when the policy documentation was issued. As for the re-issuance of policy documentation on 31st August 2000, Swiss Life says that this does not constitute the entry into a fresh contract within the meaning of section 10 of the Act, such as to give rise to third party rights which did not previously exist. Nor, Swiss Life says, was any fresh contract entered into on or taking effect from 1st October 2000; it submits that there was no renewal on that date in any contractual sense, and that what happened was simply that information contemplated by the January 2000 contract was provided so that Swiss Life could confirm the applicability of the unit rate and could calculate the premium payable in the next policy year.[35]At all events, Ms Jess Connors, who appears on behalf of Swiss Life, submits that there is a more fundamental issue between the parties than the identification of what contracts were entered into and when. That issue is: assuming that the Claimant has been continuously disabled since 11th May 2000, can it be right that Swiss Life’s liability to pay benefit in relation to her disablement falls to be determined under any contract entered into after 11th May 2000? Swiss Life says, not.

CONTRACTS OF INSURANCE

[36]There was undoubtedly a contract of insurance entered into by Norton Rose with Swiss Life on 19th January 2000. Mr. Broatch likened it to a contract which provided interim cover on a temporary basis until the insurer has had time to consider the proposal and decide whether or not finally to accept the risk. Therefore, submitted Mr. Broatch, a finally concluded contract was not in fact entered into until the policy agreement was made on 31st August 2000.[37]I cannot accept Mr. Broatch’s submission. I do not consider that the contract entered into on 19th January 2000 was either on its face or inferentially a conditional contract, or a contract that was to have effect only until Swiss Life had had the opportunity of deciding on the basis of further information to be supplied whether or not it wished to insure Norton Rose. I am compelled to this conclusion by the following:(i) The specification sent by Norton Rose was very detailed. It provided Swiss Life with most, if not all, of the information, including claims information, that Swiss Life needed in order to be able to provide a comprehensive quotation together with Specific, as well as General, terms and conditions for Income Protection.(ii) The quotation dated 10th December 1999 was not conditional, was clearly the result of a detailed underwriting analysis, and was supported by three closely typed pages of attached terms and conditions which would leave the reader in no doubt as to the content of the insurance contract that would govern the parties’ respective rights and obligations in the event that it was accepted.(iii) By its fax dated 19th January 2000, Mercer invited Swiss Life to come on risk as from midnight and asked Swiss Life to confirm. It clearly was based on the quotation terms that Swiss Life had provided. Whilst the fax promised the supply of further details, it does not seem to me that it envisaged the confirmation by Swiss Life of anything other than the provision of unconditional and permanent insurance. In particular, the four items of material promised at the end of the fax were, it seems to me, more matters of administration and form than of substance. Thus, the “actively at work” details were necessary to enable Swiss Life to identify those members of the Scheme who were absent from work through injury or illness at the Commencement Date and who, therefore, would not become insured unless and until they returned to work; the full inception data were the details of the numbers of lives and the amounts of earnings making up the benefit roll of members to be insured under the Scheme; the deposit premium obviously was required to be paid but, while the contract might have lapsed if it was not paid, the fact that it remained to be paid did not transform the contract into an interim one; and the forms to be completed were not identified and, it seems to me, are as likely to have been a reference to such forms as standing order forms and forms to be signed by members of the Scheme with benefits exceeding the free cover limit as to a proposal form.(iv) Swiss Life’s fax in reply was an unequivocal and unconditional agreement to assume risk on the terms and conditions of the quotation from the time and on the date requested.(v) Thus, it seems to me that an unconditional and permanent contract was then entered into.[38]Mr. Broatch supported his submission by referring me to the cases of Mackie v European Assurance Society (1869) 21 LT 102, Roberts v Security Co. Ltd. [1897] 1 K.B. 111 and HIH Casualty & General Insurance Ltd. v New Hampshire Insurance Co. [2001] 2 All ER (Comm.) 39. I do not consider that those cases assist him.