England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NORWICH COUNTY COURT
(HIS HONOUR JUDGE DARROCH)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th December 2008

Lord Justice Waller:

1. Calum Fraser went on holiday to Mexico. He was an experienced scuba diver and it seems he enjoyed, in particular, diving in caves. Before going on holiday, he, as usual, took out travel insurance through Trailfinders, a well-known travel agent. They provided insurance as agents for equally well-known insurers AXA Insurance.
2. Calum Fraser did go diving and indeed went cave diving. After one such dive he became ill and needed medical treatment for decompression sickness. That medical treatment was provided by Quantum Processing Services Company ("Quantum") to whom Calum Fraser assigned the benefits of the policy. The cost of that medical treatment was ultimately some $25,752.92, but AXA refused to pay under the policy, alleging that Calum Fraser was not covered under the policy because he was solo (that is to say unaccompanied by an instructor) and because he was cave diving. Quantum commenced proceedings against AXA and, by a judgment dated 18 April 2008, HHJ Darroch found in AXA's favour and dismissed the claim. Quantum appealed with the leave of Tuckey LJ.
3. There are three points which have been taken on the appeal. First, Quantum assert that the judge should have found that when Calum Fraser took out the policy he received an assurance that the policy covered his diving. Second, they assert that, on a proper construction of the policy, the policy in fact covers scuba diving and in particular cave diving. Third, they assert that, in a conversation between a Mr McCully, for agents of the insurers, and Mr Munoz of Quantum, after Calum Fraser had commenced treatment, an assurance was given that the policy would cover the treatment and thus Quantum assert AXA are estopped from alleging no coverage.
4. The first two points are to some extent connected. As regards point 3, the judge made certain findings of fact which are critical, and because they are critical I can deal with the point at the outset and shortly. The judge found that any representation made was only made after most of the treatment had taken place and that there was no reliance on that representation before it was in fact withdrawn. There is no basis on which it would be possible to disturb those findings in relation to reliance in this court. Mr Stevenson, for Quantum, realistically appreciated the force of that point and in the event did not press it. I would simply hold that on point 3 it is not arguable that the judge's findings of fact should be reversed and because of that feature it is not arguable that there was any estoppel in this case. It follows that if Quantum were otherwise to fail on the first two points, an estoppel as alleged could not rescue them. So it is on points 1 and 2 that I will concentrate.
5. As to the first point, again, there is a finding of fact which is accepted cannot be disturbed. The judge found (that is paragraph 19 of the judgment) that Calum Fraser did not say specifically that he was going cave diving and he did not ask specifically, was he covered? But I would understand the judge to have found that it must have been obvious to Trailfinders that he was going diving and Mr Poole has not been able to suggest otherwise. There clearly was a conversation in which the equipment was discussed and the fact that he was going diving was the subject of that conversation. So, it is quite clear that Trailfinders knew that that was what he was going on holiday to do.
6. The judge's view was that there was something more hazardous about cave diving as opposed to open water diving. Indeed, he had some support for that view from Calum Fraser's own evidence. Calum Fraser accepted that there were hazards in scuba diving and some additional hazards in scuba diving in caves. Cave diving required additional training and additional equipment. The argument of Mr Poole before the judge, and an argument that it would seem the judge accepted, was that unless cave diving was covered by the terms of the policy as such, nothing that occurred in the original conversation could affect the question whether there was coverage.
7. In my view it is not quite as simple as that. As will be seen, the terms of the policy are not at all clear. On one view, and Mr Poole starts from this position, the policy excludes all hazardous activity and thus, since cave diving is a hazardous activity, it is excluded unless it has been expressly agreed to come within it. That would require Mr Fraser to have expressly referred to cave diving and would have required Trailfinders to have accepted cave diving expressly as the risk to be covered.
8. On another view the policy does not exclude all hazardous activities and, provided a hazardous activity has been identified in general terms and accepted as covered, it would be for the insurers to identify any aspect of that hazardous activity which is not covered. That is the position for which Mr Stevenson contends. That position requires Mr Fraser simply to have identified diving as a hazardous activity in which he was going to engage, which he did.
9. So what then is the proper construction of the policy? It must be remembered that this is a policy issued to ordinary consumers purchasing holidays and who want insurance. They receive certain advice which appeared from a leaflet or pamphlet delivered with the documents, and that said:

"We want to provide you with the widest cover we can. However, all insurances are subject to certain terms and condition. In this leaflet we have tried to give a broad overview of our package, its benefits and its restrictions.

In fairness to our Underwriters we must ask you to tell us if there is anything about your circumstances that warrants special consideration. We will endeavour to cater for any unusual requests, although it may mean an adjustment to the premium or the terms and conditions of cover."

There is a heading "Material Facts".

"All Material Facts must be disclosed as failure to do so may affect your rights under this insurance. In particular you should disclose:

Any existing medical conditions that may require treatment during the period of overseas travel or has been treated or investigated by the departure.

Activities that could be considered hazardous."

There are three other bullet points which it is unnecessary to quote.

10. Over the page, the heading at the top of the page is "Summary of Cover and Conditions". It identifies certain aspects and then has a heading at the bottom of the page which is "Principal Exclusions". That reads:

"Claims resulting from you having been involved in hazardous activities during the course of your travel, principally defined as motor-cycling (other than in respect of motorcycles hired or borrowed during the period of insurance), climbing, mountaineering, potholing, riding or driving in any kind of race, or other wilful exposure to risk (other than in an attempt to save human life).

It will be noted that there is no mention of scuba diving in that advice, but it is a fair point that the exclusion there described does contain the word "principally" and thus is obviously giving examples.

