Neutral Citation Number: [2005] EWHC 678 (Comm)
Case No: 2001 FOLIO 1264
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 21/04/2005

Before:

MR JUSTICE CRESSWELL
- - - - - - - - - - - - - - - - - - - - -
Between:

	WILLIAM FRANCIS RENDALL	Claimant	
	- and -		
	COMBINED INSURANCE COMPANY OF AMERICA	Defendant	

- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Mr. Colin Edelman QC and Mr. Colin Wynter (instructed by LeBoeuf, Lamb, Greene & MacRae) for the claimant
Mr. George Leggatt QC and Mr. Tom Adam (instructed by CMS Cameron McKenna) for the defendant

Hearing dates:      
- - - - - - - - - - - - - - - - - - - - -
Judgment Approved by the court
for handing down
(subject to editorial corrections)

If this Judgment has been emailed to you it is to be treated as ‘read-only’.
You should send any suggested amendments as a separate Word document.

            INTRODUCTION  paragraphs 1 to 51 
            THE COMBINED WORDING  paragraph 52   
WITNESSES paragraphs 53 to 69
(1) AVOIDANCE ISSUES  paragraphs 70 to 108 
(2) CONSTRUCTION/COVERAGE ISSUES  paragraphs 109 to 188 

Mr. Justice Cresswell:
INTRODUCTION
The following introduction to this judgment (paragraphs 1 to 51) is agreed between the parties.
1.	On 11 September 2001, two hijacked commercial airliners were deliberately flown by terrorists into the North and South Towers (“the Twin Towers”) of the World Trade Centre in New York. The North Tower was struck at approximately 8.46 am and the South Tower at approximately 9.03 am. Several thousand people working in or visiting the Twin Towers were killed, either by the impacts of the aircraft or from the subsequent collapse of the Towers.
2.	Various companies in the Aon Group, pursuant to the terms of leases with the Port Authority of New York and a sub-lease with Shearson Lehman Brothers Inc., occupied floors 92, 93, 98 to 103, 104 (part only) and 105 of the South Tower, which was 110 floors high.  Because the South Tower was the second tower to be struck, Aon employees had the opportunity to evacuate their offices in the South Tower.  Some did so pursuant to express instructions at that time and others pursuant to standing instructions from Aon on safety procedures.
3.	The impact of the second aircraft was to the 78th to 84th floors of the South Tower, below the floors occupied by the Aon Group companies. (The 78th floor contained what was known as the “Sky Lobby”, a concourse to which express elevators travelled directly from the ground floor main lobby, and from which local elevators served the upper floors.)  By the time the second aircraft struck, many Aon employees had either escaped from the South Tower altogether, or had got sufficiently far down the South Tower to enable them to continue their evacuation even after the impact of the second plane and reach safety.
4.	The lives of about 400 Aon employees were saved by the evacuation.  But a total of 176 Aon Group employees were killed after the second aircraft collided with the South Tower.  Those employees died either as a direct result of the impact of the second aircraft with the South Tower, or as a result of debris falling from the South Tower, or as a result of the subsequent collapse of the South Tower.  Their precise locations at the time of their deaths are not known (and the issue of where they died is not for decision in this trial:  by order dated 26 November 2004, the Court ordered that the trial “shall not include the issue of the probable locations of death of the 176 Aon employees who died on 11 September 2001”).  However, it seems that most were in the process of leaving the South Tower by staircases or elevators, or waiting for elevators in the Sky Lobby.
5.	It is from those tragic factual circumstances that the dispute between the parties in this case has arisen. 
6.	This case concerns a dispute that has arisen between the defendant, Combined Insurance Company of America (“the defendant”/“Combined”) and its London reinsurers, represented by the claimant (“the claimant”/“Reinsurers”).  Combined is an insurance company organised under the laws of the State of Illinois, United States, and with its principal place of business in Chicago, Illinois.   Combined is wholly owned by Aon Corporation. 
7.	The families of all of the victims of the attacks have been paid their due entitlements under the terms of the insurance that was provided by Combined, and the matters in dispute in this action concern only the respective rights and obligations under the Reinsurance as between Combined and the claimant.  The rights of Combined against the claimant are in practice governed by the rights which the insured persons had against Combined as a matter of Illinois law. 
8.	The claimant Reinsurers, who have brought these proceedings for negative declaratory relief, seek declarations:
i) that they have validly avoided the contract of facultative reinsurance with Combined, by reason of the non-disclosure and/or misrepresentation by Combined and/or its agents, of matters material to the risk. This issue is to be determined pursuant to English Law;
ii) that, on a true and proper construction of the relevant, reinsured parts of the underlying insurance provided by Combined, the deaths of almost all the Aon employees who were killed were not covered by the Insurance and were thus also outside the Reinsurance. This issue is to be determined pursuant to the law of the US state of Illinois.  
9.	Combined counterclaims for a declaration that it is entitled to be indemnified by the claimant, and also counterclaims for damages.
THE INSURANCE AND THE REINSURANCE
The Aon Group and the Requests for Proposal
10.	In early 2000, the Aon group of companies  (which is described in more detail below) was seeking new group insurance of three types:  Life, Accidental Death & Dismemberment (“AD&D”), Business Travel Accident (“BTA”).  To this end, in late January/early February 2000 Aon Consulting, an Aon Group broking company, sent out to various insurers, on behalf of Aon Corporation, two “Request for Proposal” (“RFP”) documents.   One of these related to the prospective group life cover and is not relevant to this dispute.  The other related to the prospective AD&D and BTA insurance, and sought the prospective insurers’ proposals as to the provision of certain insurance cover for (principally) the domestic employees of the Aon Group. 
11.	The Aon group consisted of a holding company, Aon Corporation, and its subsidiaries. In 1999, Aon Corporation had 1,571 worldwide subsidiaries, of which 382 were incorporated in the United States.  The operating subsidiaries of Aon Corporation carried on business in three distinct segments:  (a) insurance brokerage and other services; (b) consulting; and (c) insurance underwriting.  The insurance brokerage and other services segment consisted principally of direct and reinsurance brokerage operations, including specialty and wholesale activity.  The consulting segment provided a range of consulting services including employee benefits, human resources, compensation and change management.  The insurance underwriting segment wrote direct life and accident/health insurance, extended warranty, specialty and other insurance products.  The revenue generated by these three segments for the United States in 1999 was split as follows:  53% insurance brokerage and other services; 10% consulting; and 37% insurance underwriting.  In 1999, the Aon group of companies had about 25,500 domestic employees.
12.	The AD&D/BTA RFP (“the RFP”) stated in its Introduction Section that: -
“This Request for Proposal (RFP) has been prepared to achieve the following objectives:
Provide a proposal on a fully insured/pooled basis for Aon’s existing Basic and Supplemental AD&D Plan at the existing terms and conditions to be effective April 1, 2000.
Provide a proposal on a fully insured /pooled basis for a new Aon Business Travel Accident Insurance Plan as described herein to be effective April 1, 2000.
Provide a proposal on a fully insured/pooled basis for a new Aon Basic & Supplemental AD&D Plan and Travel Assistance Program as described herein to be effective January 1, 2001 with an open enrolment period during November 2000.
…
Please provide a three-year policy provision and rate guarantee on a non-cancellable basis for each of the plans being quoted.
Your written proposals are due in this office February 15, 2000”
13.	The RFP set out what was requested in respect of BTA coverage in Section II.  It set out those who were to be eligible to become insured, Class 1 of which was described as “All domestic employees including US employees employed outside the US”.  It then stated, in relation to the requested BTA coverage, as follows: -
“A benefit is payable if an insured suffers a loss as defined in the plan as a direct result of an “accident” which occurs while travelling on the business of Aon.
Coverage starts when an insured begins a trip – either from home or the place they normally work (whichever occurs later) and stays in force until they return to either of these locations (whichever is first).
…
While travelling on the business of Aon means while an insured is carrying out authorized activities for the furthering of Aon’s business.
Coverage is worldwide and includes commutation, sojourn and personal deviations (side trips incidental to a business trip)…….”
14.	Other important elements of the RFP were that the benefit which was sought for each Class 1 employee was 6 times annual income, with a maximum benefit of $1m; and that there was to be an aggregate limit (air only) of $20m.
15.	Section V of the RFP listed data “contained in the RFP package to enable you to price the programs and features contained herein.” This data included two “diskettes” (floppy disks) containing Microsoft Excel spreadsheets of two categories of Aon group employees: the “1999 Field Life Census” and the “1999 Staff Life Census”.   These spreadsheets were the primary source of data about the Aon Group’s domestic employees.  Nowhere in the Section V data was there any historical information from the Aon Group quantifying the amount of travel which its domestic employees had undertaken.
Combined’s assessment of the RFP
16.	Combined was one of seven insurers selected to tender for the insurance requested in the RFP.  Combined was and is a substantial insurance company, owned by Aon Corporation.  Combined delegated the preparation of Combined’s response to the RFP to Johnson Rooney & Welch (JRW”).
17.	JRW was and is a specialist in group life and AD&D covers. It had been underwriting on behalf of Combined since the autumn of 1999, having previously been underwriting for Transamerica. JRW was itself a part of the Aon Group, also as of autumn 1999.  The AD&D/BTA RFP and supporting information were considered by JRW’s AD&D/BTA underwriter, Janet (“Jan”) Massara. Ms Massara was based in California.
18.	Although Combined and JRW were both part of the Aon group, they were tendering for the insurance on a competitive basis.
19.	Ms Massara examined the RFP and supporting data, and noted that they contained no historical travel data.  To rate the risk, she therefore turned to make an estimate of the likely amount of travel (in terms of employee “travel days”).
20.	Ms Massara recorded her workings/calculations in manuscript at the time.
21.	She sent her estimates by email to Combined’s Chief Actuary, Mr. Lippai, on 7 February 2000.  This email read: -
“With respect to your conversation with Mr. Welch concerning the rating of the captioned coverage without the benefit of standardized assumptions of travel exposure, I would like to offer the following liberal assumptions of travel day exposure which could be used to promote adequate rating and uniformity amongst BTA responses:
21,360 Staff Employees: 93,350 days of travel
4,100 Field Employees: 61,500 days of travel
Please let me know if you feel these are appropriate assumptions, and if so, how they may be communicated to Al Grippo at Aon Consulting”.
22.	In the event Ms Massara’s travel day exposure figures were not communicated to the other potential insurers, and all insurers were left to make their own assessments of the risk on the basis of the information provided.  It is agreed that Ms Massara received no written response to her email; whether she received an oral response is in issue.
The initial quotation for the Reinsurance
23.	Once she had made her estimate, Ms Massara turned to the question of potential reinsurance. This was first addressed in a fax sent on 10 February 2000 by Ms Massara to Mr. Nigel Garner, a broker employed in London by another Aon Group company (then named Aon Group Limited); Mr. Garner worked for Aon Re Worldwide, a trading division of Aon Group Limited.
24.	At this point Ms Massara was only seeking a limited reinsurance: she believed that what was required was only an additional cover for the “air only” aggregate of $20m. She was seeking a quotation for a layer of $5m in excess of $15m (what she believed to be JRW’s existing surplus treaty cover) so as to complete the reinsurance for this aggregate.  
25.	The fax consisted of two pages. The first set out what was described as “The plan design and estimated travel data”, setting out the way in which the cover would be structured, including stating that the benefit amount for Class 1 employees would be “6 x Annual Salary, maximum of $1m”. It then stated “Estimated days of travel for Class 1 is 160,000”, and “Current Number of Board of Directors: 14”.  The “estimated days of travel” number was a rounding up by Ms Massara of the total of 154,850 days produced by her calculations referred to above.  The second page attached a list giving details of corporate aircraft, pilots and chauffeurs. 
26.	Mr. Garner took the fax to Reinsurers’ underwriter, Mr. Boyd, on 15 February 2000.  Mr. Boyd was at the material time underwriting for Syndicate 510, one of three Leading Underwriters, each with a 20% written line (15.385 % signed line), on an Aon Group Ltd “Lineslip for Personal Accident & Sickness and Travel Business”.  The other Leading Underwriters of the Lineslip were the active underwriters of Syndicates 582 and 55 at Lloyd’s.
27.	The Lineslip authorised “the Leading Underwriter and/or any first 3 Underwriters”, for the period of 12 months at 1 July 1999,  “to bind business …emanating from Aon Group Limited…”, with any business so bound being “automatically binding upon all other Underwriters … following the agreement of the Leading Underwriter and/or any first 3 Underwriters”. The Lineslip further provided that there was to be a “maximum period of 3 years any one risk regardless of the expiration of [the] Lineslip”, and that “all off-slips were to be initialled by Leading Underwriter”, and that no declaration was to “exceed 36 months plus odd time..”.  Mr. Garner and Mr. Boyd saw each other regularly in relation to business under the Lineslip.
28.	When Mr. Garner saw Mr. Boyd on 15 February 2000, he did not ask Mr. Boyd to write only the layer $5m excess $15m which had been set out in Ms Massara’s fax. Ms Massara had intended to purchase that layer on top of a treaty which provided cover up to $15m. In fact, however, Combined had not renewed that treaty and so it was not in place. Mr. Garner therefore broked the business to Mr. Boyd on the basis of seeking a facultative reinsurance of the full risk (i.e. from the “ground up”).  
29.	The fax did not explain how the estimated figure of 160,000 days of travel had been arrived at; Mr. Garner did not provide to Mr. Boyd any information as to how it had been arrived at; and Mr. Boyd did not ask for any such information.
30.	Despite the fact that the fax had obviously not been prepared with a 100% reinsurance in mind, Mr. Boyd took the view that it contained sufficient information for him to give a quote, which he did. He quoted a premium of $70,000. The only additional information which he requested was a loss history, which he asked for by noting “sub record” (i.e. “sub[ject to loss] record”) on the fax.  Neither side relies on anything which passed orally at the broking meeting.
31.	On the same day (15 February 2000) Mr. Garner passed Mr. Boyd’s quotation back to Ms Massara. His email reminded Ms Massara that the surplus treaty had not been renewed and went on “We have therefore obtained a quote for the complete 24 hour cover whilst on trips.  Subject to a claims co-operation clause, and satisfactory loss record.” 
Combined’s tender for the Insurance
32.	On or about 15 February 2000, Combined provided its AD&D insurance proposal to Aon Consulting in response to the RFP.  The creation and preparation of the proposal was in fact effected by JRW.  Page 3 of the proposal read: -
“Please allow us this opportunity to introduce you to the makers of this proposal.
[Combined] is among the largest life carriers in the world…….and has become the fastest growing provider of Group Accident Insurance Coverages.
This growth has been the result of a unique marriage between an excellent insurance company, [Combined], and an underwriting management firm, [JRW], which specializes in underwriting Accidental Death & Dismemberment Insurance coverages.
Working for Combined exclusively, the underwriting duties of [JRW] include all administrative functions attendant to these coverages……”
33.	On 16 February 2000, Aon Consulting asked for confirmation of Combined’s final AD&D premium numbers, and this was given by Ms Massara the same day.
34.	On 25 February 2000, Aon Consulting prepared a document described as a “supplement to the Accident Insurance RFP”.   After setting out a summary of what cover had been sought, the document proceeded to an analysis of the various quotations which had been received. The conclusion at this stage was that the two most competitive quotations were from AIG and CNA (both US insurers), and Aon Consulting recommended selecting CNA.
35.	On 9 March 2000, Mr. Lippai of Combined faxed through to Mr. Welch (the General Manager of JRW), care of Ms Massara, a table showing a comparison of all the 7 competing bids.  Combined’s price for the BTA cover was the middle of the 7 bids.
36.	On 13 March 2000, a manuscript note, made by Mr. Lippai of a conversation with Mr. Welch, records “Agreed to go + match the competition”.  Similarly, an undated note on a copy of the price comparison schedule records “CICA [ie Combined] agrees to match Met Life rates for Life and CNA rates for AD&D/BTA.”
37.	On 16 March 2000, Ms Massara sent a fax to Aon Consulting setting out “revised rates”.  The premium for the BTA coverage had been reduced to $30,000, which was the rate which had been quoted by CNA. 
38.	On 18 March 2000 Ms Massara in an email to Mr. Garner stated, “We want to further pursue the offer you provided … on February 15.  This would be for the entire BTA coverage. … Please advise if there is any additional information you will need prior to issuing a firm quote”.  Mr. Garner showed Mr. Boyd this email on 20 March 2000, and he scratched it “sub record” again.  This repeated request for a loss record was relayed by Mr. Garner by email to Ms Massara on 20 March 2000, stating, “We have seen the underwriter who has confirmed that the requirements are the same as previously advised within our email dated 15 February 2000”.  She responded the same day stating “There is no existing program and so no loss record is available”. 
39.	On 7 April 2000 Ms Massara told Mr. Garner that Combined had been awarded the Aon group BTA insurance and placed a firm order for the reinsurance.  Her email to Mr. Garner stated “We would like to bind the coverage as quoted by you, on February 15, for a net premium of $70,000 as a complete reinsurance of a Combined Policy, subject to a minimum retention.” 
40.	On 14 April 2000 Mr. Garner saw Mr. Boyd again.  He showed Mr. Boyd Ms Massara’s email of 20 March 2000 stating that there was no existing programme and therefore no loss record, and Mr. Boyd scratched it. At the same time Mr. Boyd scratched the slip and bound the reinsurance.
41.	The Reinsurance provided inter alia, and insofar as is relevant, as follows: -

