World Challenge Expeditions Limited v Zurich Insurance Company Ltd

The Claimant, World Challenge Expeditions Ltd (“WCE”) is a specialised travel company registered in the UK which provides adventurous, “challenging”, expeditions worldwide for school students (known as “Challengers”). It was formerly a subsidiary of TUI but became part of the Travelopia group of travel companies in 2017 following the acquisition of TUI’s Specialist and Activity sector by KKR.

From at least 2012 to 31 March 2016, WCE had taken out personal accident and travel insurance, including cancellation cover, with Royal & Sun Alliance Ltd (“RSA”). From 1 April 2016, similar cover was provided by Zurich Insurance plc, whose business has since been transferred to the Defendant, Zurich Insurance Company plc (“Zurich”). It is unnecessary for the purposes of this judgment to distinguish further between the two Zurich entities. The present claim concerns Zurich’s Z-Alert Corporate Personal Accident and Business Travel Policy No. 7108302(19) (the “Policy”) which was in force from 1 April 2019 to 31 March 2020.

As everyone knows, COVID-19 (“Covid”) emerged in late 2019/early 2020 and rapidly spread worldwide severely restricting overseas travel. As a result, WCE was obliged to cancel nearly all of its booked expeditions for 2020. Under the applicable legislation, WCE had a statutory obligation in the event of cancellation to refund UK Challengers in full for any payments they had made. Similar regulations applied in the case of EU nationals and, although WCE had more flexibility under its own terms and conditions to offer alternative remedies in the case of overseas Challengers (such as deferrals or diversions), it ultimately repaid more than £10 million which it had received from Challengers by way of deposits and advance payments.

As will appear below, it was the firm belief of WCE that it was insured under the Policy in respect of any deposits which it was contractually obliged to refund to Challengers, such belief having been (in its view at least) confirmed by the fact that both RSA and Zurich had historically settled WCE’s cancellation claims on that basis, albeit that no physical payments were ever made since all such claims fell within the applicable policy deductible. This is denied by Zurich, which contends that on its true construction the Policy only indemnified WCE for irrecoverable costs paid out by WCE to third party suppliers (for example, in respect of flights, accommodation and other trip costs). On that basis, Zurich maintains that WCE is entitled to an indemnity under the Policy of less than £150,000. The difference is stark.

The principal issues between the parties fall into two broad categories: (1) the correct construction of the Policy; (2) whether Zurich is precluded by estoppel or collateral contract from denying that the Policy provided the coverage which WCE thought it had. Further issues arise in relation to aggregation and quantum.

As indicated above, WCE is part of the Travelopia group of companies. Travelopia consists of 123 legal entities registered in 35 different companies grouped into ten divisions. WCE is part of the Education Division and itself has a number of subsidiaries registered in different countries. At the time relevant to this claim WCE partnered with schools to organise and provide expeditions from some 21 different departure countries or groups of countries to around 36 different destination countries or groups of countries, including a number of undeveloped countries off the beaten track. The most important source markets in terms of numbers were the UK, Australia, the Middle East and the USA.

At the time of the claim, the Group Managing Director of WCE was Mr Peter Fletcher, who had joined the company in 2005 as a School Programme Manager. Mr Stuart Morris was the Operations and Products Director responsible for trip planning and logistics, including compliance and health and safety aspects. He also had worked for the company since 2005 in a variety of operational roles. Both men had assumed their current positions in around 2016. Mr James Venn joined the company as a Financial Controller in 2009 and was its Finance and Commercial Director at the relevant time.

Zurich is the well-known insurance company. Mr Aaron Stephens was one of its Senior Underwriters in the Accident & Health (“A&H”) Department, who was responsible for the underwriting of the WCE cover from its inception in 2016. Mr Joe Ratcliffe was the Claims Relationship Manager for WCE from 2016 to 2018 and was succeeded in that role by Ms Lauren Wall. Claims under the cover were handled by the A&H claims handling team, of which Sharna Aylett was the lead manager. Other members of the claims handling team included Mr Daniel Mullan who subsequently left in 2017 to join Zurich’s A&H underwriting team, and Ms Danielle Langford (previously Mace). Another key figure in the events giving rise to this claim was Mr Alexander Blake, an Executive Adjuster, who in 2020 was working as a Marine Cargo, Fine Art and Specie Claims Adjuster but who was asked in February 2020 to support the A&H claims team and thus became involved in the WCE account at that stage.

The brokers when the cover was first placed with Zurich in 2016 were Aon plc (“Aon”) who were the brokers for TUI’s business generally. In February 2017, following the sale to KKR, Travelopia used their own broker, Willis Towers Watson (“WTW”), and WTW placed the renewals for the 2017 policy year onwards. The relevant Account Manager at WTW was Mr Ian Brown, while the Loss Management Executive responsible for managing the relationship with WCE was Mr Thomas Warner.

WCE’s expeditions were focused on personal growth and development. Challengers were generally students aged 13-18 from the UK and Europe, the Middle East, the USA, Australia and New Zealand. Expeditions lasted from 7-27 nights and were led by self-employed leaders with one or two accompanying teachers.

Challengers would sign up for a trip following a presentation at their school which generally took place about 18-24 months prior to the anticipated departure date. WCE would then organise a pre-trip programme to prepare the Challengers and their teachers for what lay ahead. This included a launch meeting at which the WCE account manager would talk about the destination and what Challengers wished to achieve from the trips. There would then be an itinerary planning meeting where Challengers could choose their preferred activities, followed by a two-day camping trip to learn basic survival skills. Closer to the departure date, a final meeting would be held to discuss any last-minute issues such as visa applications and vaccinations. Information and tips were also available on a web portal which Challengers could access as they chose.

As far as payment was concerned, Challengers would pay an initial deposit of around £100-£250 on signing up, followed by monthly or quarterly instalments depending on the length of time to departure and the trip price. The final balance (known as the “balloon payment”) would generally be paid around 60 days before the departure date. Although there was no set formula for the calculation of the balloon payment, it averaged around 60% of the total trip price.

As will be appreciated, there was a substantial lead time between the booking of a trip by the Challenger and the actual departure, during which a considerable amount of work was undertaken by WCE as described above. However, flights would not usually be booked until about 3-4 months prior to departure and payment would not be made to the airline until even closer to the departure date, around 1-2 months before. Accommodation and trips (“in-country costs”) were not paid for until later still, frequently when the trip was already under way. Sums payable by WCE to the self-employed expedition leaders would usually be paid on submission of an invoice after the conclusion of the trip.

The timing of the balloon payment therefore coincided with the requirement to pay for flights, accommodation and other in-country costs. It was not in dispute that WCE typically received around 40% of the total trip cost before having to make any substantial third party outlay and that the trip cost charged by WCE to Challengers included its internal costs and an element of profit.

Although WCE partnered with schools to organise trips, its actual contractual arrangements were for the most part concluded directly with the Challengers and/or their families. Individual contracts were governed by WCE’s terms and conditions (“T&C”s), of which it had various different sets applying in different markets. These had been produced by the central legal teams at TUI and, later, Travelopia, and covered a number of matters including cancellation. While broadly consistent, each set of T&Cs was drafted so as to conform to any applicable legislation. Thus, the T&Cs applicable to UK Challengers reflected the fact that WCE was subject in this country to the Package Travel and Linked Travel Arrangements Regulations 2018 (the “PTR”) (Footnote: ¹ ) and that customer money for UK customers was protected through WCE’s ATOL licence. This was not the case in other jurisdictions.

The T&Cs play a significant part in this claim but it is unnecessary to rehearse them in detail beyond noting that (in very general terms):

What follows is a chronology of the key events set out as neutrally as possible mainly by reference to the contemporaneous documentation. (Footnote: ² ) As will become apparent, there were stark differences of recollection as to what was or was not said at certain key meetings and the parties were diametrically opposed in their submissions as to how some of the communications were properly to be read or understood. These differences will be explored when I come to consider the issues.

WCE had historically enjoyed the benefit of personal accident and business travel insurance which provided cover for medical expenses as well as cancellation. This cover was placed centrally through TUI’s broker, Marsh, and prior to 2016 was written by RSA.

I was provided with the schedule and wording for the RSA policy for the 2015/2016 policy year. The “Insured” under the policy was defined as WCE “and Subsidiary and Associated Companies”, while Individual Challengers, expedition leaders and school leaders were all designated as “Insured Persons” in addition to WCE’s own employees and directors. So far as concerns cancellation, the policy materially provided that:

Cancellation cover under the 2015 RSA policy was subject to a specific £400,000 annual aggregate deductible. In practice, therefore, it was WCE which bore any cancellation expenses, this being cheaper than paying the additional premium that would have been required for a policy with no deductible. As explained by Mr Fletcher in his witness statement, in a normal year, the level of cancellations would not be expected to exceed the deductible and this was indeed the case until 2020. The real objective in taking out cancellation cover from WCE’s perspective was to protect the company against the risk of substantial losses through having to cancel multiple trips simultaneously – a so-called “black swan” year where the level of cancellations was far higher than usual. An example would be the Icelandic ash cloud or a similar catastrophe which unexpectedly prevented all travel to a particular part of the globe.

During the currency of the RSA policy, WCE made a number of claims under the cancellation section of the policy seeking indemnity for amounts which corresponded to the amount of the deposits that it had refunded to Challengers following cancellation. WCE’s evidence was that these claims were all approved as submitted but that no actual payment was made by RSA since they all fell within the deductible. While this was not admitted by Zurich, it was not positively disputed.