[39]Mackie v European Assurance Society (loc. cit.) was concerned with what appears on its face to have been an interim cover granted by insurers for a period of one month during which they were free, upon further underwriting inquiry, to refuse to grant a policy of insurance and to terminate cover at the end of the month. For the reasons that I have expressed, I do not consider that the contract of insurance that was entered into in this case was of the same temporary nature. In Roberts v Security Co. Ltd. (loc. cit.), the Court of Appeal specifically only dealt with the interpretation and application of a policy of insurance that succeeded an earlier “protection-note” that appears expressly to have granted provisional protection. I do not gain any assistance from that case. HIH Casualty & General Insurance Ltd. v New Hampshire Insurance Co. (loc. cit.) does not, in this context, take the matter any further. It seems to me that I have to construe the contract in this case on the basis of the circumstances in which it was concluded. While I accept that temporary contracts of insurance might in certain situations be entered into and then be succeeded by permanent contracts of insurance subsequently entered into, this does not much advance the inquiry into the first question which I have to address: which is whether the contract entered into on 19th January 2000 was interim or permanent? I consider that it was the latter.[40]It was only after what I consider to be the permanent contract entered into on 19th January 2000 that Swiss Life identified in its fax of 20th January what it described as its requirements for assuming risk. It seems to me that those requirements were probably, in the circumstances that I have already set out, requirements more of form and administration than of substance and, even to the extent that they were of substance, they do not appear to me to have been intended (or, in the event, treated) by the parties as altering the character of permanence of the contract of insurance already entered into. Thus:(a) The requirement that all members with benefits exceeding the free cover limit should complete Declaration Forms might have had a bearing on the extent to which certain individuals were covered by the insurance but it did not have any impact on the nature of the original contract of insurance. If no Forms had been completed, the only effect would have been to limit the cover provided to all members to the free cover limit of £75,000.(b) The requirement that there should be written confirmation that all members were actively at work on 20 January 2000 was relevant to the ascertainment of any members who might not benefit from the insurance as a result of being absent from work on that date. But it had no impact on the nature of the contract that had already been entered into.(c) The deposit premium was required to be paid but, as I have indicated above, the fact that it remained to be paid does not mean that the contract already entered into was interim.(d) The requirement that there should be a completed Income Protection Proposal Form might normally be regarded as a condition of permanent cover for the future but, in the context of this case, I do not so regard it. Given all the details that had already been provided by Norton Rose and since the completion of a Proposal form was nowhere mentioned, it would appear, either in the original specification or in the quotation or in the attached terms and conditions, I consider that, in this case, the completion of the Form was required more as a matter of administration and form than of substance.[41]If I am wrong about the nature of the contract of insurance that was entered into on 19th January 2000, and that contract is correctly to be regarded as temporary, then it seems to me that it was succeeded by a later, permanent contract of insurance entered into on 10th March 2000. By that date, Swiss Life had received all the information it had requested in its fax of 20th January 2000 and had sent out to Mercer the Inception Accounts together with an invoice for outstanding premium; and on that date, Swiss Life issued its Group Income Protection Insurance policy, policy Schedule and Table. The fact that the Table that was issued referred to a renewal date of 20 January is, in my judgment, of no relevance. It was obviously a mistake since it failed to accord with the original specification; with the renewal date stipulated by Mercer in its fax dated 19th January which Swiss Life accepted by a fax on the same day in granting (on this hypothesis, temporary) insurance; and also with the renewal date given in the Proposal Form which, by its conduct in issuing the policy, it seems to me Swiss Life had accepted.[42]Likewise, it does not appear to me to be significant that the Table issued with the policy on 10th March 2000 provided for a benefit escalation rate of 5% per annum compound as opposed to RPI subject to a maximum of 5% per annum. One may interpret this in one of two ways. First (which is the interpretation that I prefer) the Table was, in fact, fully in accord with the quotation, and it may be said that the contract entered into on 19th January 2000 was on the terms of that quotation. Thus, the Table, which, I infer, was intended to reflect the terms agreed on 19th January 2000, was in fact accurate in this respect. Alternatively, the Table failed to reflect the Scheme benefit basis set out in Mercer’s letter of 19th January 2000 which Swiss Life had accepted by its own fax of the same date. Whichever interpretation is adopted does not appear to me to be significant in the context of the case: there was a clear intention to enter into a binding contract and the fact that there might have been a lack of consensus in relation to a minor term did not negative that contractual intent.