“TYPE:			Personal Accident Reinsurance
REASSURED:		Combined Insurance of America (sic)
FORM:	As original.  Agree sign Slip Policy.
ORIGINAL ASSURED:	Aon Corporation
PERIOD:			12 months at 30 April 2000 
INTEREST:	Covering US based employees of the Original Assured for Business Travel Only ... for the following Classes:
I	Domestic Employees		6 times Annual Salary - up to a maximum              of USD1,000,000 any one person
…………….
CONDITIONS:		Coverage is for 24 hour cover whilst on Business Travel.  Including flying as a passenger or pilot in corporate aircraft.  Claims Cooperation Clause. 
....  
PREMIUM:			USD70,000 in full 
... ….
INFORMATION:		Facsimile dated 10 February 2000, seen.”
42.	The Reinsurance was subsequently varied by endorsement. 
43.	By email on 3 May 2000, Ms Massara asked Mr. Garner “What is the chance of getting a three-year term?”  On 10 May 2000, Mr. Garner saw Mr. Boyd, who offered an increase in the period of the Reinsurance to 36 months with slightly increased premium for the second and third years. At first Mr. Garner scratched “sub no material change in travel patterns over period”; he then altered this to “sub no greater increase in travel days more than 20% at 30/4/01, or 30/4/02”. 
44.	On 10 May 2000 Mr. Garner sent an email to Ms Massara setting out what had passed between him and Mr. Boyd and asking for confirmation whether the offered terms were acceptable.  By email on 30 May 2000, Ms Massara replied accepting the terms.  The variation was formally recorded in an endorsement on 6 July 2000, stating “Coverage is subject to there being no more than a 20% increase in the travel exposure which was advised to Underwriters at inception. An annual audit of the travel exposure will be carried out at 30 April 2001 and 30 April 2002.”  This increase in the period of the Reinsurance brought it into line with the period of the BTA Insurance. 
45.	There was a further endorsement dated 6 December 2000, which recorded the fact that Combined’s retention on the reinsurance was nil. 
Combined’s BTA Policy
46.	Combined subsequently issued a Business Travel Accident Group Master Insurance Policy to Aon, with an effective date of 30 April 2000 (“the BTA Insurance”).  The policyholder was Aon Corporation.  The “persons eligible to become insured” were 5 classes of persons, the first of which was “All Full-time Employees of a US Subsidiary … of the Policyholder”, and “Insured” was defined as “an individual covered under this policy as shown on the Policy Schedule”. 
The BTA Insurance stated on its first page “This Group Master Policy is delivered in and governed by the laws of the Governing Jurisdiction”, and “Governing Jurisdiction:  Illinois”. 
47.	The BTA Insurance provided cover with regard to a range of separate Business Travel and Personal Accident hazards, which were recorded on separate “forms.”  They included “24 Hour All Risk Hazard (Business Only)”,  “Felonious Assault Hazard”, “Specified Aircraft Hazard”, and “Terrorism Hazard”.
48.	More specifically, the BTA Insurance provided, in material respects, as follows: -
“….
If you suffer an Accidental Bodily Injury from one of the Hazard(s) which is attached to this Certificate, and which results in any of the losses described herein, We will pay You as shown in the What We Will Pay Sections.
DEFINITIONS:
Covered Loss means Accidental Death or Dismemberment that occurs within 365 days of an Accidental Bodily Injury. Subject to the Hazards covered …….  
“24 HOUR ALL RISK HAZARD
(Business Only)
If You suffer a Covered Loss while on an Authorized Business Trip … We will pay the benefit(s) as set forth in Your Certificate and any applicable riders.

Authorized Business Trip means:  (1) a trip that the Policyholder authorizes You to take for the purpose of furthering its business (excluding daily commuting to or from work, vacations and leaves of absence);  or (2) a relocation to a new residence that is closer to another office of Your Employer’s business.  An Authorized Business Trip:  (a) starts when You leave Your residence or Regular Place of Employment, whichever is later; and (b) ends when You Return to Your residence or Regular Place of Employment, whichever is earlier.  Excursions for personal reasons, which are taken during the course of authorized business travel, shall also be covered.

Regular Place of Employment means the business premises at which you spend at least 50% of Your working hours and which is located within 50 miles of Your primary residence.”

TERRORISM HAZARD
If You suffer a Covered Loss because of an Act of Terrorism and the applicable premium has been paid for this Hazard, We will pay the benefit(s) as set forth in Your Certificate…..
	     DEFINITIONS:
Act of Terrorism means any clandestine use of violence by an individual terrorist or a terrorist group to coerce or intimidate the civilian population to achieve a political, military, social or religious goal. Such acts shall include but not be limited to murder, kidnapping, hijacking, sabotage or bombings. It shall not include conventional warfare designed to result in wholesale loss of life through use of missiles launched from outside the United States or Canada, aerial bombardment, nuclear, chemical or biological warfare or outright invasions.”
49.	It is now common ground between the parties that Combined did not reinsure with the claimant its exposure under the Terrorism Hazard cover included in the BTA Insurance, but did reinsure its exposure under the 24 Hour All Risk Hazard (Business Only).
50.	The deaths of the 176 Aon group employees were caused by an “Act (or Acts) of Terrorism”, as defined in the Terrorism Hazard section of the BTA Insurance. It is therefore common ground that the losses represented by the deaths of the Aon employees all fell within the scope of the cover provided by the BTA Insurance and that Combined was bound to indemnify (as it has done) the families of all of the Aon employees who perished.  However, Combined says that the claimant was also liable under the 24Hr All Risk Hazard (Business Only) section.  The claimant disputes this.  
51.	The claimant has indemnified Combined with regard to payments that were made by Combined to the families of certain Aon employees who were visiting the World Trade Center premises from other Aon offices (ie employees who, it is common ground, were not at their “regular place of employment”, were on “authorized business trips” to the World Trade Centre, and were covered under the 24 Hr All Risk Hazard (Business Only) section). These claims involve overall payments by the claimant of $6.402 million, and relate to 7 Aon employees. The sums were paid by the claimant before discovery of the alleged grounds of avoidance, and so could potentially be affected by the outcome of the claimant’s avoidance case. 