By the end of 2015, WCE had worked hard to reduce the level of cancellations and Aon (which had replaced Marsh as TUI’s broker during the course of 2015) was asked to carry out a remarketing exercise for the 2016 renewal. The unchallenged evidence of WCE’s witnesses was that Aon was instructed to obtain cover on a like-for-like basis to that provided by RSA. Zurich was one of the markets approached and on 26 January 2016, Gillian Bretherton of Aon provided Mr Stephens and his immediate boss, Mr James Dobson (now unfortunately deceased), with: (a) a final Renewal Submission, (b) passenger data, (c) RSA’s Claims Tracker (listing claims from 2009 to 31 December 2015), and (d) RSA’s Aggregate Tracker (showing the amounts paid out by WCE from 1 January 2013 to November 2015). By far the greater part of the claims from 2009 related to medical expenses following illness or injury. A far smaller proportion related to cancellation, curtailment and change of itinerary and these had reduced to almost negligible amounts by 2013.

The Renewal Submission emphasised the importance to WCE of having comprehensive insurance covering search and rescue, casualty evacuation and medical treatment and expressly requested quotations on three alternative bases:

Following receipt of this information, Mr Stephens and Mr Dobson attended a site meeting at WCE’s operations centre attended also by Ms Bretherton and Mr Deeley of Aon. By this stage, RSA and Zurich were the only contenders for the business and representatives of RSA were also present. At the meeting Mr Morris and Mr Drayton (WCE’s Operational Support Manager) gave a presentation about WCE’s business and the changes they were introducing. It was not in dispute that RSA was keen to retain the business while Zurich was equally anxious to win it.

After the meeting, Mr Stephens produced quotations. However, some of these did not correspond to the options requested and it was not until 26 February 2016 that final quotations were provided on the correct basis. Meanwhile, Mr Morris had specifically queried with Ms Bretherton the operation of a particular exclusion in the RSA cancellation cover for regulations “made by any Government or public authority”. Mr Morris’ specific concern was whether FCO advice necessitating a change of itinerary would be impacted by the exclusion. Ms Bretherton referred the query to both insurers as Zurich had a similar exclusion and a meeting was held with Mr Stephens and Mr Dobson on 25 February 2016 to discuss it.

Following the meeting, Mr Dobson provided further clarification on 26 February 2016, explaining that the intention of the exclusion was to exclude cancellation claims where the relevant advice not to travel was in place prior to the trip being booked (for example a trip to Chechnya). If, on the other hand, the trip was booked before the advice was given/changed, then cover would be provided, for example in the case of the Icelandic ash cloud where airspace was closed after booking.

In the event, Zurich provided the most competitive quote which included the added benefits of a reduced £200,000 deductible for cancellation claims, a 3-year Long Term Agreement and a profit share arrangement. The Long Term Agreement required Zurich to renew at the same premium if the exposure remained within specified levels and to offer a 10% reduction in premium if the net loss ratio was 60% or lower. An email from Ms Bretherton to Mr Stephens confirms that there was very little between Zurich and RSA in terms of premium but that the aggregate proposed by Zurich was lower. Instructions to place cover with Zurich were given by WCE on 14 March 2016.

It is apparent from the premium calculations that the level of premium was calculated by Mr Stephens solely with reference to the level of non-cancellation claims in previous years adjusted by set percentages for profit, expenses and ISB. The calculations did not take account of cancellation claims, no doubt because they had never hitherto breached the aggregate deductible.

The policy was subsequently renewed on the same terms for the 2017 policy year, by which time WTW had replaced Aon as Travelopia’s broker. Since the loss ratio for the 2016 policy year was below 60%, the Long Term Agreement required the renewal premium to be based on the 2016 premium less a 10% discount, adjusted for revised passenger numbers. The documents show that the loss ratio for this purpose was calculated on the basis of paid/payable claims and so again did not take into account cancellation claims which were still within the deductible. It was made clear in the exchanges between WTW and Zurich that WCE was concerned to ensure that the Zurich policy coverage matched that which it had enjoyed with RSA.

The policy was again renewed in 2018. By this time, the loss ratio (calculated on the same basis) had increased above 60% and Zurich was accordingly entitled to, and did, renegotiate the LTA and increase the premium, although Mr Stephens emphasised during the renewal negotiations that the relationship with WCE was one which Zurich wanted to continue. There was no change in terms so far as the cancellation cover was concerned.

I shall refer to the 2016-2018 policies as the “Earlier Policies”.

The vast majority of claims submitted by WCE under the Earlier Policies, both in number and value, were claims for medical expenses under the Personal Accident section of the cover which are not directly relevant to the present dispute. However, a question which arose immediately upon placement of cover in 2016 was who was to take responsibility for paying cancellation claims and tracking the erosion of the aggregate deductible. For commercial reasons, WCE wished to make refund payments to Challengers itself but it wanted Zurich to handle the claims in the normal way and monitor the erosion of the deductible. Zurich was not overenthusiastic about this but agreed to do so nonetheless.

A meeting was accordingly arranged for 25 April 2016 between Zurich and WCE at which this and other claims handling questions were to be discussed. Prior to the meeting, a conference call was held on 13 April 2016 between WCE, Mr Ratcliffe, Ms Aylett, Mr Stephens and others to discuss the process for handling cancellation claims. On 14 April 2016, K’an Thomas of WCE sent Mr Ratcliffe details of how WCE processed cancellation claims, stating:

Examples of the first three documents were attached. The Refund Request Form contained boxes for details of the trip and the individual Challenger and a further three boxes for “Amount Paid” (coded “£ Member_finances_Receipts”), Total Refund and Reason for Refund. (Footnote: ³ ) It should be noted that it was an altogether different form from that used for medical expenses and other travel claims.

Following receipt of this information, Mr Ratcliffe drew up a draft claims protocol (to be provided eventually to WCE) and also drafted Special Handling Instructions (“SHI”) for the Zurich claims handlers. On 18 April 2016, he provided updated SHI to Ms Aylett following a call with WCE and asked her to “just make the point to the team regarding “Cancellation” claims – and emphasising the ‘lighter touch’ needed, conscious that this will be their money ultimately.” On 20 April 2016, Mr Ratcliffe asked Ms Aylett to review the documents sent by Mr Thomas in order to allow any feedback/changes to be suggested at the forthcoming meeting. He stated that the claim form would also be discussed with a view to this being tailored to meet WCE’s needs and expectations.

As drafted by Mr Ratcliffe, the SHI contained a separate box dealing with Cancellation Claims. This provided as follows:

The meeting on 25 April 2016 took place as arranged at WCE’s offices in High Wycombe. It was attended by Mr Ratcliffe, Ms Aylett and Mr Dobson on behalf of Zurich, by Mr Morris, Mr Thomas and Geeta Patel on behalf of WCE and by Ms Bretherton on behalf of Aon. Minutes of the meeting were drawn up by Mr Ratcliffe. These contain the following relating to cancellation claims specifically:

The day after the meeting, Mr Thomas sent WCE’s current T&Cs to both Mr Ratcliffe and Ms Aylett. He also set out the template email that WCE sent to Challengers who withdrew for medical reasons. Mr Ratcliffe acknowledged this email, thanking Mr Thomas for a “really useful meeting” and stating that he would leave Ms Aylett to review the detail relating to the T&Cs and advise if any further information was needed in that regard. For her part, Ms Aylett responded saying that “This is just what we needed and now makes sense as to how the deduction is calculated.”

Receipt of the T&Cs was noted against Action Point 3 by Mr Ratcliffe in his minutes, who also recorded that Action Point 4 had been completed on 4 May 2016, presumably meaning that he made the necessary amendment to the draft SHI on that date.

In short, it was agreed that WCE would submit claims under the cancellation cover to Zurich which would then validate that each was a valid claim under the policy and agree quantum, collate the figures to track the deductible, and then authorise WCE to make payment.

In addition to the SHI (which was a document internal to Zurich), Mr Ratcliffe also drafted a Claims Protocol which was provided to WCE and WTW on around 12 May 2016. Under a General Notice section, the Protocol stated that it did not alter the terms and conditions of the policy. In relation specifically to cancellation claims (and reflecting almost word for word Mr Thomas’ email of 14 April 2016) the Claims Handling section provided:

A further section of the Claims Protocol headed “Coverage Issues/Reservation of Rights/Denials” provided as follows:

On 22 April 2016 (i.e. a few days before the meeting of 25 April 2016 referred to in paragraph 37 above), Mr Mullan wrote to Mr Thomas raising two queries on a cancellation claim that had been received in respect of an Anna Bradley. The first related to verifying disclosure of previous medical conditions. However, Mr Mullan also pointed out that “there is a difference in the amount paid and the amount refunded according to the refund request form. Please could you explain the reason for this difference and clarify if we should have invoices or receipts to confirm these expenses.” A very similar query was raised in relation to a claim relating to a Susannah Crosby: “Would you be so kind as to confirm the reason for the difference in the amount paid and the refund amount? If there are any invoices or receipt to support these amounts, please forward them to us.”

It seems reasonable to infer, as I was invited to do by WCE, that these queries were raised at the meeting on 25 April 2016 and that they were addressed by WCE’s explanation as recorded in the minutes and the provision of the T&Cs.