[43]Mr. Broatch submitted that the policy issued by Swiss Life on 10th March was merely a draft which was not accepted by Norton Rose since on 18th August 2000, Mercer on behalf of Norton Rose submitted an altered version requiring a change to the renewal date from 20 January to 1 October. This, it seems to me, is a mischaracterisation of the facts. As I have indicated above, the Table issued on 10th March mistakenly diverged from what had been agreed on 19th January 2000. Moreover, on 29th March 2000, Belinda Noble of Mercer telephoned Swiss Life to say that, contrary to the date set out in Inception Accounts that Swiss Life had sent out, the renewal date was, in fact, 1 October. This was accepted by Swiss Life on 12th April 2000.[44]I also cannot accept Mr. Broatch’s submission that a fresh contract of insurance was entered into on 31st August 2000 within the meaning of the Contracts (Rights of Third Parties) Act 1999. All that then happened was the re-issuance of the policy Table showing a correction of the renewal date to reflect what had been originally agreed both in January and also, in so far as relevant, March/April 2000; and an alteration to the benefit escalation rate. The latter was at most a minor variation to the contract entered into on 19th January 2000 (alternatively 10th March 2000). It was not the entering into of a new or fresh contract of insurance. A different analysis might apply if the alteration to the original contract of insurance were fundamental in some way. However, the alteration effected on 31st August 2000 was extremely minor and it would, in my judgment, be wrong to think that an amendment (if such it was) of that nature to an existing contract was intended by parliament to constitute the entering into of a new contract for the purposes of the Contracts (Rights of Third Parties) Act 1999.[45]Nor am I impressed with the argument that a fresh contract was entered into on 31st August 2000 (alternatively 10th March 2000) because it was only then that the full policy wording was issued. Mr. Broatch sought to draw support for that proposition from the judgment of Rix L.J. in HIH Casualty & General Insurance Ltd. v New Hampshire Insurance Co. (loc. cit.). However, it is important to bear in mind the distinction between the entering into of two separate contracts (for which Mr. Broatch contends) and the entering into of a binding original contract on certain terms which are then superseded by terms issued subsequently. It seems to me that the proper analysis in the instant case is that there was a binding contract entered into on 19th January 2000, which was not of a temporary nature, the terms of which were then probably superseded by the policy issued on 10th March, as later corrected (or at most amended) on 31st August 2000: with the result that, while the contract was entered into on 19th January 2000, the contractual rights and obligations by which the relationship between Norton Rose and Swiss Life is regulated are to be found recorded in the last policy document.[46]For reasons that will become apparent later in this judgment, I do not consider that it is necessary to consider whether the contract of insurance which, as I find, was entered into on 19th January 2000 was renewed on 1st October 2000. However, since the point was fully argued, I think it appropriate briefly to set out my views.[47]I do not consider that the contract of insurance was renewed, in the sense that a new contract was made, on 1 October 2000: Swiss Life did not, it appears to me, have available to it the exercise of a relevant discretion whether to grant or decline another year of insurance as from that date: c.f. Stokell v Heywood [1897] 1 Ch. 459.[48]The starting point of the inquiry is the definition of Renewal date in the policy wording. This provides that it is either “an anniversary of the Commencement Date or such other date as may be specified in the Table annexed.” It is interesting that the reference to “anniversary” is preceded by the indefinite article which, like the second alternative in the definition, is suggestive that the Renewal Date might well not fall upon the expiry of one year after the Commencement Date. This is confirmed by the Table which identifies 1st October as the Renewal Date. No year is specified but, since the only two candidates are 2000 and 2001, the Renewal Date falls either approximately 10 months or approximately 22 months after the Commencement Date of 20th January 2000.[49]It seems to me that the Renewal Date takes its colour from other terms in the policy Schedule and Table. In the first place, in relation to the setting of the premium rate, the Table implicitly contemplated that the set premium rate would extend beyond one Policy Year: this is reflected in the provision in the Table:
“The premium payable in each Policy Year in respect of each Member shall be determined as at the first day thereof at the rate of £15.42 for each £1000 of Scheme Benefit per annum.”