THE COMBINED WORDING
52.	Agreed Facts
The following facts are agreed between the parties.
The RFP received by Combined contained a specific request (made by Aon Consulting, acting as brokers on behalf of Aon Corporation) for the type of business travel cover which was wanted.  The part of Combined’s BTA Policy which related to this request was the “24 Hour All Risk Hazard (Business Only)” clause.  The wording of the “24 Hour All Risk Hazard (Business Only)” clause is not the same as the wording in the request in the RFP.   The final wording of the Combined BTA policy (including the 24 Hour All Risk Hazard) was drafted between May 2000 and October 2000.  The drafting of that wording was undertaken by employees of Aon Service Corporation (“ASC”), in consultation with Ms Massara of JRW.  ASC is a business unit within the Aon group.  ASC is not revenue generating; it exists to provide services to other Aon business units.  ASC consists of various non-revenue departments.   Within the Law & Government Relations Department of ASC was a team led by Mr. Ron Markovits (a senior Aon group lawyer) whose primary function was to perform in house legal services for Aon underwriting companies (including Combined).  Within Mr. Markovits’ team were Gail Fedash, Deborah Shortridge and Robin Campbell, who were all specialists in “policy filings”.  ASC provides services across the Aon group to all business units, and not just to insurers.  With the exception of a disagreement about the role played by Valeri Bent, the parties agree that the BTA Policy drafting was undertaken by employees of ASC, in conjunction with Ms Massara.   Many changes were made to the wording of the BTA policy during the drafting process described above.   These changes included a change to the “24 Hour All Risk Hazard (Business Only)” clause:  the draft of the clause at one point contained no definition of “Regular Place of Employment”.  After the wording was finalised internally it was submitted to the Regulator on 31 May 2000.   Various amendments were required by the Regulator and were undertaken by ASC employees.   Ms Shortridge, an employee of ASC, communicated with the Regulator on Combined’s notepaper, and the Regulator wrote to her at Combined’s address.  The wording was finally approved by the Regulator on 26 September 2000.  
Areas of dispute
There were two areas of dispute:  one relating to the role of Valeri Bent, and the other relating to the significance of the agreed facts. 
As to the significance of the agreed facts: -
(1) Combined says that the ASC personnel who assisted in the drafting and filing of the policy wording did so on behalf of Combined and as its agents, in just the same way that JRW acted as Combined’s agent in this process.  The history therefore shows that the Combined wording was drafted exclusively by Combined.
(2) Reinsurers say that it is artificial to describe, as Combined implicitly seeks to do, the negotiation and drafting of the BTA policy wording, as an arms length exercise carried out by separate and distinct legal entities. ASC employees provided services to business units across the Aon group, even though it appears that the individuals in Mr. Markovits’ Team, “policy filing” specialists, may, by reason of the nature of their work (ensuring that policies filed with the relevant regulator would be approved) required them to work closely with the relevant insurer. Other ASC employees, such as Ms Bent, who were not concerned with “policy filing”, would apparently have been available, if required by Aon Consulting or Aon Corp, to provide services to Aon Consulting and/or Aon Corp, with regard to facilitating or effecting the drafting of the wording for the BTA policy that had been requested and developed by Aon Consulting.
In the event it is unnecessary to say more in relation to these two areas of dispute than is set out at paragraphs 183 and 184 below. 

WITNESSES
Witnesses of fact called by the claimant
Mr. Charles Boyd
53.	At the material time Mr. Boyd was employed as Personal Accident underwriter by Kiln plc.  The reinsurance was bound by Mr. Boyd as lead underwriter under the Aon Lineslip.  The core complaint made by Mr. Boyd was as follows – “I believed when I was presented with the risk that the estimated number of business travel days as presented was a figure produced from Aon’s own historical travel data which Aon would be happy to endorse as an estimate of the future days travelled over the future twelve months and that would now appear not to be the case.  It [was] an intermediary’s interpretation of information, none of which relate[d] to actual physical travel days.”
54.	Mr. Boyd explained how he arrived at his quote of $70,000.  
55.	Mr. Boyd said that if he had been told that the figure of 160,000 was calculated by Ms Massara’s own “liberal assumptions”, and not by any reference to any Aon specific facts and figures, he would certainly have asked for details of Ms Massara’s method, and the underlying information and data used, in the calculation of her estimated figure, and then applied his own assessment.
56.	The (unchallenged) witness statements of Mr. Tim Prifti and Ms Tanya Saunders were admitted in evidence.  
Witnesses of fact called by the defendant
Ms Jan Massara.
57.	At the material time Ms Massara worked as deputy to the Chief Underwriter at JRW (Bob Rooney).  JRW had recently been acquired by the Aon group.
58.	Ms Massara assessed the annual number of travel days for staff employees.  She assessed the likelihood of travel by reference to salary levels.  She assumed that those earning $100,000 or above would travel for an average of 25 days a year each, and that those earning less than $100,000 per annum would travel for an average of 2 days a year each.  She looked at the staff diskette supplied with the RFP to obtain information about salaries and about how many employees fell into each category.  There were 2,200 employees at $100,000 or above and 19,160 employees below $100,000.  The result was an estimated total of 93,320 days of staff travel per annum, with an average per staff employee of about 4.37 days travel per annum.
59.	Ms Massara said that as at 7 February 2000, when she emailed her estimates to Mr. Steve Lippai (a senior executive at Combined), she was using those estimates for the purposes of her own assessment of the risk on Combined’s behalf.  She said, “I do not recall receiving a written reply from Steve Lippai and I am confident that I did not receive one.  If I had received any written reply, I am sure it would have been filed, and would have been located as part of the disclosure process in these proceedings.  I am also sure that I did not call Mr. Lippai myself to ask what his response was.  However, I am confident that I was told that Mr. Lippai was OK with my numbers, even though I do not recall exactly how this happened.  Tom Welch (one of the principals of JRW) was the real channel of communications with Mr. Lippai, and it could have been that Mr. Welch told me that this was what Mr. Lippai had said.  What I am sure about is that I was told that Mr. Lippai was OK with my numbers.”  
60.	In her email to Mr. Lippai of 7 February 2000 Ms Massara offered “the following liberal assumptions of travel day exposure”.  I accept her evidence that her assumptions were intended to be “very generous travel day assumptions” and that she considered “there was a potential for another underwriter to estimate lower.”
61.	Ms Massara struck me as a credible witness.  I find that Mr. Lippai probably communicated that he was in agreement with her estimates via Mr. Welch.  Mr Lippai’s agreement with the estimates constituted material support for the estimates from a person with relevant knowledge/experience.
The (unchallenged) witness statements of Ms MaryBeth Meyers, Mr. Rivam Nieder, Mr. Roger Marks, Ms Louise Pellegrino, Ms Arlene Beck, Ms Judy Wein, Mr. Richard Reilly, Ms Marissa Panigrosso, Ms Ellen Perle (three), Mr. Richard Longyhore and Ms Patricia Novales were admitted in evidence. 
The underwriting experts
Mr. Raymond Hoare was called by the claimant and Mr. Bernard Kurtz by the defendant.  
62.	From November 1989 to April 2000 Mr. Hoare was Managing Director of Duncanson & Holt (Europe) Ltd., an underwriting management company specialising in accident and health business.  During his tenure as Managing Director, Mr. Hoare was also Deputy Underwriter for four years from 1990.  Mr. Hoare accepted that those four years represented the only time when he could describe himself as an underwriter.  During those four years he did the underwriting on a full time basis.  He accepted that the volume of business travel accident risks that Mr. Kurtz wrote would have far exceeded risks he wrote.
63.	Mr. Kurtz’s first position was as an underwriter with the Continental Insurance Company.  He then moved to American International Group where he served as a senior underwriter.  After leaving AIG he worked for the next 24 years at IOA Re Inc., Duncanson & Holt Inc. and LDG Reinsurance Corporation, serving as both a direct underwriter and reinsurance underwriter.  In December 2002 he began a second term at AIG.  He has now left AIG in order to return to the reinsurance underwriting side of the business.  All his work as direct underwriter has included business travel accident policies; approximately 75% of his work as reinsurance underwriter has involved such policies.  Throughout over 32 years of professional experience he has been called upon almost daily to evaluate submissions for business travel accident coverage, both as a direct underwriter and a reinsurer, and to rate those risks.
64.	It follows that Mr. Kurtz has had far greater experience of underwriting business travel accident policies than Mr. Hoare, although Mr. Kurtz’s experience has been in the United States and not in the London market.  Mr. Kurtz struck me as a particularly impressive witness.  
The underwriting experts agreed the following: 
1. The number of anticipated employee travel days is the primary basis for underwriting business travel risks.  
2. The most reliable predictor of anticipated business travel days is actual historical business travel data from the insured.  However, the unavailability of such travel days data by no means requires an underwriter to reject a submission.  In the absence of historical data, travel days can be, and often are, estimated based on other information such as knowledge of the industry, the insured’s business and employee occupations.
3. In some cases, higher paid employees may undertake a greater amount of business travel than the lower paid employees. 
4. Salary data is a reasonable rule of thumb guide to the amount of travel exposure employees may undertake, depending on the type of company.  
The experts as to Illinois law
Mr. Robert J Bates Jnr. was called by the claimant and Judge Kenneth L Gillis (retired) was called by the defendant.
65.	Mr. Bates is a founding partner of the Chicago law firm, Bates & Carey LLP.  He has represented insurance companies in connection with insurance coverage disputes since 1984.  He has represented reinsurance companies in reinsurance disputes since the late 1980s.  Insurance coverage and reinsurance issues have been his primary areas of expertise, and he has been personally involved in over 500 insurance coverage and reinsurance matters in Illinois and throughout the United States.  
66.	Judge Gillis is a former judge of the Circuit Court of Cook County, Illinois, where he served for more than 18 years.  From 1995 to 1999 he was a Commercial Calendar judge in the Law Division of the Circuit Court of Cook County.  In this role he tried commercial issues in jury and bench trials, including cases involving insurance disputes.  From 1993 to 1995 he served as a Motion Judge in the Law Division, where he often dealt with motions to dismiss and motions for summary judgment.  Prior to that, from 1978 to 1990 he served as a judge of the Circuit Court of Cook County in both the Felony Trial Courts and the Chancery Division. 
67.	Prior to the start of the trial the experts had prepared a joint report.  At the start of the trial I gave directions for a further meeting between the experts which resulted in a supplemental joint report containing further points of law on which the experts agreed, points of law offered by Judge Gillis with which Mr. Bates disagreed and points of law offered by Mr.. Bates with which Judge Gillis disagreed.  After cross-examination of both experts in the usual way I called both experts forward and asked a number of questions with a view to narrowing the issues.  This procedure worked well.  The experts assisted by reordering the points that they had agreed.  At the end of the day there was one major point of disagreement as to which see below.
68.	The role of an expert as to foreign law, unless the court is concerned with special meanings, is to prove the rules of construction of the foreign law.  It is then for the court to construe the contract in accordance with those rules.  The view of an expert as to the meaning which would be given to a particular word is not admissible evidence unless he or she is saying that it has a special meaning under the foreign law (King v Brandywine [2005] EWCA. Civ. 235 paragraph 68, Waller L.J.).  
69.	Mr. Bates in particular went beyond the proper role of an expert as to foreign law in his first report, but by the conclusion of the trial both experts understood their role.