On 9 May 2016, Ms Aylett emailed the claims team (including Ms Langford and Mr Mullan) attaching the T&Cs and explaining that they detailed the “deductions for cancellations which illustrates why the amount to be refunded may be less than paid.” She then continued: “Can you please ensure the amount calculated for refund reflects this document, then if ever audited it will be clear how we came to agree the figure”.

So far as the disclosure goes, cancellation claims thereafter appear to have been consistently handled in the following manner:

An email from Mr Mullan to the claims handling team on 5 July 2016 passed on feedback from WCE as to how the new insurance arrangements were working from its perspective. He recorded that:

Thus, where claims were approved by Zurich, they were routinely approved in the amount of the refund claimed by WCE. The disclosed documentation shows that any queries raised by the Zurich claims handlers tended to be in relation to whether the claim satisfied the requirements of WCE’s T&Cs as regards time of cancellation/disclosure of medical conditions etc. Where claims were refused, it was generally because no refund was due under the T&Cs. The following are fairly typical examples of terms in which the Zurich claims handlers approved or rejected a claim although obviously the precise wording differed between individual claims handlers:

It is fair to point out that disclosure was only given by the parties in relation to the 43 claims specifically identified in the Particulars of Claim as having been handled under the Earlier Policies. By the time of trial WCE had ascertained from Zurich’s claims records that in fact a total of around 195 cancellation claims had been handled, of which 139 had been approved and paid (by being set against the deductible) and 46 rejected or not otherwise paid. It submitted that it was entitled to rely on all these claims in support of its case.

Mr Jonathan Hough KC (who appeared on behalf of Zurich with Mr William Harman) protested that Zurich had not had a proper opportunity to investigate these further claims and locate relevant documentation. I accept that Zurich was not in breach of its disclosure obligations in relation to these claims and the contrary was not suggested by Mr Daniel Shapiro KC who appeared on behalf of WCE with Mr Michael Harper and Ms Alethea Redfern.

In these circumstances, Mr Hough submitted that it was not open to Mr Shapiro to advance his case save by reference to the 43 expressly pleaded claims. However, he did not suggest that the Zurich claims handlers would have approached the other claims in any different way from that in which they handled the 43. Moreover, it was at all times open to Zurich to investigate its documentation with a view to establishing the contrary if it had so wished but it did not do so, from which I infer that it had no grounds to suppose that this was the case. While, therefore, I bear in mind the fact that full disclosure was not available in relation to these further claims, it seems to me overwhelmingly likely that they were handled in the same way as the 43 for which there is disclosure and were therefore either approved or rejected on the basis of their compliance with WCE’s T&Cs. To the extent necessary, I so find and in my view WCE can properly rely on them as part of its case.

Both sides referred me to individual claims which, for one reason or another, were said to be of particular relevance to the arguments in this case. Rather than encumber this judgment further with the details of these claims, they are set out in a separate annex.

Renewal negotiations for the 2019 policy year commenced in February 2019. The loss ratio for the expiring year was again around 113% and Mr Stephens initially quoted a substantially increased premium to reflect this. He also declined to offer a new LTA. In emails to Mr Brown of WTW dated 25 February, he nonetheless indicated his desire to continue the relationship and following a telephone call, revised the terms he was prepared to offer. As recorded in Mr Brown’s email dated 13 March 2019, these included a slight reduction in the premium and a lower cancellation aggregate deductible of £100,000. Mr Stephens again stressed that he did not want to risk losing the account in the following year and indicated that he would be prepared after all to continue the existing LTA at the new premium or start a new one.

These terms were passed on to WCE by Mr Brown on the basis that the policy coverage and wording would be as expiring. Mr Brown included in his headline points the reduction in premium compared with Zurich’s original offer and the reduction in the aggregate deductible for cancellation. The terms were acceptable to WCE and the policy was renewed on that basis.

Five cancellation claims were handled under the Policy prior to February 2020 with at least some documentation available for four of them. All of these four appear to have been approved in the amount of the refund claimed by WCE, albeit in two cases only after querying whether WCE’s T&Cs had been complied with.

As is by now all too well known, Covid emerged in Wuhan, the People’s Republic of China (“PRC”) towards the end of December 2019 and spread rapidly across the globe. By the end of January 2020, WCE was starting to receive enquiries from anxious Challengers and their families and on 27 January 2020, it produced an Internal Advisory Document for the benefit of its customer support and sales teams. This noted that: (a) current advice from the FCO and its Australian counterpart, DFAT, was only against travel to Hubei province; (b) WCE had nonetheless decided to postpone or divert one expedition to China by a Canadian school (Toronto French School) which was due to depart on 7 March 2020; (Footnote: ¹² ) (c) the situation would be closely monitored with a view to taking decisions regarding further China bookings at a later date; (d) as far as other affected destinations were concerned, WCE’s advice was to communicate with schools and families via an External Advisory Document. Such a document was issued a few days later on 3 February 2020 and likewise recorded that the only formal advice from the FCO, DFAT and US State Department was against travel to China but that WCE was monitoring the situation: “At this stage we do not anticipate any change to your planned trip, however we will be in touch if this changes.”

By 7 February 2020, WCE had diverted further trips and was in discussion about diverting others. Also in February, WCE drew up a Covid-19 Policy and Scenario Planning document. At this stage, its strategy was broadly:

Covid continued to have an increasing impact on expeditions, however, and on 25 February 2020 Mr Morris asked Mr Brown to clarify the following point under the cancellation cover:

He followed this with a further request on 27 February 2020 to clarify that WCE could work to certain levels of advisory notice issued respectively by the FCO for UK schools, DFAT for Australian schools and the US State Department for US schools.

Mr Brown raised both points with Mr Stephens in a telephone call on 27 February 2020, the outcome of which he set out in an email sent to Mr Stephens later the same day. This recorded in relation to Mr Morris’ second point that, although the policy conditions only referenced the FCO, WCE’s practice was understood and accepted by Zurich. As regards the first query, it recorded Mr Stephens’ agreement that both paragraphs represented correct policy assumptions. Mr Brown observed that WCE clearly had in mind its forthcoming peak trip period and was monitoring the situation very closely. He asked Mr Stephens for an email response by return so that he could provide some comfort to WCE but meanwhile forwarded the email to Mr Morris summarising the policy position as being that “where trips are cancelled on advice, costs can contribute towards the annual aggregate, which if/when exceeded will leave Zurich providing cover thereafter.” He also said that he would share any written response as soon as it was received and suggested that it would be prudent to keep Zurich informed of the existing and likely future impact of Covid on WCE.

On 2 March 2020, Mr Brown initiated negotiations for renewal of cover for the 2020 year.

On the same day a telephone conversation took place between Mr Drayton and Mr Stephens regarding the recent decision of the UAE authorities to ban all school trips both within and outside the UAE. In an email, Mr Stephens confirmed his view that Zurich would regard this as a state-driven decision rather than a disinclination to travel such that trips could be claimable under the policy. He noted, however, a difficulty in that no time period was being suggested for the ban.

This point was then discussed internally within WCE. It was recognised that a restriction might be relevant for a trip departing in 2 weeks’ time, but not for one which was only due to depart 4-5 months hence. WCE’s position at that stage was accordingly to wait to make a decision closer to the time. In an email of 3 March 2020, Phil Durrell, WCE’s Regional Middle East Manager, noted that he had five trips due to depart that month, of which three had already been cancelled by the schools. Mr Durrell confirmed that refunds would not be offered until the insurers had paid and that he had reiterated that all June/July trips would still go ahead unless the travel ban remained in place and they were unable to travel.

The following day, Mr Fletcher issued a Zoom message internally asking his teams to note that claims would not be insured unless there was government advice not to travel, in which case WCE would look to process a refund although nothing was to be unequivocally promised until the insurance claims had been settled and paid.

On 7 March 2020, Vicky Doherty (WCE’s Head of Customer and Leader Experience) circulated an email to the communications team, noting that Covid was changing things on a daily basis in terms of how WCE communicated with its customers. She attached a document outlining two scenarios that might result in cancellation and explaining that if governmental travel restrictions were imposed, WCE should wait until four weeks prior to departure before making any decision on what to do. Appropriate holding statements would therefore need to be prepared. At the four-week point, decisions would be taken on a case-by-case basis in order to see whether diversion or delay might be an option. Otherwise trips would be cancelled no less than 2 weeks and no more than 3 weeks before departure.

Between 11 and 17 March 2020, many governments issued various restrictions and advice against travel, of which the following were of most relevance to the present proceedings:

Meanwhile, on 12 March 2020, Zurich indicated that any renewed policy would be subject to an annual cap of £200,000 for cancellation claims.

On the same day, Mr Morris sent a Zoom message to Mr Fletcher referring to the UK government’s ban on overseas school trips and stating that it would be necessary to discuss whether WCE should continue to wait and see in relation to the summer trips or whether it should put together a proactive cancellation plan. Mr Fletcher’s response was that cancellation was more appealing in some respects but that it would be necessary to get insurers’ co-operation. In a message to staff on 13 March 2020, he stated that, given the restrictions/advice now in place in most markets, WCE would almost certainly see a number of trips cancelled over the next few months. Meanwhile, the advice for customers remained the same but would be updated as the situation unfolded. He recorded a similar message in a video for staff.

Also on 13 March 2020, Mr Brown chased Mr Stephens for a response to his email of 27 February and passed on a further query from WCE as to which policy would respond to cancellation of a trip where the booking and departure dates fell in different policy years. Given the severe reduction in cover proposed for 2020, this was obviously a matter of the utmost concern.