11. The policy itself is contained over a number of pages, which runs from page 127 to 130 in our bundle, but on the front is what is described as the "Master Certificate". There is at the bottom of the page a heading "Code of Practice", and that starts with these words:

"Under the Association of British Insurers' General Business Code of Practice, we have to bring to your attention some of the important features of your Travel Insurance Certificate:

Insurance Certificate This contains full details of the cover provided, plus the conditions and exclusions that apply to it.

The second bullet point, is "Conditions, Exclusions and Warranties". The next bullet point is "Health" and I do not need to quote the passage, but then appears the fourth bullet point, headed "Hazardous or Sporting Activities". That then says:

"If you are going to take part in hazardous or sporting activities, including water sports activities, that present a greater risk of injury than ordinary travel activities, you must check that your policy covers you. Sometimes such activities are excluded and you may need to arrange specialist cover."

It will be noted that the advice is not that the policy will not cover water sports activities or any hazardous activities, the advice is to check that the policy covers the same or contemplates the possibility that specialist cover may have to be arranged, presumably with a greater premium. The last sentence of that advice can only be understood as meaning that sometimes hazardous activities are covered, and sometimes they are covered but only with an extra premium.

12. One then turns to the conditions themselves and those are divided into various sections, and the first section which it is necessary to go to is the one described as "general conditions". That has a number of general conditions in it, many of which are not relevant to anything we have to decide, but the section starts with these words:

"This insurance is available for holiday or business travel, but excludes permanent overseas residency, permanent overseas employment, work of a predominantly manual nature or any hazardous activity."

13. Before coming back to consider those words, I should quote the general exclusions on the opposite column. The general exclusions provide:

"Underwriters shall not be liable for any claim arising out of:

1. mountaineering or climbing, potholing, sports tours, motorised competitions or races, suicide, insanity, the use of drugs (other than medically prescribed), the effects of alcohol, any activity in the air other than flying as a passenger in a fully-licensed passenger-carrying aircraft, or wilful exposure to needless danger (other than in an attempt to save human life).

2. travelling by motorcycle (other than in respect of motorcycles hired or borrowed during the period of insurance), or winter sports, unless the appropriate premium has been paid, but nevertheless excluding ski racing and major events, ski jumping, ice hockey or the use of bob sleighs or skeletons.

Note: not application to cancellation claims only."

Then there are four other exclusions, which it is unnecessary to read out.

14. What happened on this occasion was that Calum Fraser disclosed, in accordance with the advice under the Code of Practice, that he was going to engage in diving on his holiday in Mexico and he clearly followed the advice to disclose what can only be described as a hazardous activity. It seems to me once a disclosure has been made of a hazardous activity, and once that hazardous activity has been accepted by the insurers as covered by the policy, either because they have said, "Well, it will cost you a little bit more" and charge an extra premium, or simply accept that it is covered, then the policy only makes sense if the general conditions are read as if that disclosed hazardous activity had been written into the policy as covered. So those general conditions, as it seems to me, should now be read in the context of this case as: "This insurance is available for holiday or business travel but excludes" (leaving out unimportant words) "or any hazardous activity save for scuba diving."
15. It is also important, in my view, that, knowing Mr Fraser was going scuba diving, the insurers, through Trailfinders, did not suggest there were any limitations on what Mr Fraser, as a scuba diver, could do. "Scuba" as is well known is an acronym for a "self-contained underwater breathing apparatus". In other words it is a form of diving where the diver carries with him or her their own oxygen. The insurers did not, for example, say that Mr Fraser would only be covered if he was accompanied while performing the scuba dive nor that he would only be covered if he kept within a certain depth as it seems the insurers were contending at one stage. As it seems to me, diving in caves is a form of scuba diving in that the diver is carrying his or her own oxygen, and Mr Fraser was not told by Trailfinders that he would not be covered for scuba diving if he happened to enter a cave.
16. It follows, as it seems to me, that once the policy is read with scuba diving recognised as a hazardous activity which is covered, then if some particular form of scuba diving or some particular activity whilst scuba diving is not to be covered, that can only be as a result of one or other of the general exclusions applying. It is simply not permissible to construe the cover as covering only that which the insurers have in their own minds identified as a less hazardous form of scuba diving. It is to the exclusions that one must turn if liability is to be excluded.
17. If one goes to the exclusions, it is clear that diving in caves, scuba diving in caves is not, as such, excluded. If liability is to be excluded, that would have to be as a result either of a word such as "potholing" being construed as covering diving in caves or because the final sentence of the first exclusion applied. Potholing was faintly suggested by the judge as being applicable and as excluding cover in this case, but that does not seem to me to be tenable. If liability were to be excluded it would have to be, in my view, by virtue of the last words of the first general exclusion, the words "Wilful exposure to needless danger other than in an attempt to save human life." The insurers have never suggested, in this case, that Mr Fraser needlessly exposed himself to danger, and rightly, but those words do demonstrate that there would be a limit on what a scuba diver could or could not do. That diver could not do things that would expose him or her to needless danger and the exclusion makes perfect sense in those circumstances.
18. It seems to me that it makes good business sense to construe this policy in the way I have suggested. If a hazardous activity is accepted by the insurers as covered, the insurers must either expressly exclude certain parts of the activity if they are to limit their liability, or they have to be able to rely on the general exclusions in the policy, for example, exposure to foolhardiness.
19. I would allow the appeal and Quantum should succeed in their claim for the sum of the medical expenses.

Lord Justice Thomas:

20. I agree.

Lord Justice Aikens:

21. I also agree.

Order: Appeal allowed