(1) AVOIDANCE ISSUES

These issues are governed by English law.

The fax of 10 February 2000
70.	The first page of the fax of 10 February 2000 (see paras 23 to 30 above) was in the following terms: -
“To: Nigel Garner – Accident & Health
  From: Jan Massara 
  Subj: Aon Corporation
           Business Travel Accident Proposal
  Pages: 2 (including cover)
Nigel:
We are currently quoting all of the AD&D coverages for Aon Corporation (perhaps you’ve heard of them?)
The only piece which exceeds our treaty limits, is the Aggregate Limit of Indemnity (Air Only) at $20,000,000.  Under our surplus treaty, our limit is $15,000,000.
Please price for the facultative placement of the additional $5,000,000.
The plan design and estimated travel data is as follws:
Class	Description	Benefit Amount	
I	Domestic Employees	6 x Annual Salary, maximum of $1 Million	
II	All non-empoyee BOD Members 	$500,000	
III	Dependents of Class I & II	Spouse: $100,000, Children $50,000	
IV	Independent contractors	Amount specified in the Insured’s contract	
V	Guests of the Poicyholder	$100,000	

Estimated days of travel for Class I is 160,000
Current Number of Board of Directors: 14
Attached is a listing of Corporate Aircraft, Corporate Pilots and their salaries and corporate Chauffeurs.
…..
                                                                                  Jan Massara 
                                Accident & Health Underwriting Manager
                                                      Johnson Rooney Welch, Inc.”

The claimant’s pleaded case as to misrepresentation and non-disclosure
71.	The claimant’s pleaded case as to misrepresentation and non-disclosure includes the following:  -
“As presented, the “estimated days of travel” figure of 160,000 implicitly suggested, and was reasonably understood by the claimant’s underwriter, as representing an estimate that had been made on reasonable grounds by the defendant and/or Aon and that had been based on Aon’s own information and experience of the business travel undertaken by its Class 1 and/or other employees …
For the avoidance of doubt, the reference to “Aon’s own information and experience of the business travel undertaken by its Class 1 and/or other employees” means and is limited to Aon’s historical information and experience of the business travel undertaken by [its] Class 1 and/or other employees [in the Aon Group].
The defendant and/or its brokers failed to disclose to the claimant the material fact that the number of travel days that had been estimated for Class 1 employees had been arrived at by the application of assumptions, and not on the basis of the actual travel experience of Aon’s own Class 1 or other employees.
For the avoidance of doubt, the reference to the “actual travel experience of Aon’s own Class 1 or other employees” means and is limited to Aon’s historical information and experience of the business travel undertaken by [its] Class1 and/or other employees [in the Aon Group].”

Allegations that the claimant has not made
72.	It is important to note that the claimant has not made the following allegations:- 
i)	that the estimate was in fact inaccurate; or 
ii)	that any failure to carry out an annual audit of the travel exposure entitled the claimant to avoid the contract.

The claimant’s submissions as to Avoidance issues
Mr. Edelman QC for the claimant submitted as follows.
Misrepresentation
73.	The representation as to 160,000 estimated days of travel included a representation of fact that the estimate was based on Aon-specific historical information/experience.
74.	This conclusion is reached by considering “by whom and in what circumstances the representation was made” (Peter Gibson L.J. in Economides v Commercial Union [1998] QB 587).  From the circumstances in this case, a specific assertion of fact is implicit.
75.	An application of Economides to facts of this case is inappropriate, for reasons apparent in the judgments themselves, as subsequently applied in Sirius International Insurance Corp. v Oriental Assurance Corp. [1999] Lloyd’s Rep IR 343, and as explained in the final sentence of paragraph of 16-13 of MacGillivray (lay insured declaring truth of statement of values in proposal form to best of knowledge and belief, in contrast to commercial reinsured in Sirius).
Non-Disclosure 
Materiality is not in dispute, inducement is not challenged. Waiver is the only issue.      
Waiver 
76.	The presentation was not a fair presentation. Absent fairness of presentation, waiver cannot apply and Mr. Boyd, who had an established relationship with the experienced placing broker, Mr. Garner, was not put on enquiry.  The requirement of fairness of presentation as a precondition for waiver remains good law.  In any event, in the circumstances Mr. Boyd was not put on enquiry.  In the light of the terms for the three year period for the reinsurance, Ms Massara, when accepting those terms would not have been entitled to assume that Mr. Boyd was indifferent to or uninterested in the basis for the estimate. 
No reasonable basis for representation 
77.	Ms Massara’s knowledge/experience of Aon, its operations and the travel undertaken by its employees, was limited and inadequate for the assumption/estimation exercise that she undertook. It was one thing for Combined, as insurer, to proceed to quote on the basis of the estimate, but it was quite another for the estimate to be deployed as placing information for Reinsurers. 
78.	Ms Massara sought but never obtained any verification of the reliability or appropriateness of her estimate or, if she did, she did not obtain verification from anyone having the requisite knowledge/experience to render reliable the estimate that she reached.
79.	Moreover, any claim to reasonableness of assumptions was undermined by the application of arbitrary dividing lines between employees at different salary levels, application of an arbitrary cap of maximum of 50 days, and arbitrary disregard of any local travel.

The defendant’s submissions as to Avoidance issues
Mr. Leggatt QC for the defendant Combined submitted as follows.
80.	The words “Estimated days of travel for Class 1 is 160,000” were a representation that Combined (or its agent, JRW) estimated (i.e. expected) that the total number of days of travel to be undertaken by Aon’s Class 1 employees during a (future) annual period was 160,000. This was a representation as to a matter of expectation or belief. 
81.	It follows, pursuant to s. 20(5) of the Marine Insurance Act 1906 (“MIA 1906”) that the representation was true if it was made in good faith (i.e. if there was an honest belief in its truth), and there is thus no scope for any implied representation that there were reasonable grounds for the expectation or belief: see Economides supra. 
82.	In any event, the evidence demonstrated conclusively that the estimate made by Ms Massara as to the number of travel days was made on reasonable grounds. 
83.	The estimate of travel days carried no implied representation about how it had been made or on what information it was based. Nor was the presentation of the risk in any way unfair or misleading. It would have been obvious to any prudent underwriter that the estimate might very well not be based on historical travel days data, since (as Mr. Boyd knew) it was not unusual to estimate travel days for group BTA policies without such data, because the organisation did not have it. 
84.	When he considered the fax, a reasonably careful underwriter would naturally have been prompted to ask how the estimate of travel days had been made (as well as enquiring about the total number and average salary of Aon’s Class 1 employees). In fact, however, Mr. Boyd chose not to ask for any of this information, and made it clear that he did not require any additional information (apart from any loss record), although had he asked for any further information it would readily have been provided. In these circumstances there was the clearest waiver of any further information as to the data and assumptions on which the estimate of travel days was based. 
85.	There is no allegation and no evidence that the estimate of 160,000 travel days was in fact inaccurate (in the sense that the actual number of days travelled by Aon employees was more than estimated). Nor is it probable that, if Mr. Boyd had known how the estimate had been arrived at, he would have used any different figure. 

The relevant legal principles – avoidance issues
86.	The legal principles set out in paragraphs (87) to (90) and (92) to (95) below are common ground.   
87.	The principles governing the right to avoid a contract of insurance (or reinsurance) on grounds of misrepresentation or non-disclosure are those set out in sections 17 to 20 of the MIA 1906, which apply equally to non-marine as to marine insurance: see e.g. PCW Syndicates v PCW Reinsurers [1996] 1 WLR 1136 (CA).
Misrepresentation 
88.	MacGillivray, paragraph 16-10 summarises the law as follows: -
“Requirements of actionable misrepresentation.
In order for an innocent misrepresentation to entitle a party to avoid the contract of insurance it must satisfy the following conditions:
(1) it must be a statement of fact or, in relation to the insurer’s remedy under section 20 of the 1906 Act only, a statement of opinion or belief ;
(2) it must be untrue;
(3) if made to the insurer, it must be material to his appraisal of the risk, and in other cases material in the wider sense;
(4) it must be a statement as to present or past fact and not de futuro;
(5) it must have induced the aggrieved party to enter into the contract of insurance.”

89.	Section 20 of the MIA 1906 provides, in so far as is relevant, as follows: -
“Representations pending negotiation of contract.
(1) Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract.
(2) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.
(3) A representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief.
(4) A representation as to a matter of fact is true, if it be substantially correct, that is to say, if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer.
(5) A representation as to a matter of expectation or belief is true if it be made in good faith.”

90.	A representation is material if it would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk: see s.20 (2) of the Act. For this purpose it is not necessary to show that a prudent insurer would have made a different decision if the representation had not been made, but only that a prudent insurer would have taken the representation into account as a factor in reaching his decision: see Pan Atlantic Ins Co v Pine Top Ins Co [1995] 1 AC 501 (HL).  However, to show that the representation satisfies the requirement of inducement, it must be shown that the actual underwriter would have done something different (either in the terms which he would have agreed for the insurance, or in whether he would have entered into it at all):  Pan Atlantic (supra).
91.	There is a dispute between the parties as to whether the representation relied on by the Reinsurers is to be treated as being only a representation of expectation or belief or whether it can, consistently with s.20 (5) of the MIA 1906, involve an implicit representation that there were reasonable grounds for the expectation or belief:
i)	Reinsurers say that by considering the facts as to by whom and in what circumstances the representation in question was made, the representation is properly characterised as including an assertion of a specific fact, namely that there were reasonable grounds for the estimate given.  They say that this approach is consistent with and not contrary to the decision of the Court of Appeal in Economides supra and is supported by paragraphs 16-13 and 16-45 of MacGillivray and Sirius International Insurance Corp. v Oriental Assurance Corp. [1999] Lloyd’s Rep IR 343, 351 (in which they say Longmore J distinguished Economides).  They say that the facts in Economides are very different from the facts in this case and that that affects how one construes the representation made.
ii)	Combined says that Economides is binding authority for the proposition that a representation as to a matter of expectation or belief cannot, consistently with s.20 (5) of the MIA 1906, involve an implied representation that there are reasonable grounds for the expectation or belief.
Non-disclosure and waiver
92.	In general, an insurer may avoid a contract of insurance on the ground of non-disclosure, if: -
i)	the assured did not disclose to the insurer before the contract was concluded a material fact which was known to the assured; and
ii)	the non-disclosure induced the making of the contract in the sense that the insurer would not have entered into the same contract if he had known the fact in question.
 See s.18 (1) of the MIA 1906 and Pan Atlantic, supra.