On 14 March 2020, a number of Zoom messages were exchanged between Mr Fletcher and Mr Morris discussing the possibility of a more proactive approach to cancellations, as well as the insurance renewal strategy. The perceived problem was how far in advance Zurich would permit WCE to cancel although Mr Fletcher was also concerned about “how we cover refunds though and what the exposure is once we offset any recouped costs.” Mr Morris’ response was that they needed to understand the insurance policy and ensure that WCE’s operations plan was co-ordinated with it so that WCE was not exposed. He expressed the view that WCE should not cancel any trips until it had confirmation that it was covered, and referred to a query raised by Travelopia’s M&A Director as to whether WCE was under an obligation to mitigate supplier costs and whether the policy only paid out net of any supplier refunds. Mr Morris told Mr Fletcher about Zurich’s proposed £200,000 cap on cancellation claims for the forthcoming year to which Mr Fletcher’s response was that they needed legal advice as soon as possible. He referred to the T&Cs and suggested that WCE could just let schools cancel if they chose not to travel. However, he expressed a concern that WCE’s existing FAQs might be misleading and that WCE might need to defer more trips in order to appease customers. In response, Mr Morris pointed out that WCE could not operate trips contrary to government advice as this would invalidate the insurance so that if the advice remained in place, it would have no option but to cancel. On the other hand, if it waited, it would incur more flight and in-country costs.

On 15 March 2020, Mr Fletcher emailed Ms Northey asking to set up a call with Mr Morris to discuss WCE’s proposed plan of action. This was to submit to Zurich that all trips due to depart up to the end of August 2020 should be covered under the 2019 policy on the basis of the government restrictions already in place in the major source markets, combined with expert advice that the peak of the pandemic was expected in the UK around the start of June. In an email on 16 March 2020 to Mr Morris and others he confirmed his view that once WCE knew where it stood on insurance, he would like publicly to cancel all the trips that it thought could and should be cancelled.

Also on 16 March 2020, Mr Brown spoke to Mr Stephens by telephone and informed him of WCE’s internal decision to cancel all expeditions departing up to the end of August at an estimated cost of £4 million on the basis of the existing FCO advice/restrictions. In an email to Mr Moss (Zurich’s Head of Specialty Lines), Mr Stephens stated that he had told Mr Brown that Zurich would be looking to discuss the matter as he felt that the decision to cancel was “hugely overreacting at this point.” He also informed Mr Moss that in order to limit exposure he had provided renewal terms with an annual cap of £200,000 for cancellation.

Mr Moss passed this email on to Ms Hayley Robinson, Zurich’s Chief Underwriting Officer, (also copying Mr Stephens) stating that Zurich’s current stance was to consider cancellation up to 60 days prior to departure which he understood to be consistent with the approach taken on similar risks written by Zurich Municipal (“ZM”), another division of Zurich. He concluded that “the UW team and Claims will be communicating this tomorrow…”

It seems likely that Mr Brown then spoke to Mr Morris after his conversation with Mr Stephens since Mr Morris records in a Zoom message to WCE’s directors, that WTW agreed that an open discussion was urgently needed with Zurich and that Mr Brown did not think they were expecting July trips to be cancelled at this stage although they had not indicated any timeframe. Mr Brown had advised WCE to be open about the scale of the claim, as to which Mr Morris thought WCE should also be indicating the difference between the current exposure and the potential exposure if cancellations were delayed.

Arrangements were made for a call to take place with Zurich on the following day. During the evening of 16 March 2020, Mr Stephens emailed Mark Dowsing, Zurich’s Technical Claims Manager, asking whether he would be free to join the call. Mr Dowsing replied saying that he was unavailable but that he had asked Mr Blake to attend in his absence. By way of initial comment, he said that Zurich could not provide a view on cover until they had received notice of claims under the policy year. At a high level, Zurich were currently considering a timescale for cancellation of 30 days before the date of travel. At first blush he thought the proposed cancellations were too far ahead to fall into the current policy. However, he emphasised that this was only an indication of Zurich’s likely approach and that coverage could not be addressed in detail until a formal claim was submitted. He thought that WCE was “testing the water” and that Zurich should therefore be mindful as to what it said at this stage.

At 1030 on 17 March 2020, a Webex call took place. The participants were Mr Morris on behalf of WCE, Mr Brown and Zara Golder on behalf of WTW and Mr Stephens, Mr Blake and Mr Ankit Saha (an underwriting manager) on behalf of Zurich.

Mr Blake was new to WCE’s account. Indeed he was new to the entire A&H department having worked in the Marine, Fine Art and Specie team since March 2018 handling mainly marine claims. In February 2020, however, he was asked to support the A&H Claims Team alongside his duties in the Marine Team by replacing Ms Langford as Senior Claims Handler, she having moved to another role within the company. As such, he acted as a senior referral point rather than a dedicated account handler, assisting with all aspects of A&H business and also with the operational management of the team. Prior to February 2020, Mr Blake had no experience of Business Travel Policies and had never handled a cancellation claim under such a policy. By the date of the call, he had been taken through the Z-Alert wording at a high level by Ms Langford and had handled a small medical expenses claim, but had not looked at the WCE policy or schedule or the T&Cs.

Exactly what was said at the 17 March meeting is a matter of dispute and will be addressed further below. Mr Blake’s manuscript notes contain the following:

Following the call, Mr Morris sent an email to Mr Stephens timed at 1301, also copied to WTW, Mr Dowsing, Mr Fletcher and Ms Northey (amongst others) summarising the position reached as follows:

At 1213, Mr Fletcher emailed Mr Morris and others stating that following the meeting with Zurich, WCE would confirm its decision to cancel all trips up to the end of May. Trips due to depart thereafter would be reviewed in April as there was still a question mark over the insurance for these trips that needed to be resolved over the coming days. He reiterated that in no circumstances should refunds be made to customers until monies had been received from the insurers.

At 1307, Mr Stephens sent an internal email to Mr Dowsing and Mr Moss amongst others updating them on the call with WCE in the following terms:

At 1315 Mr Stephens replied to Mr Morris saying:

At 1358, Mr Blake sent an email to Mr Dowsing and Mr Stephens asking the latter to:

In response, Mr Stephens explained that an aggregate cap had been imposed on renewal in order to mitigate Zurich’s risk and suggested that this explained WCE’s current stance on cancelling all claims in the current policy period.

At 1726, Mr Saha emailed Mr Stephens and Mr Moss noting a couple of points arising out of the call:

Mr Stephens acknowledged this email stating: “As you discussed on the call, there needs to be a consideration on recouping airfares etc. Ironically, this cannot be done for July/August trips, as it is deemed to far outside the reasonable period.”

At 2011, Mr Stephens sent another email to Mr Dowsing and Mr Blake adopting Mr Saha’s comments verbatim.

On 18 March 2020, Mr Morris chased Mr Stephens for an update following the 17 March telephone call. He said that WCE was still finalising the spreadsheet to send to Mr Blake for the first 60 days cancellations and hoped to provide it later that day. He stressed that “As discussed yesterday, resolving the 2 outstanding issues as soon as possible is paramount to us.” Mr Stephens sent a holding response explaining that all information and internal discussions were being reviewed both internally and externally. It appears that Zurich had instructed Clyde & Co. at around mid-March to advise in relation to “a number of challenging enquiries we are receiving.”

Meanwhile, Mr Fletcher and Mr Venn were discussing by Zoom message the stance to be adopted by WCE vis-à-vis its customers. Mr Fletcher reported that Travelopia were happy with the concept of a credit note as it protected cash flow and could result in a similar outcome to a deferral. The difficulty would be in persuading schools to accept them. He suggested that credit notes should only be offered if (1) there was government advice against travel, (2) insurance was not available and (3) a deferral was impossible. Mr Venn pointed out that if the insurance did not go WCE’s way then a decision would have to be taken for each market whether to give a refund, hold the line and annoy the school or try to give a credit. Mr Fletcher responded saying that outside the scope of the PTRs WCE was not obliged to give refunds and he did not want to do so. However, WCE was bound by the T&Cs to run the trip at a later date which was its only option for performing its contract. If this did not work for some schools WCE would be in a difficult position although it might be able to retain some schools by offering a credit note. He agreed that if the insurance did not respond, there would be a huge cash hole which could only be mitigated by cost actions and holding the line on refunds.

A further urgent chaser from Mr Morris to Mr Stephens was sent on 19 March 2020 following the announcement that UK schools would be closing the next day. This was again met with a holding response.

On 20 March 2020, Mr Sapsford of WCE issued a general email to colleagues confirming that WCE had cancelled all domestic and overseas operations to the end of May, including 37 overseas trips. He noted that “Our insurer (Zurich) are covering all cancellations for 60 days (minimum - still under negotiation)”.

On 24 March 2020, Mr Morris emailed Mr Fletcher reporting on a conversation with Mr Brown in which the latter, having spoken to Mr Stephens, had suggested that WCE should not be overly concerned:

On 25 March 2020, an internal email conversation involving Hayley Robinson took place within Zurich concerning the cancellation threshold for travel policies. One issue was the cancellation threshold for ZM which was “currently 60 days but proposed to be increased until the end of the academic year.” Ms Robinson responded that:

Ms Robinson’s response was forwarded to Mr Moss who replied as follows:

At 0925 on 26 March 2020, Mr Stephens emailed Mr Brown stating informally that:

Later that evening, Ms Northey sent an email to Mr Stephens expressing in no uncertain terms WCE’s disappointment and frustration that Zurich had still not provided any substantive response following the call of 17 March and hinting that more formal action might be taken if there were any further delay.

