Coverage for ‘Doomsday or Armageddon’ data breach class actions: insurance implications of the Court of Appeal’s decision to confirm Morrisons’ vicarious liability for employee’s deliberate actions

In the recent judgment in Wm Morrisons Supermarkets Plc v Various Claimants [2018] EWCA Civ 233 the Court of Appeal has dismissed an appeal against the High Court’s decision that Morrisons was vicariously liable for its employee’s misuse of data, despite: (i) Morrisons having done as much as it reasonably could to prevent the misuse; and (ii) the employee’s intention being to cause reputational or financial damage to Morrisons itself. It is understood that Morrisons intends to appeal to the Supreme Court. Our full analysis of the Court of Appeal’s decision can be found here.

Companies now find themselves exposed to potential UK data breach class action claims, including for distress-based damages, based on vicarious liability, even if they have appropriate safeguards in place and even if they are the intended victim of the breach. Day by day businesses find themselves responsible for higher volumes of personal data; and the risk of data breach claims is exacerbated by the legislative changes made by the GDPR, increasing public awareness of data protection issues and the publicity that this case has attracted. In addition, the facts of Morrisons were such that the company had been found not to be in breach of data protection laws. Future class action claims may be even easier to launch in circumstances where a company has been found to breach the GDPR, for example, by not having appropriate security measures in place. It is understood that Morrisons intends to appeal to the Supreme Court.

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Brexit Continuity Clauses: what policyholders need to know

We have assisted Airmic to produce a guide for policyholders on Continuity Clauses, which some in the insurance market are using to prepare for the impact of Brexit.

The clauses aim to provide a level of contract continuity in the event that the UK leaves the EU without suitable transitional arrangements being put in place or without an agreement allowing UK insurers to perform cross-border business into the EEA.

The guide explains those Brexit issues of particular relevance to policyholders and explains what Continuity Clauses aim to do. Policyholders are encouraged to discuss the implications of Brexit for their insurance programme with their broker and this guide should assist policyholders in those discussions. Click here to access the guide.

Herbert Smith Freehills is Airmic’s Preferred Service Provider on insurance law issues and has assisted Airmic in producing a number of its technical guides over the past few years.

Paul Lewis
Paul Lewis
Partner, London
+44 20 7466 2138
Geoffrey Maddock
Geoffrey Maddock
Partner, London
+44 20 7466 2067
Sarah Irons
Sarah Irons
Professional Support Lawyer, London
+44 20 7466 2060

Alison Matthews
Alison Matthews
Consultant, London
+44 20 7466 2765

CAN A LAWYER BE AN ARBITRATOR WHERE THE REQUIREMENT IS FOR “EXPERIENCE OF INSURANCE OR REINSURANCE”?

In Allianz Insurance and Sirius International Insurance Corporation v Tonicstar Limited [2018] EWCA Civ 434, the Court of Appeal has reversed the decision of the High Court on whether a party-appointed arbitrator met the contractual requirements as to requisite experience. The dispute arose under a reinsurance contract that incorporated the “Excess Loss Clauses” of the Joint Excess Loss Committee. The arbitration clause required the arbitrators to have “experience of insurance and reinsurance”. The Court of Appeal held that that an English QC with experience of insurance and reinsurance law was sufficient to comply with this requirement.

This decision is of particular interest as such challenges to arbitrators rarely come before the courts. It highlights the importance of drafting arbitration clauses clearly, particularly where parties require their arbitrators to possess certain qualifications or experience. If insurance parties want a tribunal convened of one or more market practitioners, as opposed to lawyers with sector experience, this should be clearly expressed.

For more on this decision, see our arbitration team’s blog post here.

CONSTRUCTION OF EXCLUSIONS IN INSURANCE POLICIES

In Crowden and Crowden v QBE Insurance (Europe) Ltd [2017] EWHC 2597 (Comm) the Commercial Court found in favour of the Defendant insurer on the disputed construction of an “insolvency” exclusion in a professional indemnity insurance policy.  The case is a useful reminder of the approach which the English Courts take to the construction of exclusions in insurance contracts. Continue reading

Non-disclosure clauses: when is a non-disclosure “deliberate or fraudulent”?

In Mutual Energy Ltd v Starr Underwriting Agents Ltd [2016] EWHC 590 (TCC), Mr Justice Coulson considered the proper construction of a clause which prevented insurers from avoiding the policy for non-disclosure unless that non-disclosure was "deliberate or fraudulent".  The Judge held that a non-disclosure would only be "deliberate or fraudulent" if the insured deliberately withheld information knowing that it was required to be disclosed.  Insurers were not entitled to avoid the policy where the insured withheld information in the honest but mistaken belief that the information did not need to be disclosed.

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High Court construes “in any way involving” in liability policy

The High Court has held that the words "in any way involving any act, error or omission" before a certain date in an exclusion clause in a professional indemnity policy meant "indirectly caused by".  The act, error or omission must be part of the chain of causation leading to the insured's liability for the underlying claim, not merely part of the historical context or background, for the exclusion to bite.  The policy in question also included (a) a notification clause providing that notification as soon as practicable was a condition precedent to recovery; and (b) a continuity of cover clause.  On the facts the insured had given notice under the 2013/2014 policy in accordance with the notification clause.  The Court stated, obiter dicta, that even if the insured should have notified the claim under the 2012/2013 policy, it would have been entitled to cover under the 2013/2014 policy by virtue of the continuity of cover clause.

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Court of Appeal considers meaning of a Product under a Contractors’ Combined Liability Policy

In Aspen Insurance UK Limited v Adana Construction Limited [2015] EWCA Civ 176, the Court of Appeal considered the meaning of a "Product" under the terms of a Building Services Combined Liability Policy. The Court of Appeal adopted a purposive interpretation in the context of a policy which was intended by the parties to cover a wide range of circumstances in which liability would arise.

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