93.	A material fact is one which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk: see s.18 (2) of the MIA 1906. For this purpose it is not necessary to show that a prudent insurer would have made a different decision if the fact had been disclosed, but only that the fact is one which a prudent insurer would have taken it into account as a factor in reaching his decision: see Pan Atlantic, supra.  
94.	There are certain facts which (in the absence of inquiry) need not be disclosed to the insurer, even if material. These include:
i)	any fact which is known or presumed to be known to the insurer (and the insurer is presumed to know matters which an insurer in the ordinary course of his business, as such, ought to know) – see s.18 (3)(b) of the MIA 1906; and
ii)	any fact as to which information is waived by the insurer – see s.18 (3)(c) of the MIA 1906.
95.	Disclosure of a fact is waived by the insurer (even though the fact which is not disclosed is material) if:
i)	the presentation of the risk to the insurer is fair; and
ii)	the presentation contains information which would naturally lead a prudent insurer to make a further inquiry which, if made, would elicit the fact; and 
iii)	the further inquiry is not made.
See WISE (Underwriting Agency) Ltd v Grupo Nacional Provincial [2004] Lloyd’s Rep IR 764 (CA).
96.	Reinsurers say that if there has been no fair presentation of the risk, the reinsurer will not have been put on enquiry, citing Iron Trades Mutual v Compania de Seguros [1991] 1 Re LR 213 (Hobhouse J).
97.	Combined says that the position is more subtle following the decision in WISE, which did not apply the same approach as Iron Trades, and that the question of whether the presentation contained facts which would have put a prudent insurer on enquiry is relevant to the question of whether the presentation was fair.

List of Avoidance Issues
I set out below a list of the avoidance issues.
Misrepresentation 
(1) Is the representation that was made with regard to the estimated number of travel days capable of carrying with it an implicit representation that it was based on reasonable grounds?  
If the answer to 1 is “yes”; 
(2) Was there in fact a representation as to the basis on which the estimate had been made?
(3) Was the representation false?
(4) Was the misrepresentation material?
(5) Was Mr. Boyd induced?
Non-Disclosure
(6) Was there a fair presentation of the risk to Mr. Boyd?
(7) Materiality 
(8) Was disclosure of the basis of the estimate (agreed by Combined to have been material) waived by Mr. Boyd?
(9) Inducement
The correct approach
98.	It is important when considering the avoidance issues, and in particular the factual and expert evidence, to put on pre 9/11 spectacles, and not post 9/11 spectacles. 
99.	At the conclusion of her evidence Ms Massara was asked whether she believed Combined would have made money on the risk had it not been for 9/11.  She replied, “At my price, it would have made money.  Actually there were no claims on the BTA except for the 9/11 claims”.
100.	The assessment of this type of risk may have changed since 9/11.  But the issues must be examined through the spectacles of the relevant period of time.

Misrepresentation 
(1) Is the representation that was made with regard to the estimated number of travel days capable of carrying with it an implicit representation that it was based on reasonable grounds?  
(2) Was there in fact a representation as to the basis on which the estimate had been made?
101.	Reinsurers submit that the question for the court to determine is whether, considering “by whom and in what circumstances the representation in question was made”, the representation is properly characterised as a representation only of “expectation or belief” (as Combined contends), or of or as including “an assertion of a specific fact” (as Reinsurers contend).  If the former, it will be sufficient if the representation was made in good faith. If the latter, there must have been some reasonable justification for the belief.  Reinsurers contend that the representation to Mr. Boyd that “estimated travel data …Estimated days of travel for Class I is 160,000” in the fax dated 10 February 2000 is properly characterised as a representation which includes an implicit assertion that the figure put forward to Mr. Boyd had been arrived at by reference to “Aon’s historical information and experience of the business travel undertaken by its [US domestic] and/or other employees.”
102.	Combined submits that as a matter of construction, the words "Estimated days of travel for Class 1 is 160,000” in the fax dated 10 February 2000 clearly meant that Combined (or its underwriting agents, JRW) estimated (i.e. expected) that the total number of days of travel that Aon’s Class 1 employees would be likely to undertake during the (future) annual period of the insurance was 160,000.  Not only is this how the words would have been understood by any reasonable reinsuring underwriter (and how Mr. Hoare would have understood them), but it was also how Mr. Boyd in fact understood them.  Section 20(3) of the MIA 1906 states that a representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief. Applying that distinction, the representation made in the present case was expressly one as to a matter of expectation or belief: it was an “estimate” of next year’s travel exposure.  Reinsurers have not alleged that the representation made in this case was made in bad faith (nor could they). By operation of section 20(5), Combined says the representation is true.  
103.	I analyse the position as follows:
1. In an insurance context one cannot, consistently with section 20 (5) of the MIA 1906, find in a representation of expectation or belief, an implied representation that there are reasonable grounds for that belief.  (Economides supra Simon Brown L.J.).  Once statute deems an honest representation as to a matter of expectation or belief to be true, there is no scope for inquiry as to whether there were objectively reasonable grounds for that belief (Peter Gibson L.J. in Economides). 
2. What may at first blush appear to be a representation merely of expectation or belief can on analysis be seen in certain cases to be an assertion of a specific fact (Simon Brown L.J. in Economides).  In that event the case is governed by subsections (3) and (4) rather than subsection (5) of section 20.  In this connection it is important to keep in mind by whom and in what circumstances the representation in question was made (see Peter Gibson L.J. in Economides).  
3. There must be some basis for a representation of expectation or belief before it can be said to be made in good faith (Simon Brown L.J. in Economides). 
4.  In the present case the material words were: - 
“The … estimated travel data is … Estimated days of travel for Class 1 is 160,000.”
5.  It is not suggested by Reinsurers that there was no basis for the representation made.
6.  I do not consider that the words in question on analysis constituted an assertion of a specific fact.  In particular I do not find in the words in question an assertion of a specific fact that the estimate “had been based on Aon’s historical information and experience of the business travel undertaken by … Class 1 and/or other employees in the Aon Group”.  It should be remembered that (as the experts agreed), in the absence of historical data, travel days can be, and often are, estimated based on other information such as knowledge of the industry, the insured’s business and employee occupations.  An estimate of future travel can be arrived at in a number of different ways.  Further in 1999 Aon Corporation had 382 subsidiaries incorporated in the United States.  The fax related to the Aon Group, not a single company.  I do not consider that there was an assertion of a specific fact as Reinsurers allege.  
My conclusion as set out above is consistent with the oral evidence.  Mr. Boyd accepted in cross-examination that nothing in the fax entitled him to draw any conclusion about whether there was hard historical travel data that had been collated, or whether “these were entirely estimated data because hard historical data were not available,” or whether there was some intermediate possibility.  Mr. Hoare agreed in cross-examination that the fax did not say whether the figure of 160,000 was based on any hard historical data about travel days or whether it was based on no data about travel days, or whether it was based somewhere in between.  
7.  In my opinion the representation in question was as to a matter of expectation or belief made in good faith and deemed by section 20 (5) to be true.  There is no scope for inquiry as to whether there were objectively reasonable grounds for the expectation or belief.  
8.  Further if contrary to the above it was necessary to consider whether the estimate was made on reasonable grounds, I would find that it was made on reasonable grounds.  Ms Massara struck me as a credible witness.  I find that Mr. Lippai probably communicated that he was in agreement with her estimates via Mr. Welch.  Mr Lippai’s agreement with the estimates constituted material support for the estimates from a person with relevant knowledge/experience.  In cross-examination Mr. Hoare agreed that Ms Massara took account of relevant sources of information.  Again in cross-examination Mr. Hoare was asked, “you are not suggesting in your reports, are you, that [the estimate] is one that no reasonable underwriter could [make]?”  Mr. Hoare answered, “I am not suggesting that, no.”  When asked, “and you do not suggest that today, do you?” Mr. Hoare answered “no.”
 (3) Was the representation false?
(4) Was the misrepresentation material?
(5) Was Mr. Boyd induced?
104.	In the light of my conclusions set out above it is not necessary to consider these questions save to record that Combined accepted that the representation would have been material, had Reinsurers’ case been upheld.
Non-Disclosure
(6) Was there a fair presentation of the risk to Mr. Boyd?
105.	I analyse the position as follows.
1. Reinsurers’ case is that the defendant and/or its brokers failed to disclose to the claimant the material fact that the number of travel days that had been estimated for Class 1 employees had been arrived at by the application of assumptions, and not on the basis of Aon’s historical information and experience of the business travel undertaken by Class 1 and/or other employees in the Aon Group.  In closing submissions Reinsurers contended that the fax gave the impression that the estimated figure for travel days had been arrived at by reference to Aon’s historical travel information or experience.  I reject that submission and repeat the analysis under the heading misrepresentation.  A prudent underwriter would have realised that the estimate of days of travel could have been arrived at in a number of ways.  I agree with Mr. Kurtz’s statement - “the presentation contained information which would naturally lead a prudent underwriter to make a further enquiry which, if made, would have elicited how the estimate was arrived at.”   
2. Mr. Boyd accepted in cross-examination that there was nothing misleading in the fax itself.  
Mr. Hoare accepted in cross-examination that he did not suggest in his reports that the fax was a misleading document.  Further in cross-examination Mr. Hoare accepted that he was not saying that “it was an unfair presentation to the underwriter”.
3. I accept Combined’s submission that the presentation was fair because Reinsurers were specifically told that the days of travel were estimated.  This carried with it no implication about how the estimate had been arrived at.  It could have been based on hard data or on judgments or assumptions or any mixture of these.  It again should be remembered that (as the experts agreed), in the absence of historical data, travel days can be, and often are, estimated based on other information such as knowledge of the industry, the insured’s business and employee occupations.  
(7) Materiality 
(8) Was disclosure of the basis of the estimate (agreed by Combined to have been material) waived by Mr. Boyd?
106.	I analyse the position as follows.
1. In WISE supra at paragraph 110 Longmore L.J. said: -
“It is these passages that are the foundation of para 17-83 (pp 446–447) in MacGillivray which is in these terms: -
	   ‘The assured must perform his duty of disclosure properly by making a fair presentation of the risk proposed for insurance. If the insurers thereby receive information from the assured or his agent which, taken on its own or in conjunction with other facts known to them or which they are presumed to know, would naturally prompt a reasonably careful insurer to make further inquiries, then, if they omit to make the appropriate check or inquiry, assuming it can be made simply, they will be held to have waived disclosure of the material fact which that inquiry would necessarily have revealed.’ 	
This presupposes a test which is perhaps closer to constructive notice than Kerr LJ and Hobhouse J would approve but is a fair summary of the law as laid down by Parker and Stephenson LJJ and, being the view of the majority, binds this court. It is no doubt sufficient if the actual underwriter actually waives; but waiver will also be established by proving that a prudent underwriter would by inquiry have elicited the fact said now to be material. 