This email was then the subject of an internal conversation between Mr Blake and Mr Stephens some parts of which one can only hope that neither of them expected to become public:

At 1746 on 27 March 2020, Mr Blake sent a formal response to Ms Northey and WCE which included the following:

It should be noted that the words “any agreed claim for” in the first line of the quoted extract had been added into Mr Blake’s original draft at the instigation of David Nichols, Zurich’s UK Chief Claims Officer, in order not to create any impression that the claim would be settled in full.

Following receipt of Mr Blake’s email of 27 March 2020, Ms Northey suggested to Mr Morris, Mr Venn and Mr Fletcher that it was worth speaking to WTW about the reference to airline/accommodation costs and whether WCE was under any duty to mitigate. Mr Morris replied on 29 March 2020 that he had arranged a call with WTW for the following day and that there were a couple of points on which he felt WCE needed to get absolute clarity:

On 30 March 2020, Mr Fletcher informed his colleagues internally that WCE had received confirmation that trips departing after 31 May would be covered by the current policy. However, he reminded them that refunds would only be approved if they were in line with the insurance coverage and that no refunds should be confirmed until WCE was fully informed of any caveats that Zurich might impose. He also cautioned that not every cancelled trip would be covered in any event and that for those trips, WCE would either apply its T&Cs (allowing deferral rather than a refund) or offer a credit note to the school for the latter to administer with students.

Later that day, Mr Warner of WTW emailed Mr Blake in response to his email of 27 March 2020 (also copying in Mr Stephens and WCE). He noted that WCE was currently collating the costs incurred and to be claimed and suggested that all parties work through a small sample of trips to establish a claims management process and information requirements. He also raised the question of trips booked in the current policy year which were due to depart from September onwards (mainly for Australian schools). He stated that WCE wished to discuss with Zurich the appropriate time to take decisions about cancellation for these trips, pointing out that the earlier such decisions were taken, the greater the mitigation of incurred costs since this would stop the receipt of additional trip payments by Challengers.

Mr Stephens’ initial response on 31 March 2020 was that further deposits or bookings taken since the declaration of the pandemic “would potentially not be covered due to the situation being known at the time of either booking or accepting further deposits. Therefore, the cancellation for such trips are foreseeable.” However, he promised to revert with a formal response. By this stage, Zurich had withdrawn its renewal terms for the 2020 policy year. In circumstances where clearly no trips would be running in the immediate future, this was not a matter of concern to WCE and the Policy therefore expired on 31 March 2020 without being renewed.

On 1 April 2020, further internal discussions took place within WCE as to whether (a) to tell customers there and then that trips to the end of August would be cancelled and that WCE was working with its insurers to establish what costs could be recovered; or (b) to wait until the insurance had become clear and then announce the cancellation and refund of monies paid to date at the same time. Both Ms Doherty and Mr Fletcher preferred the latter but recognised that there was a limit to how long WCE could wait in order to do this.

Meanwhile, on the same day, Mr Warner replied to Mr Stephens explaining that no new trips would have been booked by WCE since the relevant government advice was released:

Mr Stephens turned to Mr Blake for his opinion on this point, and Mr Blake replied stating:

On 3 April 2020, Mr Blake issued an internal Early Warning Email (“EWE”) in relation to the claim submitted by WCE for the trips which had already been cancelled up to 31 May. An EWE was the means by which senior figures within Zurich were alerted to the possibility of a large claim. The report form compiled by Mr Blake and attached to the EWE contained the following description:

The suggestion of working through a small sample of claims was accepted by Mr Blake and, later the same day, Mr Warner forwarded a spreadsheet compiled by Mr Venn containing details of four example claims showing different permutations according to whether the students had fully paid for the trip or not and whether any refunds had been obtained in respect of flights, accommodation etc.

Each example trip was broken down into columns showing, amongst other things:

Mr Venn candidly accepted in cross-examination that it did not seem right to be claiming both refunds and third party costs, but explained that he put the spreadsheet forward on the basis that this was the information that Zurich had requested and that it represented the most favourable position for WCE. He fully expected a further discussion before any claim was formally advanced.

Having reviewed the spreadsheet, Mr Blake emailed Mr Warner (with a copy to Mr Venn) on 6 April 2020 asking for more detail regarding the “Trip Cost to Challenger” and what it comprised. Mr Warner responded saying that he believed it to be the price charged to Challengers and a telephone discussion then took place on 7 April 2020 between the three of them. It was common ground that Mr Blake suggested during this call that the claim as presented by WCE involved an element of double-counting because it claimed refunds in addition to irrecoverable costs. He did not confirm expressly that refunds were covered under the Policy but equally did not say that they were not.

Meanwhile, an internal discussion was taking place between Mr Stephens, Mr Dowsing and Mr Blake regarding the response that Zurich should give to WCE regarding the cancellation of trips departing after August. In the evening of 7 April 2020, Mr Blake expressed his view as follows:

The following day, Mr Blake received an email from Mr Moss in response to the EWE. Mr Moss queried whether the trips had already been cancelled and stressed that WCE should pursue all possible avenues of recovery before presenting a claim. In response, Mr Blake said that he understood all trips had been cancelled to the end of May and that Zurich would be supporting WCE in obtaining recoveries. He also stated:

Later in the afternoon of 8 April 2020, Mr Blake emailed Mr Venn and Mr Warner regarding the spreadsheet of sample claims. He attached a spreadsheet of his own which sought to break down the costs in Mr Venn’s first example on the basis of his understanding that the flight, accommodation and trek costs were included within the total Challenger Cost. Mr Blake’s spreadsheet accordingly had three columns showing “Flight Cost”, “Accommodation/Trips” and “Balance of TBC Costs”. He also asked a number of further questions which had occurred to him, including a request for any updated version of WCE’s T&Cs and for a list of all trips to the end of August showing the departure date, the amount collected to date, and the amount and payment date of any remaining balance.

An internal chat then took place between Mr Blake and Rebekka Carter and Lisa Telford of the claims handling team in which Mr Blake asked for information about the way in which WCE cancellation claims were handled. This included the following exchanges:

Meanwhile, Mr Fletcher, Mr Morris and Mr Venn had been discussing Mr Blake’s email which, as Mr Morris pointed out and Mr Venn agreed, suggested that Zurich was focusing on costs as against profit (but not acknowledging any costs of the programme other than flights and in-country costs) and looking to deduct any third party recoveries from any deposits refunded. Mr Fletcher’s response was that mitigation made sense where the trip had been fully paid:

Internal Zoom messages between Mr Morris and Mr Venn show that they regarded Mr Blake’s email as a source of concern, particularly since, as Mr Morris stated “Aaron already confirmed to Ian at the start of all this that the customer deposits would be claimable, but Ian won’t seem to step up on that point.” Mr Morris suggested to Mr Fletcher that they might need to discuss a “Plan B” in case the insurance unravelled, for example by pointing schools to their own insurance to which Mr Fletcher replied that they could only do their best to get a good outcome for customers and the organisation.

A telephone call with Zurich was arranged for 2.00 pm on 9 April 2020. In a Zoom message to Mr Fletcher beforehand, Mr Morris expressed his frustration:

The call took place as arranged between Mr Fletcher, Mr Morris, Mr Venn, Mr Warner, Mr Brown and Mr Blake and again the parties are in dispute as to precisely what was said. Mr Blake made some notes in his diary while Mr Warner compiled notes on his laptop during the meeting. These formed the basis of the following email which he circulated to the participants immediately afterwards at 1533. This was an important document which featured heavily in both parties’ submissions although the accuracy of certain passages was strongly contested by Zurich. I set it out in full.

Mr Blake’s diary notes contain the following entries:

At 1633, Mr Blake forwarded Mr Warner’s email to Mr Dowsing stating, without further comment, “Just some outcomes from my call with World Challenge today.” Mr Dowsing acknowledged receipt immediately noting, “Food for thought and further action next week.”

The Easter weekend then intervened. WCE was plainly desperate by now to obtain clarity so that it could properly formulate a strategy for communicating with its customers. Although the intervention of the Easter holidays had provided some respite, it could foresee that it was fast running out of time. On 13 April 2020, Mr Fletcher recorded another video for staff in which he informed them that, following the call with Zurich, he had “every reason to believe that we will get to the position we want to get to in terms of confirming our refund position, you know, i.e. being able to give full or certainly majority refunds to customers, touch wood,…” but it was taking longer than he wanted and staff should not jump the gun. He also confirmed Mr Warner’s summary of the 9 April call in an email to all the participants and reminded Mr Blake that WCE would answer any questions or provide any information required.

On 14 April 2020, Mr Morris messaged WCE staff informing them that while it was internally acknowledged that trips up to the end of August were likely to be cancelled, this was not to be communicated to clients until clarity had been reached on the insurance. In fact, it transpired that Mr Durrell, the Middle East manager, had already confirmed cancellation to Middle East schools albeit without saying anything about refunds.

Mr Venn also replied that day to Mr Warner’s email attaching a voluminous spreadsheet containing the details which had been requested at points 5 and 6 of the email regarding all trips cancelled and to be cancelled.

15 April 2020 was a pivotal day on which a number of important communications took place:

On 16 April 2020, Mr Fletcher emailed Mr Blake expressing his own frustration at the delay in the provision of Zurich’s written confirmation:

At this point steps were also taken within WCE to obtain specialist legal advice on the position.

