(Harrison and Wild JJ)
Nature of case: Appeal against summary judgment entered in the High Court in favour of a third party lessor seeking declaration that it was entitled to indemnity under policy made between insurer and lessee/assignee.
Facts: Crystal leased hotel premise (top three floors of building) to Accor, which in turn assigned the hotel to HHR Christchurch (Host). Accor insured its interest in the premise with Allianz and later extended the policy to cover the interest of Host. Accor consistently denied that the head lease required it (and its assignees) to insure Crystal’s interest as lessor in the premise, but told Crystal that its interest was noted in the policy. The Allianz policy described the insured as being the Accor group, as well as those “more fully described in the schedule titled Appendix 1 (Schedule of Insured, in which Crystal was noted as a “financier”). The insured also included “owner of managed properties” as well as “mortgagees, lessees and other interested parties for their respective right and interest”. Prior to assignment, Crystal requested from Host a confirmation that Host would insure all Crystal’s interests in the premise. In return, Host forwarded a certificate of insurance (generated by Allianz) to Crystal which contained:
NAMED INSURED: Accor Group and all other related subsidiaries
INTERESTS INSURED: HHR New Zealand Holdings Limited, HHR Christchurch NTL Limited & Crystal Imports Pty Ltd
The hotel was damaged in the February 2011 earthquake. Crystal claimed that it was entitled to indemnity under the Allianz policy.
- Whether Crystal’s interest in the hotel was unarguably insured under Allianz’ policy.
- Whether Host and Allianz were estopped from denying that Crystal’s interest is so covered by the policy.
- The answer turned on the text of the policy in light of the background facts. Here, the policy was materially ambiguous and the lessor’s interest is not unarguably insured -.
- Host and Allianz were estopped by the insurance certificate from denying that Crystal’s interest was insured .
For 1 above:
The policy limited cover to the Accor group and Host, which fell within the defined category of insured parties. Crystal was only erroneously mentioned as a “financier”. “Owner of managed properties” referred to owner of the leasehold estate -.
Crystal was also neither a mortgagee nor a lessee. While it has an interest in the property, its interest was not “more fully described in the schedule”. The phrase “as more fully described in the schedule titled Appendix 1” required an express reference to a particular insured within the Accor or Host groups .
The fact that a policy states that it covers the interest of a third party does not of itself give that third party a right to enforce the policy. Such right only exists where the policy is arranged by an agent on behalf of that third party. Host had the authority to arrange cover for Crystal but it was not clear whether it had in fact done so -.
The purpose of the certificate of insurance issued by Allianz is to certify what is in the policy. It cannot alter the content of the policy. Moreover, the certificate was expressly subject to the terms of the policy .
For 2 above:
Representation – the certificate gave rise to an unambiguous representation that Crystal’s interest was covered . It did not matter that the certificate was addressed to Accor (and not Crystal) , and by forwarding the certificate Host had adopted Allianz’ interpretation of the policy .
Reliance – if Crystal had been correctly advised that its interest was not covered it would have taken immediate steps to procure cover  (notwithstanding that it had allowed its previous cover to lapse in 2009).
Reasonableness – Host provided the certificate to Crystal for the purpose of securing its consent to the assignment of lease. Host cannot now argue that it was unreasonable for Crystal to rely on it .
Host’s appeal dismissed. Summary judgment given in favour of Crystal affirmed (as Crystal was successful on the estoppel ground).
(White J Dissenting)
- (Endorses the majority’s judgment and reasoning on issue 1).
- Crystal failed to establish an unarguable estoppel in order to justify entry of summary judgment .
For 2 above:
Representation – the certificate did not name Crystal as an “insured” or define the nature of the “interest insured”. To ascertain those interests it was necessary to read the policy itself. The certificate provided expressly that it was issued in accordance with the terms of the policy -.
Reliance – arguable that Crystal did not rely on the certificate, as even after the earthquake it did not seem to know whether or not and to what extent its interest was insured .
Reasonableness – necessary to ask whether it was reasonable of Crystal not to have asked for a copy of the policy, which would have disclosed that its interest was not insured. There was an absence of evidence as to whether such failure was reasonable or not -.
Unconscionability – here unclear whether it is (i) unconscionability on the part of Host or (ii) Crystal trying to take advantage of a mistake by Allianz in issuing the certificate (in the knowledge of Accor’s consistent denial of an obligation to insure Crystal’s interest) .
Prepared with assistance from Ken Ng.
13 July 2015