So the question becomes: (a) was there a fair presentation of the risk? And (b) was the insurer in the course of that presentation in the words of Parker LJ (at 511–512):  
	
   ‘put on enquiry by the disclosure of facts which would raise in the mind of a reasonable insurer at least a suspicion that there were other circumstances which would or might vitiate the presentation[?]’”	
2. It is thus common ground that disclosure of a fact is waived by the insurer if, (even though the fact which is not disclosed is material):
i)	the presentation of the risk to the insurer is fair; and
ii)	the presentation contains information which would naturally lead a prudent insurer to make a further inquiry which, if made, would elicit the fact; and 
iii)	the further inquiry is not made.
3. Mr. Boyd knew (without limitation) the following facts and matters: -
(a) The fax of 10 February 2000 had been prepared for the purpose of obtaining limited cover as mentioned in the second and third paragraphs (“Please price for the facultative placement of the additional $ 5 million”).
(b) The fax stated “Estimated days of travel for Class 1 is 160,000.”  The number of anticipated employee travel days is the primary basis for underwriting business travel risks.  The figure provided was an estimate.
(c) “Any estimate is going to be based on some information and some assumptions”.  (Mr. Boyd when giving evidence).  
(d) “The most reliable predictor of anticipated business travel days is actual historical business travel data from the insured.  However, the unavailability of such travel days data by no means requires an underwriter to reject a submission.  In the absence of historical data, travel days can be, and often are estimated based on other information such as knowledge of the industry, the insured’s business and employee occupations”.  (See the agreement between the underwriting experts; Mr. Boyd also accepted this). 
(e) He himself had had experience of estimating travel data where historical travel days data was not available.
(f) It was more common (for whatever reason) before 9/11 to find that figures from corporations for travel days were not available.  (Mr. Boyd agreed this when giving evidence).
(g) (As the experts confirmed) in the case of a very large corporation it is often impractical to get a very detailed breakdown of the business travel exposure.
(h) Aon Corporation had numerous subsidiaries in the United States
107.	For these reasons and in these circumstances I find that the presentation contained information which would have naturally prompted a prudent insurer to make further inquiry which, if made, would have elicited how the estimate was arrived at.  This conclusion is supported by the evidence of Mr. Kurtz.  Such further enquiry was not made.  Thus I find that disclosure of the basis of the estimate (agreed by Combined to have been material) was waived by Mr. Boyd.
In reaching these conclusions I accept Mr. Kurtz’s evidence to the following effect.  If the presentation had been made to him, Mr. Kurtz would have asked the broker to go back to the underwriter to find out how the underwriter came up with the estimate of 160,000 days.  Further Mr. Kurtz would also have asked for the total number of employees and the average salary (because of the benefit amount – 6 x annual salary, maximum of $1 million).
(9) Inducement
In view of my analysis of issues 6 to 8 it is not necessary to consider issue 9.
Conclusion as to avoidance issues
108.	For the reasons set out above, the claimant’s claim for a declaration that he has validly avoided the reinsurance on the grounds of the defendant’s misrepresentation and/or non-disclosure fails.

 

(2) CONSTRUCTION/COVERAGE ISSUES
The Issue
109.	The issue as to coverage is whether the Aon employees who were tragically killed on 9/11 in the course of leaving the South Tower were covered at the time of their deaths by the main coverage section (entitled “24 Hour All Risk Hazard (Business Only)”) of the Business Travel Accident policy issued by Combined. 
110.	It is common ground that the policy issued by Combined is governed by Illinois law.  The rights of Combined against Reinsurers are in practice governed by the rights which the insured persons had against Combined as a matter of Illinois law.
The BTA Insurance 
111.	The BTA Insurance provided, in material respects, as follows:
“….
If you suffer an Accidental Bodily Injury from one of the Hazard(s) which is attached to this Certificate, and which results in any of the losses described herein, We will pay You as shown in the What We Will Pay Sections.
DEFINITIONS:
Covered Loss means Accidental Death or Dismemberment that occurs within 365 days of an Accidental Bodily Injury. Subject to the Hazards covered …….  
“24 HOUR ALL RISK HAZARD
(Business Only)
If You suffer a Covered Loss while on an Authorized Business Trip … We will pay the benefit(s) as set forth in Your Certificate and any applicable riders.

Authorized Business Trip means:  (1) a trip that the Policyholder authorizes You to take for the purpose of furthering its business (excluding daily commuting to or from work, vacations and leaves of absence);  or (2) a relocation to a new residence that is closer to another office of Your Employer’s business.  An Authorized Business Trip:  (a) starts when You leave Your residence or Regular Place of Employment, whichever is later; and (b) ends when You Return to Your residence or Regular Place of Employment, whichever is earlier.  Excursions for personal reasons, which are taken during the course of authorized business travel, shall also be covered.

Regular Place of Employment means the business premises at which you spend at least 50% of Your working hours and which is located within 50 miles of Your primary residence.”

TERRORISM HAZARD
If You suffer a Covered Loss because of an Act of Terrorism and the applicable premium has been paid for this Hazard, We will pay the benefit(s) as set forth in Your Certificate…..
	     DEFINITIONS:
Act of Terrorism means any clandestine use of violence by an individual terrorist or a terrorist group to coerce or intimidate the civilian population to achieve a political, military, social or religious goal. Such acts shall include but not be limited to murder, kidnapping, hijacking, sabotage or bombings. It shall not include conventional warfare designed to result in wholesale loss of life through use of missiles launched from outside the United States or Canada, aerial bombardment, nuclear, chemical or biological warfare or outright invasions.”

Submissions
The claimant’s submissions as to Construction/Coverage issues
Mr Edelman QC for the claimant submitted as follows.
112.	Illinois rules/principles of construction are very similar to those in this jurisdiction. This is confirmed by the content of the many points that were agreed by the experts.
113.	If the words in question are given their plain ordinary meaning and construed as a whole, the only sensible conclusion is that the employees who died were not on “authorized business trip(s)”. 
114.	Individual analysis of the constituent parts of the relevant wording leads to the same conclusion.  The employees were neither on trips, nor doing what they were doing “for the purpose of furthering [Aon’s] business”, nor had they left their “Regular Place of Employment”, being Aon’s “business premises”.
115.	Combined cannot point to any legitimate ambiguity, but seeks to do so in order to invoke the rule of contra proferentem.
116.	In fact, the ambiguities asserted by Combined are no more than “creative possibilities” and involve the torture of words in an effort to force them to confess to ambiguity. The words have resisted and there are no ambiguities.
117.	Even if genuine ambiguities can be identified, there are no reasons in the circumstances of this case, for the contra proferentem rule to be applied.
118.	Illinois Courts plainly recognise that that rule is not to be applied in every circumstance against an insurer. This is apparent not only from the legal and public policy rationale(s) behind the rule, but also from decisions and judgments in, amongst other cases, Alberto-Culver, Outboard Marine and Associated Indemnity and Central Illinois (see below).
119.	If there ever were factual circumstances in which Illinois Court would not apply the rule, these are they.   
The defendant’s submissions as to Construction/Coverage issues
Mr. Leggatt QC for the defendant Combined submitted as follows.
120.	The relevant principles of Illinois law were ultimately agreed between the experts, except that Mr. Bates sought to qualify the rule that ambiguous words will be construed in favour of the insured, by suggesting that it does not apply if “both parties are equally sophisticated in the use of contract language”. As to this:
(1) The alleged exception is inconsistent with the decision of the Illinois Supreme Court in Outboard Marine (see below); 
(2) If there is any exception for sophisticated parties, it cannot apply where (as stated in Outboard Marine) “the insurer chose the words used in the policy” - which Combined did here; and
(3) In any event, the persons insured under the policy were the individual employees of Aon, who cannot be characterised as sophisticated parties. 
121.	In principle, the rule that any ambiguity in a policy provision must be resolved in favour of the insured cannot be affected by the fact that cover is granted by some other section of the policy, quite separate from the one being construed. 
122.	The term “Authorised Business Trip” is a term defined in the policy. As agreed by the experts, the court must therefore apply the policy definition of this term even if it differs (indeed particularly if it differs) from the ordinary understanding of the term. Pursuant to the policy definition, the question which the court has thus to decide is whether each of the Aon employees tragically killed on 9/11 died during (1) a trip (2) that Aon authorized the employee to take (3) for the purpose of furthering its business. 
123.	Pursuant to the policy provisions and consistently with ordinary language, a “trip” refers to any journey that an employee makes (whatever its distance and duration) which involves the employee leaving his or her residence or “Regular Place of Employment”. 
124.	“Regular Place of Employment” is a defined term, which means “the business premises at which You spend at least 50% of Your working hours and which is located within 50 miles of Your primary residence”. Although the term “business premises” is not itself defined, as a matter of ordinary language it clearly and unambiguously refers to any premises (i.e. real property) occupied by Aon and at which Aon carries on business. (Alternatively, if there is any ambiguity in the term, it must be construed in favour of the insured employees). 
125.	Combined agrees that the identification of those premises is a question of fact. On the facts of the present case, the business premises at which the relevant employees spent at least 50% of their working hours were the areas in the South Tower which Aon leased.   
126.	It is common ground that the evacuation of Aon’s offices was authorized and took place pursuant to Aon’s instructions.
127.	Moreover, it is plain that the employees were authorized to leave Aon’s offices for the purpose of furthering Aon’s business in circumstances where:
(1) The evacuation took place when the employees were at work and during time for which they were being paid;
(2) The evacuation took place pursuant to Aon’s instructions, and at the time of their deaths the Aon employees were doing what their employer had sent them to do (namely, to evacuate the building to a place of safety);
(3) Aon had a legal and moral duty to save the lives of its employees, if possible, by requiring them to leave their place of work; and
(4) The evacuation also directly and critically furthered Aon’s economic interests by seeking to protect its most vital and valuable assets as a business, namely its employees.
128.	Combined was accordingly liable under the main “24 Hour All Risk Hazard” section of its Business Travel Accident policy to the estates and families of the deceased insureds. Liability under the reinsurance follows.

Factual Evidence
129.	The witness evidence as to events on 9/11 comes from Combined, which put in evidence statements from 9 employees of Aon who survived the disaster. Their evidence was not challenged.  
130.	In addition to the facts set out in the Introduction to this judgment, the witness evidence shows the following further facts about the evacuation of Aon’s offices on 9/11.  
(1) It was Aon’s policy to prepare its employees for an evacuation. Following the terrorist bombing of the World Trade Centre in 1993, evacuation procedures were a well established fact of life in Aon’s New York offices and were taken very seriously. Aon held regular fire drills and appointed fire wardens and searchers on each floor, whose job was to direct Aon employees out of Aon’s offices and out of the building in the event of an evacuation. 
(2) When the North Tower was struck at approximately 8.46am on 9/11, it was not immediately apparent whether or not the South Tower was itself in danger as a result of whatever had happened to the North Tower (which of course was unknown at that stage). Nevertheless, Aon senior managers rapidly decided to order Aon’s employees to evacuate immediately.  
(3) Aon’s evacuation procedures required employees to exit their floors via the stairs.  It appears that most employees followed the practised procedure and descended by the stairs to the 78th floor sky lobby, although there is evidence that some took the local elevators. 
(4) While many people were waiting in the sky lobby, an announcement was made by the Port Authority that the South Tower was secure and that it was safe for people to return to their offices. 
(5) Although it is apparent that individuals varied in their perceptions of whether they were in danger, the evidence indicates that the evacuation proceeded in a reasonably orderly manner, until the South Tower was itself struck by an aircraft at approximately 9.03am. By that time many Aon employees had either escaped from the South Tower altogether, or had reached sufficiently far down the South Tower to enable them to continue their evacuation and reach safety.
131.	After the South Tower was hit by the second hijacked jet, cracks started to appear in the walls and even the stairs themselves started to buckle.  Almost everybody gave in to an impulse to try to run down the flights of stairs, although after about ten flights down, it became easier to try and move in a more orderly way.
132.	
The role of an expert as to foreign law and proof of foreign law
133.	The role of an expert as to foreign law, (unless the court is concerned with special meanings), is to prove the rules of construction of the foreign law.  It is then for the court to construe the contract in accordance with those rules.  The view of an expert as to the meaning which would be given to a particular word is not admissible evidence unless he/she is saying that it has a special meaning under the foreign law (King v Brandywine [2005] EWCA. Civ. 235 paragraph 68, Waller L.J.).  
134.	“Where an expression is ambiguous, which of the possible meanings was intended by the parties is ascertained in accordance with the canons of construction which form part of the governing law.  If the governing law ascribes a particular meaning to particular words, the parties are bound by that meaning.  In other cases, where foreign law is the governing law, the expert proves the foreign rules of construction, and the court, in the light of these rules, determines the meaning of the contract.”  Dicey and Morris, The Conflict of Laws 13th Edition paragraph 32 – 189.
135.	
Where foreign decisions conflict, the court may be asked to decide between them, even though in the foreign country the question still remains to be authoritatively settled (Dicey and Morris on The Conflict of Laws 13th Edition volume 1, paragraph 9 – 020, citing Re Duke of Wellington [1947] Ch. 506).  
136.	I must address myself to the question, what is the law on the issues in question which would be expounded by the Illinois Supreme Court, if the case were before that Court?  (Duke of Wellington supra at 514, Wynn-Parry J).
137.	My duty is to find as a fact what is the relevant law as it would be expounded in the Illinois Supreme Court.  For that purpose I have to proceed as if I were notionally sitting in the Illinois Supreme Court and I have to put on the legal spectacles of a judge of that court.  The task is particularly difficult if an English judge is required to expound for the first time the relevant law as it would be expounded by the Illinois Supreme Court, if and to the extent that that court has made no pronouncement on the subject (see Duke of Wellington supra, at page 515).  