On 17 April 2020, Mr Blake replied to Mr Fletcher with what was effectively a holding response. He noted Mr Warner’s summary of the 9 April call but stated that “these calls have continued to be exploratory whilst we try to establish the facts at hand in order that we can then set out in writing, as you have requested, the relevant provisions of the policy and how we expect the claims to be adjusted.” He apologised for the delay and indicated that a position letter should be provided early the following week.

By this time, the school Easter holidays were drawing to a close and it is evident from WCE’s internal discussions that its customer service teams were coming under unbearable pressure from customers to know whether or not trips would be cancelled. Accordingly, WCE’s senior management engaged in urgent discussions throughout the course of 19 and 20 April as to whether WCE should continue to hold the ring by saying that the position could not yet be confirmed pending clarification of the insurance position or whether it should bite the bullet and confirm cancellation of all trips up to the end of August. In a Zoom message on 19 April 2020, Mr Fletcher commented that if trips were cancelled, WCE would need to issue a credit note to UK families within 14 or 28 days redeemable for cash after 31 July and to tell overseas customers that they were still working with Zurich to try to obtain refunds. He stated:

In an email to a colleague, Mr Fletcher commented that:

In the afternoon of 20 April 2020, a WCE leadership call took place at which the decision was taken to confirm cancellation of all trips up to the end of August and to send out appropriate customer communications the following day, irrespective of the fact that Zurich had not yet provided its position statement. The minutes of the call recorded that the PTR applied to trips sold in the UK and EU and that these customers would require Refund Credit Notes. Otherwise, customers would be held to WCE’s T&Cs with refunds only being offered if a favourable position was reached with Zurich.

Following this call, Mr Morris emailed Mr Fletcher regarding the communications to be issued for each market and what they should contain, stating that he could not imagine Zurich coming back with what WCE wanted.

On 21 April 2020, Mr Fletcher repeatedly chased Mr Blake to set up a call. Mr Blake eventually replied, informing Mr Fletcher that Zurich was expecting to issue its position paper the following day and that perhaps the call would be better postponed to 23 April allowing the letter to be considered.

Later that afternoon, Mr Warner emailed Mr Fletcher to update him on a brief phone call he had had with Mr Blake, confirming that Zurich’s position paper would be available the next day and that he had asked Mr Blake to send it first to WTW so that they could review it in the light of the policy wording.

Later still that evening, Mr Brown emailed Ms Northey in response to her request for an update on the current status of the claim as she needed to brief Travelopia’s CEO the following day. Mr Brown explained that following the provision of costs information by WCE, Zurich wished to carry out a robust review of the costs so that they understood them fully and had advised that there were further elements that needed their attention. He confirmed that the position paper would be provided the next day and would be reviewed first by WTW who would update WCE as soon as possible thereafter. He continued:

On 22 April 2020, WCE formally cancelled the bulk of the trips due to depart to the end of August. Cancellation of the remainder was delayed by one or two days because of delays in the mail merge.

In the early afternoon, the long-awaited position paper was sent by Zurich to WTW in the following terms:

At 1833, WTW forwarded the position letter to WCE noting that Zurich had highlighted that the policy intention was to cover irrecoverable costs incurred and not trading profit. The call that had been arranged with Zurich for 23 April did not proceed and on 18 May 2020, Mr Fletcher sent a lengthy response asserting that Zurich’s current stance was contrary to the way in which cover had been operated hitherto and in apparent disregard of the confirmation given in February and April that customer refunds were covered in full.

Thus were the battle lines drawn.

renewal with Axa

Given the obvious impracticality of running expeditions with a global pandemic raging, WCE did not run any trips for the remainder of 2020 or 2021. It therefore had no need of insurance and did not seek to renew for either the 2020 or 2021 policy years. In 2022, however, it instructed WTW to obtain quotes. There was no great appetite for this type of risk, however, with some markets regarding the provision of cover for Challengers as a problem. In the event only RSA and Axa were willing to offer terms, although RSA was not prepared to include cancellation cover on the basis that they did not write traditional cancellation for tour operators and that there were other covers better suited to this exposure. In a report dated 8 December 2021 comparing the Axa cover to the 2019 Zurich Policy, WTW advised that:

Cover was therefore put in place with Axa from 1 March 2022, albeit with a Covid exclusion and an aggregate limit of indemnity of £175,000. In an attempt to avoid the problems that had arisen under the Zurich cover, and notwithstanding the WTW advice, Mr Morris emailed WTW on 9 February 2022 asking specifically how the policy would respond in circumstances where students had paid £25,000 in total, the trip was cancelled due to a terrorist incident, and a full refund was made by WCE which was able to recover £10,000 from suppliers. The response from received from Axa’s Senior Underwriter and confirmed by him in writing was that the net amount of £15,000 would be regarded as costs recoverable under forfeit of contract and therefore recoverable by WCE under the policy.

The parties were agreed that the following headline issues arise for decision in this case:

Happily, the parties were able to agree most of the issues regarding quantum “as figures” before the commencement of the trial. Some other pleaded issues have also fallen away. It was accordingly common ground that this judgment should be limited to determination of the points of principle arising out of the matters set out above, leaving the parties to determine the financial consequences of my decisions.

I heard oral evidence of fact on behalf of WCE from Mr Fletcher, Mr Venn and Mr Morris, Ms Northey of Travelopia and Mr Brown and Mr Warner of WTW.

On behalf of Zurich, the following witnesses gave oral evidence: Mr Blake, Mr Stephens, Mr Ratcliffe, Mr Mullan, Ms Langford and Ms Wall. I also heard evidence from Mr Martyn Alcock of Zurich and Mr Paul Garner of RSA concerning an exchange of correspondence regarding coverage under the RSA policy.

The inherent unreliability of witness recollection has been highlighted in a number of cases in recent years and the courts are increasingly aware of the problem, which is summarised in the well-known passage from the judgment of Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd, [2013] EWHC 3560 (Comm) at [15]-[22]. The essential point to which Leggatt J drew attention was that all “memory” of distant events in fact depends on a process of reconstruction which is inevitably influenced, whether consciously or not, by a multitude of factors. These include the particular selection of documents from which the witness may be invited to refresh his or her memory in order to provide a witness statement (some of which may not previously have been seen), the fact that, even if their statement has not been drafted by lawyers, the matters which are included or left out will almost certainly have been dictated by legal strategy, and the fact that preparation for trial may well result in the witness becoming increasingly reliant on the reconstruction set out in the witness statement rather than on his or her original experience of events. To this I would add the very natural human instinct, when one’s past behaviour is subjected to critical scrutiny, to reconstruct events in such a way as to put oneself in the most favourable light possible. This is particularly likely to be the case when the witness has a stake in the outcome of the proceedings through a tie of loyalty to or dependence on one of the parties, such as an employer.

Although I do not set out the relevant passage from Gestmin in full, two paragraphs bear citation:

Bearing all these matters well in mind, I found the WCE witnesses to be uniformly impressive. Mr Fletcher was a transparently candid and honest witness who was co-operative, frank, and straightforward, and answered questions directly and courteously. Mr Venn too was frank, direct and helpful in his answers under cross-examination. While he may have harboured marginally graver doubts in April 2020 about Zurich’s ultimate position than his witness statement suggested, his oral evidence was consistent and credible. Mr Morris was another impressive and candid witness, as was Ms Northey, although she was further removed from events than Messrs Fletcher, Venn and Morris, and was only intermittently involved in the dispute as it evolved. In short, I have no hesitation in accepting all of them as witnesses of truth who gave an honest account of events as they saw them – even where their answers were not necessarily helpful to WCE’s case. I find that their understanding of the various communications with Zurich was genuinely held and, importantly, their testimony was supported entirely by the documentary record.

Mr Brown and Mr Warner were likewise straightforward witnesses although neither of them could recall very much about the critical events save in so far as it was reflected in the documents. I bear in mind, of course, that both WTW and Zurich would have been extremely busy at the relevant time dealing with a multitude of claims and enquiries on many policies and that it is therefore unsurprising that their recollections were not as detailed or extensive as those of the WCE witnesses, for whom this was a potentially existential issue.

By contrast (and with the exception of Mr Alcock and Mr Garner who fall into a different category), the Zurich witnesses created a dismal impression.

Mr Shapiro submitted that their evidence was nothing more than a reconstruction of events so obviously dictated by Zurich’s interests that I should find either that they were not witnesses of truth, or that they had convinced themselves of the truth of their false reconstructions. He accordingly invited me to reject their evidence save where it was consistent with the contemporaneous documents. Mr Hough, on the other hand, invited me to find that they were honest witnesses doing their best to assist the court and were not simply trying to toe a party line.

It is true that there was a marked similarity in the evidence given by the Zurich witnesses in their answers regarding their understanding of the coverage being given under the Policy. So far as concerns the standard Z-Alert wording, this is not surprising. The wording was in standard form and it is to be expected that it would be understood and applied consistently across the organisation.

What was more contentious, however, was the insistence of all the witnesses that they had not appreciated that the cancellation claims put forward by WCE were for customer refunds as such but believed instead that they related to irrecoverable third party costs. In this respect, each of the main witnesses seemed to have a set form of words repeated time and again during the course of their testimony to the extent that it appeared to have been rehearsed, at least in their own minds. For example, Mr Blake repeatedly stated that he understood the refunds to represent monies “paid forward”, while Mr Stephens referred to “irrecoverable costs” and Mr Ratcliffe to “third party costs minus recoveries”.