. This, it seems to me, is a reasonably clear indication that the parties to the insurance envisaged that the term of the contract would extend beyond 1st October 2000 before being replaced by a new contract: i.e. before renewal. This conclusion is, in the second place, reinforced by the “Premiums” term in the Schedule to the policy where these refer to the premium rates applying from the Commencement Date for a period of two years or such other period as may be agreed in writing between Norton Rose and Swiss Life. This implies a default policy term of two years. Moreover, it does not appear to me that it was agreed between Norton Rose and Swiss Life (in writing or otherwise) that the premium rates set out in the Table should apply only to the period up to 1st October 2000. In the third place, and following from the above, there was a distinction in the policy schedule between those anniversary or other dates when, because of the beginning of a Policy Year, the premium payable in respect of that Year fell for determination in accordance with premium rates already set out in the Table; and those dates when Swiss Life, by the exercise of an independent underwriting judgment, could undertake a rate review and propose it to Norton Rose for acceptance. It is implicit that the parties agreed that what was to occur on 1st October 2000 was akin to the simplified administration procedure proposed in the quotation dated 10th December 1999, and accepted by Norton Rose by its fax of 19th January 2000: namely, a calculation of the premiums for the following year without a rate review; and not that there should be a renewal of the contract of insurance after the exercise of discretion by Swiss Life as to whether it wished to continue to insure Norton Rose, or the exercise of a discretion by Norton Rose as to whether it wished to continue to be insured by Swiss Life.[50]In coming to this conclusion I have confined myself to the construction of the policy, its Schedule and Table. I do not consider that, in the absence of any case for rectification or estoppel, I should have regard to the conduct of the parties and their correspondence after the contractual wording had been agreed. Having said that, while the correspondence after the contractual wording had been agreed lays testament to the fact that the parties spoke consistently in terms of a renewal on 1st October 2000, I venture to doubt whether they were intending to speak with any determined contractual intent. I consider that, in the relevant period in 2000, they were equating renewal with the beginning of a new Policy Year under an existing and continuing contract of insurance, and that they were not thinking in terms of the entering into of a new contract. This is in contrast with the position on renewal in October 2001 when a rate review took place; a new unit rate was quoted by Swiss Life and guaranteed for two years from 1st October 2001; and Norton Rose expressly notified Swiss Life through Mercer that it had decided to remain insured with Swiss Life. What happened in 2001 was redolent of a fresh contract being entered into. What happened in October 2000 was not.

ACCRUAL OF CAUSE OF ACTION

[51]Even if the contract of insurance between Norton Rose and Swiss Life had been renewed on 1st October 2000, I do not consider that this would avail the Claimant. In my judgment, the contract that governs Swiss Life’s alleged liability to pay an indemnity in respect of the Claimant’s disablement, in other words, the contract under which the Claimant’s cause of action has accrued, is that which was entered into on 19th January (alternatively 10th March) 2000. That was the contract by which insurance was provided to Norton Rose in connection with the Claimant and under which the Claimant’s physical condition was covered at the time when she became allegedly disabled and the relevant Deferment Period began.[52]It seems to me that the matter may be tested in this way: assume that, on the day after the Claimant had to cease work on the ground of her disablement, the contract of insurance had come to an end and had not been replaced. Would Norton Rose have a cause of action against Swiss Life under the contract? The answer would be that Norton Rose would have a cause of action under the contract and that it would make no difference to this conclusion that the Deferment Period would not have expired, and therefore the cause of action would not have come into existence, until after the contract of insurance had come to an end. The termination of the contract would not, on its terms, have precluded a cause of action thereafter accruing under it.[53]Thus the “Termination of Insurance” provision in the policy Schedule made it clear that, whilst the termination of an insurance of a Member takes place immediately on termination of the insurance of the Scheme with Swiss Life, this neither extinguishes the right to continuing payments of Benefit under the policy nor precludes the accrual of Benefit as due at the end of a Deferment Period current at the date of termination (subject to contractual notice being provided under the terms of the policy). As a result, the “Notice of Disablement” and “Payment of Benefit” provisions in the policy Schedule would continue to apply to a disablement occurring prior to termination of the contract of insurance whether or not the Deferment Period in respect of that disablement had expired before termination. It is evident from these provisions that the policy effectively survives for the purposes of the accrual of a cause of action in respect of a disablement commencing prior to the date of termination where the Deferment Period has yet to expire.