The United States Court Systems
United States Federal Court System
138.	The federal court system is generally comprised of the Supreme Court of the United States, the United States Courts of Appeals, and the United States District Courts. 
139.	Illinois is part of the Court of Appeals for the Seventh Circuit.  The Seventh Circuit also includes the states of Wisconsin and Indiana.
140.	Federal court decisions are not binding upon Illinois courts, although they can provide guidance and serve as persuasive authority.  
Illinois State Court System
141.	Each state and the District of Columbia has its own independent court system.
142.	The state court system in Illinois consists of the Illinois Circuit Court (trial level), the Illinois Appellate Court (intermediate or appellate court), and the Supreme Court of Illinois, the highest court in the state
143.	Decisions of the courts of other states are not binding upon Illinois courts, but again they can provide guidance and serve as persuasive authority.
Illinois Appellate Court
144.	Like the federal system, Illinois has an intermediate appellate court to handle cases in which a party seeks review of a trial court decision.  The Illinois appellate court is made up of five geographic districts.  Each district has its own appellate Court. Cook County, which includes Chicago, is the First District.  The First District has 18 appellate judges.  Each of the remaining 4 Districts has 6 appellate judges.
Illinois Supreme Court
145.	The Supreme Court of Illinois is the state’s highest court. It has 7 justices, with 3 from the First District (Cook County) and one each from the remaining 4 Districts.
146.	This court serves as a reviewing court of Illinois appellate court decisions.  Although some cases have a right of appeal to the Illinois Supreme Court, most cases are only appealed to the Illinois Supreme Court if the Illinois Supreme Court accepts the appeal at its discretion.  
147.	Decisions of the Illinois Supreme Court are final, except for certain cases which are reviewable by United States Supreme Court.
148.	Decisions of the Illinois Supreme Court are binding upon the lower Illinois courts.

Principles of Illinois law on which the Experts agree
149.	The Illinois Supreme Court is the highest court in Illinois.  It is the ultimate arbiter of Illinois law.  Its decisions are binding on all appellate and circuit courts.
150.	All Illinois appellate courts are equal.  No district or division is superior to any other.         
151.	When faced with the task of construing an insurance contract, Illinois law requires a court to apply the principles applicable to construing contracts generally.  The primary goal of the court in construing a contract is to give effect to the intent of the parties.
152.	These contract law principles require that a court enforce the contract as made by the parties.
153.	In the case of an insurance contract, where a policy provision is clear and unambiguous, an Illinois court will give the policy provision its plain and ordinary meaning.
154.	Absent a finding of ambiguity, an Illinois court cannot look beyond the four corners of a contract to ascertain its meaning. 
155.	In order to ascertain the meaning of the policy and the parties’ intent, the court must construe the policy as a whole and take into account the type of insurance purchased and the nature of the risks involved and the overall purpose of the contract. 
156.	The Illinois Supreme Court in Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill.2d 90, 607 N.E.2d 1204 (1992), stated that: -
‘Usual and ordinary meaning’ has been stated variously to be the meaning which the particular language conveys to the popular mind, to most people, to the average, ordinary, normal [person], to a reasonable [person], to persons with usual and ordinary understanding, to a business [person] or to a lay [person].  2 Couch on Insurance 2d § 15.18 (rev.ed. 1984).
157.	An Illinois court will construe the policy as a whole, with due regard to the risk undertaken, the subject matter that is insured, and the purpose of the entire contract.
158.	A policy term is ambiguous if it is subject to more than one reasonable interpretation. 
159.	Whether an ambiguity exists turns on whether the policy language is subject to more than one reasonable interpretation, not whether creative possibilities can be suggested.
160.	In determining whether policy language is ambiguous, a court will not search for ambiguity where there is none.  
161.	A court will not strain to find an ambiguity where none exists. 
162.	An insurance policy is not rendered ambiguous merely because the parties disagree as to its meaning.   
163.	The contra proferentem rule does not apply where there is no ambiguity in the contract language. 
164.	In order to enforce the agreement between the parties regarding coverage, the court must not inject terms and conditions different from those agreed on between the parties in the policy.  
165.	Courts will not insert exclusions beyond those already in the policy.  
166.	If there are definitions in a policy, the definitions contained within the policy are controlling.  This is particularly true when an insurance policy defines terms in a manner that differs from the ordinary understanding of a term or phrase.
167.	In construing a contract, it is presumed that all provisions were inserted for a purpose.  	
168.	In addition to considering the particular language of a policy and applying applicable canons of construction, an Illinois court may also look to decisions from other jurisdictions interpreting similar insurance policy language.