As discussed further below, I am satisfied that there was no objective basis for a belief that the refunds represented irrecoverable third party costs beyond a corporate understanding of the Z-Alert wording in general. For one thing, as Mr Hough was at pains to elicit, WCE never said anything one way or the other about how the refunds related to its costs. No doubt it never thought to do so because (as I also find), rightly or wrongly, it was under the impression that the RSA policy covered customer refunds as such, that Zurich were providing cover on the same basis, and that it was as plain as the proverbial pikestaff that the claims were for customer refunds.

Indeed, any assumption that WCE’s refunds to Challengers represented third party costs (whether net of recoveries or not) involved myriad apparent inconsistencies with the documents which were clinically exposed by Mr Shapiro in cross examination - no doubt very uncomfortably for the witnesses concerned. For example:

None of the witnesses had convincing answers to any of these points beyond reiterating his or her belief. Their various attempts in the witness box to explain why documents did not in fact mean what they appeared to mean were frequently incoherent and illogical, and made them look more than a little foolish. The repetitive manner in which they answered difficult questions likewise did not serve to enhance their general credibility.

The choice between being taken for a knave or a fool is unappealing at the best of times. However, I do not for one moment suggest that Zurich either directly or indirectly sought to influence their employees as to the testimony that they should give. Rightly, no such suggestion was made by Mr Shapiro. I also acquit the Zurich witnesses of any conscious dishonesty or attempt to mislead. Nonetheless, in view of its apparent inconsistency with the documents, I treat their evidence with some caution save where it is consistent with the contemporaneous documents or what I find to be the inherent probabilities of the case.

Mr Blake was not an impressive witness. He appeared nervous at the start of his cross-examination (not in itself, of course, a matter for criticism) and was very cautious in his answers to the extent that he was reluctant to make concessions even on uncontentious matters. He looked more and more uncomfortable as cross-examination progressed and while he resolutely maintained that he had only ever understood that cover was being provided under the Policy for irrecoverable expenses, repeating again and again that deposits in his mind meant “deposits paid forward” by WCE, some of his testimony was difficult to square with the contemporaneous documents. In particular, as discussed in more detail below, I reject a critical part of his evidence relating to the call of 9 April 2020 and his state of mind in the days following.

Mr Stephens likewise did not make a good impression. He seemed determined to say as little as possible and frequently avoided agreeing with any proposition put to him unless he had rephrased it first. Getting him to agree that Zurich needed to offer a lower premium if it was to win the business from RSA in 2016 was an uphill struggle, despite him having said as much in his witness statement, and it required several attempts and the assistance of the court before he could be brought to state whether he would normally challenge an assertion that he had agreed to something when he had not. He had no very good explanation for some of the documents which plausibly suggested an understanding on his part that the Policy was covering customer refunds other than simply disagreeing with the question. (Footnote: ¹³ )

Mr Ratcliffe was another highly unsatisfactory witness who also was inclined simply to disagree with questions he could not answer. He too looked uncomfortable in the witness box but stuck doggedly to the line that he only ever thought the Policy covered third party costs minus recoveries. He knew that it was for Zurich to validate the claims made by WCE and accepted that it was his job when drafting the SHI and the Claims Protocol to work out (in the case of the former) what information would be needed by the claims handlers to adjust the claims and (in the case of the latter) to instruct WCE as to what information it should typically provide. However, when challenged as to why, in that case, neither document made any mention of third party costs or recoveries, he said that it was a matter for the claims handlers to decide whether the information provided by WCE as set out in Mr Thomas’ email of 14 April 2016 (adopted as the basis for both documents) was sufficient for this purpose. He had no idea himself whether it was or not and was simply setting out a “process” to be followed. His attempts to explain his own notes of the meeting on 25 April 2016 were little short of incredible except on the basis that he was either not telling the truth in the witness box or simply failed to engage his critical faculties at the time. The latter is more likely to be the case.

Mr Mullan began his cross-examination by saying that he did not know whether he was aware at the time that the claims being advanced by WCE were for refunds made to Challengers and that he may have thought they referred to amounts paid out by WCE. When it was put to him that it was obvious on the face of documents to which he was privy that the claims which Zurich were being asked to approve and validate were claims for customer refunds and that there was nothing to suggest otherwise, he retreated to the position that he could not recall what he actually thought at the time. He had no satisfactory explanation for Ms Aylett’s email of 9 May 2016 if it was not an instruction to indemnify customer refunds in line with the T&Cs and his attempts to suggest that it could be read in some other way (for example, as referring to a claim settlement to WCE) contradicted the clear words of the email and lacked all plausibility.

Mr Mullan accepted that the SHI did not require evidence of third party costs or recoveries and that he did not routinely ask for it. However, his supposed justification for this, namely that he gradually came to understand after inception that it would be difficult for WCE to provide this documentation for individual Challengers because bookings were made on a group basis does not withstand serious scrutiny. It is correct that WCE said at the meeting of 25 April 2016 that “individual documents” might not always be available because bookings were generally made on a group basis. However, it is entirely possible to work out a per passenger cost from an invoice for a group booking. Moreover, there was no evidence to support Mr Mullan’s assertion that he had requested invoices and receipts but been told by WCE that they could not be provided or were difficult to provide, and I dismiss this as an ex post facto attempt at justification. On the contrary, in the two documented cases where such information was requested, it was provided promptly and without any apparent difficulty at all.

The only case which even remotely suggests that there would have been any difficulty in isolating individual Challenger costs was that relating to Alexander Fritot, but this was a claim in the very different context of curtailment where Mr Fritot returned part-way through a trip. In these circumstances, WCE apparently said that it was quite difficult to work out the unused element of the trip because of the large number of different elements. That is entirely understandable where the various expeditions and costs may not have been incurred evenly over the entire duration of the trip and it would therefore be necessary to work out separately for each element how much had been used. However, WCE never said that it was an impossible task, and once the apportionment had been done on a group basis there would have been no difficulty in then calculating the relevant costs on a per Challenger basis. Nonetheless, given the relatively small amounts involved, it was obviously sensible to work on a proportionate basis for curtailment claims and that is the approach that was adopted. It is therefore hardly surprising that Mr Mullan then took the same approach to the later Mardling curtailment claim, although it is clear from his correspondence that this was based on his own assumption about the difficulty of quantifying the claim rather than because of anything said by WCE.

I reject altogether the wholly implausible suggestion by Mr Mullan (echoed rather faintly in Ms Langford’s oral evidence) that Zurich’s review of WCE’s claims for compliance with the T&Cs was an additional service provided as a favour to WCE, presumably gratuitously. This would not only have involved the Zurich claims handlers offering free legal advice but would have been of no obvious benefit to WCE when it had the entire resources of the Travelopia legal department to draw on. This smacked of a somewhat desperate attempt to avoid the obvious forensic point that the T&Cs were prima facie irrelevant unless Zurich understood that they were indemnifying WCE’s customer refunds.

As far as Ms Langford was concerned, I formed the impression that she was honestly trying to assist the court to the best of her ability. She stated repeatedly that Zurich handled cancellation claims as an administrative function to guide WCE as to whether it could proceed with making a refund. Although Mr Shapiro took issue with this description of the claims handling process, what I understood her evidence to mean was that the claims adjustment process was administrative from Zurich’s point of view because they were simply tracking the deductible rather than making physical payment. As such, it was unexceptionable.

Ms Wall’s evidence did not advance matters greatly. She answered the questions put to her straightforwardly but she was a comparative latecomer to the WCE cover, had no experience of handling business travel claims and, as Claims Relationship Manager, had no claims handling authority in any event. She professed a general understanding that WCE’s cancellations claims were to cover direct losses that WCE had suffered as a result of cancellation but accepted that this was not based on anything said or done by WCE. I did not find her evidence of material assistance one way or the other.

As for Mr Alcock and Mr Garner, their evidence was directed to a brief exchange of correspondence in 2022 in which Mr Alcock asked Mr Garner how RSA would have responded to WCE’s current claim if WCE had been insured by RSA for 2019/2020 on the same terms as in 2015/2016. In his letter, Mr Alcock set out in two sentences the rival contentions (namely WCE’s case that the policy covered all deposits received by it which were then refunded, and Zurich’s case that it only indemnified irrecoverable third party costs) and the financial consequences of each case.

Mr Garner had had no involvement whatsoever with the WCE account and had no knowledge of either the specific policy or the way in which RSA handled claims thereunder. Unsurprisingly, therefore, he was unwilling to answer the question posed without considerable further investigation which he was not prepared to undertake. He also stated in correspondence with Mr Alcock that even if he carried out an investigation, he could not be sure that his evidence would remain entirely supportive of Zurich’s position. He declined Mr Alcock’s offer to provide a copy of the Case Memorandum and List of Issues or the RSA policy and was accordingly not in a position to compare the terms of the RSA policy to the Zurich policy or to comment in any way on the facts of the case. All that he was prepared to say was that he would have considered that a claim for deposits paid to an insured and then refunded to a customer would fall outside the scope of a travel policy in general terms. However, he agreed that he was unable to comment on whether such a claim fell within the scope of either the Zurich policy or the RSA policy written for WCE specifically.

In these circumstances, I accepted the evidence of both gentlemen without hesitation or qualification but found that it did not ultimately assist me.

The course of claims handling by Zurich was the foundation of WCE’s case in relation to both the construction of the Policy and estoppel. It is therefore convenient for me to set out my findings in this regard before considering how they impact on the issues for determination.