[54]What is important, therefore, is the onset of disablement - and the commencement of the Deferment period rather than its expiry - during the currency of the contract of insurance. To put the matter into its factual context in this case, when on 22nd September 2000 Mercer notified Swiss Life of a potential claim under the insurance in connection with the Claimant’s physical condition, it was doing so in relation to a potential claim arising under the contract of insurance that covered the Claimant at the time when she first became disabled: i.e. under the contract of insurance entered into on 19th January 2000 (alternatively, 10th March 2000). It was not doing so in relation to a potential claim to be made under a contract of insurance that had not yet been entered into which, if certain of the Claimant’s arguments were correct, would be the unlikely position.[55]The policy schedule does not explicitly deal with the situation that might arise in relation to a Member who, on the Commencement Date of the policy, was absent from work because of disablement but in relation to whom the Deferment Period, as defined in the Table, has not expired. It seems to me that the answer is to be found implicitly both in the nature of the contract of insurance at issue and also in the terms of cover. It is in the nature of an insurance, and this contract of insurance was no exception, that it insured against the occurrence of fortuities. In the case of this contract, it seems to me that the principal fortuity or risk insured against was the occurrence of disablement affecting a Member of the insured Scheme during the period of the insurance and running continuously for the Deferment Period whether or not that Period expired before or after the termination of the insurance. It would be improbable if Swiss Life were intending to cover a Member who was already suffering from a disablement at the Commencement Date of the insurance.[56]The fact that the contract was not designed to insure in respect of a Member whose onset of disablement preceded the Commencement Date finds support in two policy terms. First, the provision headed “Payment of Benefit” refers to the amount of Benefit payable being that for which the Member was insured immediately prior to the commencement of the Deferment Period. This suggests that the Deferment Period - and thus the disablement - must have started during the period of insurance. It is unlikely that the reference to insurance in the context could be a reference to some preceding contract of insurance, perhaps with some completely different insurer. Moreover, if there were no preceding contract of insurance during the currency of which the disablement occurred, the reference to such insurance would make no sense. It can only sensibly be a reference to the current contract of insurance under which the disablement will have occurred. Secondly, the definition of salary in the Table is to the salary at the date of disability. Since benefits under the insurance were calculated as a proportion of salary (or earnings) it would be inherently unlikely if the salary in question were to be that applicable not on the Commencement Date or thereafter during the currency of the policy but, rather, on some date before inception.[57]Finally in this context, it is not insignificant to note that, when the contract of insurance was first agreed on 19th January 2000, Mercer undertook to confirm “Actively at Work” details as soon as possible. It is partly against this background that the contract was concluded. Even if one is not permitted to have recourse to the terms of the quotation in order to construe the policy documents (c.f. Rix L.J. in HIH Casualty & General Insurance Ltd. v New Hampshire Insurance Co. (loc. cit.)), it is to be inferred from this undertaking and its acceptance by Swiss Life against the background of which the policy documents were issued, that it was the purpose of the insurance to extend cover to Members who were actively at work at the Commencement Date and not to do so, at least in the first instance, in respect of those Members who were not. This lends colour to the somewhat imprecise terms of the policy documents and completes the analysis which concludes that the accrual of a cause of action is dependent on disablement occurring to a Member during the currency of the contract of insurance and thereafter continuing for the Deferment Period whether or not that Deferment Period expires during the policy term.