Since the subjective views of the Zurich personnel are of critical importance to the question of estoppel, I start with my conclusions in relation to each of them, having considered their written and oral evidence carefully against the documents and the inherent probabilities.

I accept that Mr Blake understood in general terms that the Z-Alert wording indemnified irrecoverable costs: see, for example, his email to Ms Northey of 27 March 2020.

He was new to the WCE account in March 2020. He had no knowledge of WCE’s business and no knowledge of how cancellation claims had been handled over the previous three years. While I have some sympathy for him in the sense that he was suddenly propelled into an unfamiliar setting in what was no doubt a very stressful situation for everyone in the insurance industry at the time, the fact remains that he was performing the role of senior claims handler and specific referral point for the WCE account. As such, he should not in my view have left it so late before taking steps to understand WCE’s business or to elucidate the relationship between the deposits received by WCE and its cost outlays.

Because of this failure, I find that he unthinkingly assumed that the customer refunds must represent irrecoverable costs to WCE and that this explains why some of his communications after 17 March 2020 were couched in terms suggesting that deposits were indeed covered under the insurance (see, for example, paragraphs 106, 107 and 112 above) while others referred to incurred costs (see, for example, paragraph 113 above). This assumption would have been confirmed by his conversation on 8 April 2020 with Lisa Telford.

As regards the 9 April 2020 call specifically, I find that:

The reason Mr Blake gave such a clear impression is because (as I find) he still believed at that stage that the refunds represented costs to WCE. This was notwithstanding:

Whether Mr Blake never read Mr Stephens’ email properly, or was out of his depth, or simply slow in putting two and two together is unclear. However, a continuing belief that customer refunds were indemnifiable costs under the Policy is entirely consistent with Mr Blake forwarding Mr Warner’s email without qualification to senior Zurich personnel as setting out “some outcomes from my call with World Challenge today”, and also with his suggestion in the morning of 15 April (having received the full claims spreadsheet from Mr Venn) that the EWE might need to be increased to £14.4 million. I do not accept his evidence that he did not read Mr Warner’s email before sending it on. He may well not have spent much time on it given that it was received on the eve of the Easter bank holiday, but I find that he would not have sent it on without checking (at least briefly) that there was nothing in it with which he took issue.

As it was, the penny did not finally drop until later in the day on 15 April at around the same time (and whether or not prompted by the fact) that alarm bells were starting to ring higher up in the organisation. When it did, it is hardly surprising that he felt “a bit foolish”.

Only at this point, however, did Mr Blake belatedly appreciate that the refunds claimed by WCE did not represent third party costs and his subsequent holding responses to WCE referring to previous conversations as purely “exploratory” I find to be no more than a fig-leaf to excuse what he now realised was the wholly incorrect impression that he had given during the 9 April call.

Thus, while I accept Mr Blake’s evidence in cross-examination that he found himself in an embarrassing position on 15 April, I do not accept his explanation that this was simply because he had misstated the figures in his proposed update to the EWE through excessive haste. On the contrary, as just stated, I find that these were precisely the figures he intended and that his “embarrassing” mistake was in having failed to appreciate – despite all the indications staring him in the face – that the refunds being claimed by WCE had nothing to do with its third party costs.

As I have already said, I acquit him of any conscious dissembling. However, it does seem to me that the evidence he gave regarding the 9 April call and the appreciation of his error on 15 April 2020 was a classic example of Gestmin reconstruction which put his conduct in a less damaging light.

Mr Stephens was an underwriter. He too understood that the intention of the Z-Alert policy wording in general terms was to indemnify the irrecoverable third party costs of the insured.

Once he had underwritten a policy, he was clearly unconcerned with how it was handled thereafter or whether the claims being agreed conformed to the scope of the cover he had written. He regarded responsibility for adjusting claims in accordance with the policy as being that of the claims team alone.

For this reason, I accept his evidence that when the Dixon and Fritot claims were referred to him by Mr Mullan, he did not focus specifically on the figures being claimed but looked only at the points of principle involved.

In so far as he applied his mind to it at all, he (like Mr Blake) assumed, without any basis other than his own understanding of the Z-Alert wording in general, that the claims being put forward by WCE represented irrecoverable costs within the meaning of that wording.

For the same reason, I consider it likely that in his exchanges with Mr Brown at the end of February 2020 he was focusing only on the question of whether Zurich would make physical payments once the deductible was exhausted and was not considering how or why refunds would be covered under the Policy in the first place, even though it was clear that WCE was asking about coverage for refund payments. He may well, therefore, have said something to the effect that “costs can contribute towards the annual aggregate” as recorded in Mr Brown’s report of the conversation to Mr Morris (paragraph 60 above).

I accept Mr Stephens’ evidence that there may have been some discussion during the call of 17 March 2020 about third party recoveries. However, it is clear from his response to Mr Saha’s email following the call that (i) WCE was under the impression that refunds were covered; (ii) nothing had been said about the policy only covering irrecoverable third party payments; and (iii) the claims handling process hitherto had not necessarily reflected this.

Despite Mr Saha’s email, however (the wording of which Mr Stephens adopted in his own email to Mr Dowsing), he seems to have done nothing about Mr Saha’s concern beyond telling Mr Brown on 26 March 2020 that the response to WCE needed to be very specific as to what was claimable and that the claims team would be taking this forward. It is completely unclear what, if any, steps he took to investigate how claims had hitherto been adjusted or to ensure that the claims team was appropriately instructed going forward.

It was only after speaking to Mr Blake in the early afternoon of 15 April 2020 after concerns had been raised about the size of the potential claim that Mr Stephens finally appreciated that Zurich had in fact been consistently indemnifying WCE for its customer refunds, hence his belated recognition that “we are almost acting as the insurance for the package being offered by WCE” contrary to the intention of the policy.

I accept Mr Ratcliffe’s evidence as to his understanding of the general scope of coverage of the Z-Alert wording. I also find that he knew that WCE’s cancellation claims were for the amount of the refunds made to Challengers and that Zurich were to assess the validity of those claims under the policy. Nonetheless he seems to have utterly failed, for whatever reason, to consider the implications of these two apparently irreconcilable propositions but simply regarded it as a matter of no concern provided “the process” was followed.

On the evidence I find that Mr Mullan knew that Zurich were approving claims for the amount of WCE’s customer refunds. I accept that he may have held a general belief that the Z-Alert wording indemnified irrecoverable third party costs, but I find that he never applied his mind to how the two could be reconciled. As he said in evidence, once he had been supplied with the SHI (which answered his initial query of 22 April 2016), he simply handled claims in accordance with the prescribed process, which he accepted was different from the process followed for other insureds: see, for example, his approval of the Bentley sisters’ claim even though the only documented third party costs were substantially less than the amount of the refund. Accordingly, he did not think about why there would be a difference between the amount of the Challenger’s deposit and the amount of the refund if it was only concerned with WCE’s lost costs.

Ms Langford said that she understood WCE’s customer refunds to represent third party costs and that Ms Aylett and Mr Ratcliffe had said nothing to the contrary when they presented the SHI to the claims handling team. This was consistent with her initial approach to the Bentley sisters’ claim, where she asked for details of the flight costs which were duly provided by WCE. Ms Langford was unable to say on what basis the claim was approved by Mr Mullan, but it does not appear that she ever asked about third party costs again, and she maintained that she always thought the amount paid by each Challenger was entirely expended on flights and accommodation etc. She frankly admitted that she simply did not think about where (on this basis) WCE was making its profit, or how it was that the amount of the refunds invariably matched the amount of any third party costs less recoveries. She simply complied with the instructions in the SHI to apply the appropriate deduction in accordance with the T&Cs.

I accept that this was her genuine belief, even if there was no substantial basis for it. All she could point to in this regard was a medical expenses claim in January 2019 where she was told (incorrectly) that the administration fee represented WCE’s internal costs. However, that does not necessarily imply that the remainder of the refund represented third party costs. In any event, this was an isolated incident which was irrelevant to the handling of any claims before that date and there is no evidence that Ms Langford passed this information on to the rest of the claims handling team, whether as a relevant consideration for cancellation claims or at all.

I was invited by Mr Shapiro to take account when assessing the evidence of Zurich’s failure to call either Ms Aylett (now Hanley) or Ms Telford, whose evidence – at least on the face of the documents – might have been supportive of WCE’s case in a significant respect. Both still work for Zurich but the only explanation proffered as to why neither of them had been called was that Zurich considered that it had called a sufficient range of claims personnel to cover the issues raised. In these circumstances, I consider that it would be open to me to draw such inferences from their absence as I thought appropriate in all the circumstances: Efobi v Royal Mail Group Ltd, [2021] UKSC 33; [2021] 1 WLR 3863 at [41]. Having considered the matter carefully, however, I am unable to conclude that either witness would have materially changed the view I have formed of the evidence that was put before me, particularly in the light of the point made at paragraphs 224 and 225 below.

For his part, Mr Hough suggested that it was equally remarkable that WCE had not called any witnesses who could give relevant evidence of claims handling. It is true that none of WCE’s witnesses was involved in the handling of claims under the cover. However, given the way in which claims were submitted, it is not apparent that any of them could have contributed materially to what was evident on the face of the documents. Certainly, there was nothing (unlike in the case of Ms Aylett or Ms Telford) to suggest that any such witness might have been able to give positive evidence in support of Zurich’s case.

Based on these findings, I conclude as follows:

I now turn to the issues for determination.