[58]It is for these reasons that I conclude that the contract of insurance under which a cause of action for benefits payable in respect of the Claimant’s claimed disability has accrued was that entered into on 19th January 2000, alternatively 10th March 2000; and, at all events, that the cause of action in respect of the Claimant’s claimed disability did not accrue either under the contract of insurance entered into on renewal on 1st October 2001 or, if contrary to my judgment there was an earlier renewal, under any contract of insurance entered into on 1st October 2000. The fact that a cause of action might have accrued while one or other of the latter two contracts was in existence does not warrant the conclusion that the cause of action accrued under either. In my judgment, it did not.[59]Mr. Broatch has suggested that, if there were a renewal on 1st October 2000, the Commencement Date of the insurance would remain 20th January 2000 with the consequence that any onset of disablement thereafter and before expiry or termination of the renewed insurance would be covered by its terms. I do not consider that this can be right. In the first place, I am not aware that, on the alleged renewal of 1st October 2000, any Table or other contractual document was issued containing a Commencement Date of 20th January 2000. Secondly, if there were a renewal on 1st October 2000, the original insurance contract would come to an end and, therefore, unless (and it does not appear to me that it was) otherwise agreed, it seems to me to follow that the Commencement Date in the original Table, applicable as it was to a prior contract, would not have any contractual effect in relation to a successor contract taking effect from a later date. Thirdly, if there were a renewal on 1st October 2000, this would constitute a new contract of insurance taking effect, one would presume in the absence of any contrary agreement (and it does not appear to me on the facts that there was any such contrary agreement), from the date of the renewal: namely 1st October 2000 and not some retroactive date.[60]My conclusion in relation to the 1st October 2001 renewal is reinforced by recognition of the fact that, assuming that the Claimant was disabled as and when she claims, Swiss Life came under an obligation and liability to pay benefits in respect of her disablement before the 1st October 2001 contract was ever made. It follows as a matter of legal logic that, if the Claimant is entitled to enforce a term of a contract of insurance for her benefit in respect of her disablement, which Swiss Life has breached, it will not be a term of a contract that was entered into only after that liability began. The fact that the 1st October 2001 contract was that in force at the time when Swiss Life allegedly breached its insurance obligations is, therefore, nothing to the point.[61]Mr. Broatch has also submitted that, if Norton Rose and Swiss Life did not finally conclude their contract until the issuance on 31st August 2000 of the (correct) Table, the Claimant will have acquired a cause of action in respect of her alleged disablement under that contract with the consequential vesting in her of rights pursuant to the Contracts (Rights of Third Parties) Act 1999. He draws to my attention that the Commencement Date in that Table, like in its predecessor, was 20th January 2000. The difficulty which Mr. Broatch has with this submission lies in its premise, which I have already rejected. For the several reasons that I have given above, I do not consider that that Norton Rose and Swiss Life entered into a (fresh or indeed final) contract of insurance on 31st August 2000 within the meaning of section 9(2) of the Act. SUMMARY[62]On the essential issue that arises between the parties, which is whether the Claimant can establish that a cause of action for benefits payable in respect of her claimed disability has accrued under a contract of insurance entered into between Norton Rose and Swiss Life after 11th May 2000, I conclude against the Claimant. I consider that the contract of insurance under which the Claimant’s cause of action has accrued was entered into on 19th January 2000, alternatively on 10th March 2000. I do not consider either that there was a relevant contract entered into on 31st August 2000 or that there was a renewal of the contract on 1st October 2000. Moreover, even if there were a renewal taking effect on and from 1st October 2000, the Claimant has no right of action in respect of her assumed disablement under that contract or, for that matter, under the fresh contract of insurance that (it is common ground) was entered into upon renewal on 1st October 2001.[63]It follows that I conclude that the Claimant’s claim fails. She is not entitled by virtue of the Contracts (Rights of Third Parties) Act 1999 to institute and prosecute arbitration proceedings against Swiss Life in order to have determined the issue whether she is and has been since 31st January 2002 entitled to be paid benefits by Swiss Life under the Group Income Protection Insurance Policy.[64]I wish to express my gratitude to Counsel for all their considerable assistance in this case. I shall also welcome their assistance on the terms of the appropriate orders that follow from my judgment, the drawing up of the orders, all issues of costs, and such other directions as they might consider appropriate.

Cited in 1 later judgment