Point of Illinois law on which the Experts Disagreed
169.	The point of law on which the experts disagreed is as follows: - 
If words in the policy are ambiguous they will be construed in favour of the insured and against the insurer who drafted the policy (unless, says Mr. Bates, the parties are equally sophisticated in the use of contract language and the terms are not imposed by the insurer on a “take it or leave it” basis”; Judge Gillis says that this qualification does not apply).
As to contra proferentem Reinsurers submitted as follows.
170.	The cases establish that the contra proferentem rule is applied where wordings are “standard- form”, are offered on a “take-it-or-leave-it basis”, where there is “little or no negotiation” and where “the insurer has total control of the terms and the drafting of the contract” (all from Outboard Marine supra at p.13); the rule “being intended to aid a party whose bargaining power was less than that of a draftsperson” (Alberto-Culver 351 Ill.App.3d 123, at p.7, citing Corbin on Contracts).
171.	However, as the decisions in the Alberto-Culver and Central Illinois Light Company v Home Insurance Co, 2004 WL 2743593 (Ill. 2004) cases demonstrate, the rule is not slavishly to be applied to all insurance cases, but will only be applied where the features identified in Outboard Marine are present.
172.	Whilst, of course, in this case the fact that the employees would be the claimants under the policy cannot be disregarded, this would not cause the Illinois Courts to apply contra proferentem because:
(1) the scope of the cover was specified by the policyholder and put out to tender;
(2) the department of the policyholder which was responsible for formulating the programme was one of the leading consultancy and broking organisations in this field of business;
(3) the insurer was a subsidiary of the policyholder;
(4) the drafting process was carried out by one of the policyholder’s service companies;
(5) importantly, in circumstances where the insured employees had cover under the Terrorism section, the question whether there was also cover under another section, has arisen and could only have arisen as between Combined and its reinsurer (or potentially some other insurer which also provided cover) – the Illinois Courts will not apply the ordinary contra proferentem rule where the issue is not one of recovery by the insured but apportionment as between insurers (Associated Indemnity v INA 68 Ill.App.3d 807 and Alberto-Culver).
Combined submitted as follows. 
173.	Judge Gillis was right to say that the exception to the contra proferentem rule contended for by Mr. Bates is inconsistent with the decision of the Supreme Court of Illinois in Outboard Marine
174.	In Outboard Marine, the Supreme Court of Illinois gave an authoritative statement of principles governing the construction of an insurance policy in Illinois law. The facts were that OMC had discharged toxic chemicals into Lake Michigan. It agreed to pay redress to government agencies and brought an action against its liability insurers seeking (inter alia) a declaration that it was covered. Insurers disputed coverage and relied on a policy provision whereby liability for pollution damage was covered only if the release of pollutants was “sudden and accidental”. On the facts, the release of pollutants had occurred gradually over many years, and insurers argued that it therefore was not “sudden”. The Illinois Supreme Court rejected this contention. The Court found that the word “sudden” could reasonably be interpreted to mean merely unexpected or unintended, without any temporal connotation, and was therefore ambiguous.  It was argued by the insurers that the rule of construction which directs the court to construe ambiguities in favour of the insured should not apply because the insured was a large corporation, “sophisticated and counseled in insurance matters”. This is to all intents and purposes the same exception to the rule which Mr. Bates has contended for in the present case. The Supreme Court rejected the contention. In its reasoning, the court drew attention to certain general facets of the insurance contracting process, such as that most policies are standard form, and that any insured, whether large and sophisticated or not, must enter into a contract with the insurer, “which is written according to the insurer’s pleasure by the insurer”. The Supreme Court concluded:
“Like any insured, OMC is entitled to its application where the court has determined that the policy is ambiguous. After all, the insurer chose the words used in the policy.” 
175.	In the light of this clear holding of the Illinois Supreme Court, “any insured” is entitled to the application of the rule, whether sophisticated or not.
176.	As to the authorities on which Mr. Bates relied:
Central Illinois is not in any way inconsistent with the holding in Outboard Marine (and certainly does not purport to overrule it). See the passage at the end of the judgment, where the Supreme Court says: -
“The terms of the policies are either plain in their meaning, in which case they will be given effect unless they violate public policy, or else they are ambiguous and may be construed against the drafter.” 
177.	Furthermore, even if there are some circumstances in which an Illinois Court would decline to apply the contra proferentem rule in a dispute between parties who are “equally sophisticated in the use of contract language”, the present case is not such a case. This is because: 
(1) If there is any exception for sophisticated parties, it cannot apply where (as stated in Outboard Marine) “the insurer chose the words used in the policy” - which Combined did here; and
(2) In any event, the persons insured under the Combined policy were the individual employees of Aon, who cannot be characterised as sophisticated parties. 
178.	I turn to consider these conflicting submissions.
179.	In Outboard Marine the Supreme Court of Illinois at page 13 said: - 
“The insurers and their amici argue that the rule of construction which directs the court to construe ambiguities in favour of the insured should not apply in the instant case.  They assert that this rule of construction was developed to aid the unwary insured who was unsophisticated in insurance matters.  The insurers argue that it should not apply here because OMC is a large corporation, sophisticated and counseled in insurance matters.  We disagree with this contention.  The insurance industry is powerful and closely knit.  As evidenced by the CGL policies in the instant case, most policies are standard-form, are worded very similarly (see Zurich Insurance Co v Raymark Industries Inc. (1987) 118 Ill.2d 23, 33 112 Ill.Dec. 684, 514 N.E.2d 150), and are offered on a take-it-or-leave-it basis (Aetna Casualty & Surety Co. v Condict (S.D.Miss. 1976), 417 F.Supp. 63, 73).  Any insured, whether large and sophisticated or not, must enter into a contract with the insurer which is written according to the insurer’s pleasure by the insurer.  (See AIU Insurance Co. v Superior Court (1990), 51 Cal.3d 807, 822, 799 P.2d 1253, 1264-65, 274 Cal.Rptr. 820, 831-32; Broadwell Realty Services. Inc. v Fidelity & Surety co. (1987), 218 N.J. Super, 516, 524, 528 A.2d 76, 80.)  Generally, since little or no negotiation occurs in this process, the insurer has total control of the terms and the drafting of the contract.  (AIU Insurance Co. 51 Cal. 3d at 822, 799 P.2d at 1264-65, 274 Cal.Rptr. at 831-32; Broadwell Realty Services, Inc. 218 N.J. Super, at 524, 528 A.2d at 80.)  This rule of construction recognises, inter alia, these facets of the insurance contracting process.  (AIU Insurance Co. 51 Cal.3d at 822, 799 P.2d at 1264-65, 274 Cal.Rptr. at 831-32; Broadwell Realty Services, Inc. 218 N.J. Super, at 524, 528 A.2d at 80.)  Like any insured, OMC is entitled to its application where the court has determined that the policy is ambiguous.  (See Boeing Co v Aetna Casualty & Surety Co. (1990), 113 Wash. 2d 869, 882, 784 P.2d 507, 514.  But see AIU Insurance Co. 51 Cal. 3d at 823, 799 P.2d at 1265, 274 Cal.Rptr. at 832.)  After all, the insurer chose the words used in the policy.  Cf. Claussen, 259 Ga. at 337, 380 S.E.2d at 688. ”
180.	In Central Illinois Light Company the Supreme Court said: -
“We conclude that the policy language, standing alone, does not require the insured to have been served as the defendant or respondent in an adversarial proceeding before the duty to indemnify arises.  If this were a dispute involving the construction of an insurance contract between a consumer and his insurer, we might stop at this point in the analysis and conclude that the language of the policy should be construed against the drafter because it is “obscure in meaning through indefiniteness of expression”.  Platt, 351 Ill. App.3d at 330, 286, Ill.Dec, 222, 813 N.E. 2d 279.  However, both parties to these policies are sophisticated business entities that can be assumed to have specialised knowledge of the contractual terms they employ.  Indeed, both parties cite to the substantial body of case law from Illinois and other jurisdictions interpreting similar policy language in similar factual situations.  We now turn to those authorities to aid in our construction of the policies to determine whether the filing of a lawsuit or other adversarial action is a precondition to indemnification …
However, the question presented in this case, while complex, is merely one of construction of the language of an insurance policy.  The terms of the policies are either plain in their meaning, in which case they will be given effect unless they violate public policy, or else they are ambiguous and may be construed against the drafter.  We are not permitted to rewrite the language of the policies agreed upon by the parties simply to suit our idea of desirable social goals.”
181.	The point of law on which the experts disagreed is as follows: - 
If words in the policy are ambiguous they will be construed in favour of the insured and against the insurer who drafted the policy (unless, says Mr. Bates, “the parties are equally sophisticated in the use of contract language and the terms are not imposed by the insurer on a “take it or leave it” basis”; Judge Gillis says that this qualification does not apply).
182.	I have to proceed as if I were notionally sitting in the Illinois Supreme Court and I have to put on the legal spectacles of a judge of that court.
183.	I prefer the view of Judge Gillis that the Illinois Supreme Court would hold that the qualification advanced by Mr. Bates does not apply.  In particular (as Judge Gillis pointed out) the spouses and children of the Aon group employees who died were the claimants under the policy.  Even if there is a “sophisticated parties” exception under Illinois law it would not apply on the facts of the present case.  The rights of Combined against Reinsurers are in practice governed by the rights which the insured persons had against Combined as a matter of Illinois law.  As between the insured persons and Combined if the words in the policy are ambiguous they will be construed in favour of the insured and against Combined.   
184.	It follows that I have to construe the material words in the policy applying the principles of Illinois law set out in paragraphs 149 to 168 above with the following addition.  If words in the policy are ambiguous they will be construed in favour of the insured and against the insurer who drafted the policy.  In the circumstances of the present case Combined would be treated as the insurer who drafted the policy. 
The Question of Construction 
185.	The question is whether the employees were on an “Authorised Business Trip” and in particular (1) were on a trip, (2) that they were authorized to take, (3) for the purpose of furthering the business of an Aon Group company, (4) having left their “Regular Place of Employment” as defined.
186.	I turn to construe the policy in accordance with the rules of construction of Illinois law referred to in paragraph 184 above.
187.	It is common ground that no Illinois case has considered the meaning of the words “business trip” or “business travel”.
My analysis is as follows. 
1. The deaths of the 176 Aon group employees were caused by an “Act (or Acts) of Terrorism”, as defined in the Terrorism Hazard section of the BTA Insurance. It is therefore common ground that the losses represented by the deaths of the Aon employees all fell within the scope of the cover provided by the BTA Insurance and that Combined was bound to indemnify (as it has done) the families of all of the Aon employees who perished.
However, Combined says that the claimant was also liable under the 24Hr All Risk Hazard (Business Only) section.  Reinsurers dispute this.  
The claimant has indemnified Combined with regard to payments that were made by Combined to the families of certain Aon employees who were visiting the World Trade Centre premises from other Aon offices (i.e. employees who, it is common ground, were not at their “regular place of employment”, were on “authorized business trips” to the World Trade Centre, and were covered under the 24 Hr All Risk Hazard (Business Only) section). These claims involve overall payments by the claimant of $6.402 million, and relate to 7 Aon employees.
2. Were the 169 Aon Group employees on an authorised business trip when they died on 9/11 in the tragic and unique circumstances described above?  Leaving aside the definitions in the policy, I would answer this question in the negative.  The popular mind/most people/the average, ordinary, normal person/a reasonable person/a person with usual and ordinary understanding/a business person/a lay person if asked - were the 169 Aon Group employees on an authorised business trip when they died? - would answer no.
3. There are however definitions in the policy.  Thus the definitions contained within the policy are controlling.  
4. I turn to consider whether the 169 Aon Group employees whose regular place of employment was within the South Tower, were on a “trip” when they died?  It is common ground that the length of a trip or journey does not matter.  But in order to ascertain the meaning of the word “trip” and the parties’ intent, the court must construe the policy as a whole and take into account the type of insurance purchased and the nature of the risks involved and the overall purpose of the contract.
The Illinois Supreme Court has regard to dictionary definitions when construing words in a contract (see for example Outboard Marine supra).  It is common ground that the appropriate dictionary for this purpose is Webster’s Third New International Dictionary.  Webster’s Third New International Dictionary contains the following definitions: -
“Business … purposeful activity: activity directed toward some end … a usu. commercial or mercantile activity customarily engaged in as a means of livelihood and typically involving some independence of judgment and power of decision ... and sometimes contrasted with the arts …”
“Trip … a relatively short run of a vehicle usu. between two points or to a point and return … VOYAGE, JOURNEY … esp: one that is short or is undertaken for some usu. specified purpose … a single tour of travel in the course of a business operation …”
“Further … to help forward: PROMOTE, ADVANCE …”
“Travel … vb … to go or proceed on or as if on a trip or tour: JOURNEY … n. … a journey esp. to a distant or unfamiliar place: TOUR, TRIP …” 
I construe the word “trip” in accordance with the rules of construction of Illinois law as set out above.  I do not consider that the word “trip” is ambiguous in the sense that it is subject to more than one reasonable interpretation.  This is not a case where the dictionary includes two conflicting definitions.  There is no ambiguity in the word “trip”.  I do not consider (applying the Illinois rules of construction) that the usual and ordinary meaning of the word “trip” would include an evacuation/attempted evacuation in the unique circumstances described above.  The 169 Aon Group employees who died were not on a “single tour of travel in the course of a business operation”.  If the popular mind/most people/the average, ordinary, normal person/a reasonable person/a person with usual and ordinary understanding/a business person/a lay person were asked  - were the 169 Aon Group employees on a “trip” when they died? - the answer would be no.  This answer is fortified if regard is had to the policy as a whole and account is taken of the type of insurance purchased and the nature of the risks involved and the overall purpose of the contract.
For completeness I add that it would appear that the policy treats “trip” as synonymous with “travel” and this in my view confirms the construction set out above.  “Travel” denotes a journey.
5. I turn to consider whether the 169 employees were on a “trip … for the purpose of furthering [the] business” of an Aon Group company?  I consider (applying the llinois rules of construction) that the answer is in the negative.  In order to ascertain the meaning of the word “business” and the parties’ intent, the court must construe the policy as a whole and take into account the type of insurance purchased and the nature of the risks involved and the overall purpose of the contract.  In context “business” means some commercial or mercantile activity.  I emphasise that the question is whether the employees were on a “trip … for the purpose of furthering [the] business” of an Aon Group company?   The question is not were the 169 employees furthering the business of an Aon Group company?  
6. As to whether the 169 Aon Group employees had left their “regular place of employment”, this question does not need to be considered in view of my construction of the words “trip … for the purpose of furthering [the] business” of an Aon Group company.  The claimant’s case is that an employee did not leave his/her regular place of employment until at the earliest he/she left the entrance door to the building and/or reached some public thoroughfare at which he/she acquired the unimpeded freedom to choose his/her next course of direction.  The defendant’s case is that an employee left his or her regular place of employment when he/she left the entrance door to Aon’s leased premises and entered the common parts in the South Tower.
7. The primary goal of the court in construing a contract is to give effect to the intent of the parties.  In my opinion (applying the Illinois rules of construction) the policy provision in question is clear and unambiguous and should be given its plain and ordinary meaning as set out above.  I do not consider that there is an ambiguity.  In order to ascertain the meaning of the policy and the parties’ intent, the court must construe the policy as a whole and take into account the type of insurance purchased and the nature of the risks involved and the overall purpose of the contract.  In my opinion (applying the Illinois rules of construction) the meaning of the policy and the parties’ intent did not extend to include as an “authorized business trip”, an evacuation/attempted evacuation in the unique circumstances described above.
As to ambiguity, in the Supreme Court of Illinois case of Hobbs v. Hartford 2005 WL. 120 357 (Ill) the Court said at page 8: - 
“The touchstone in determining whether ambiguity exists regarding an insurance policy is whether the relevant portion is subject to more than one reasonable interpretation, not whether creative possibilities can be suggested. ….. Where an ambiguity in an insurance policy is found, we will construe it in favour of the insured.  We will not, however “torture ordinary words until they confess to ambiguity”.   
(Applying the Illinois rules of construction) I construe the policy as a whole, with due regard to the risk undertaken, the subject matter that is insured, and the purpose of the entire contract.  I do not consider that the policy term is subject to more than one reasonable interpretation.  The Illinois Supreme Court would hold that the contra proferentem rule does not apply where there is no ambiguity in the contract language.  
8.  For the reasons set out above in my judgment, applying the law of the State of Illinois, on a true and proper construction of the relevant, reinsured parts of the underlying insurance provided by Combined, the deaths of the 169 Aon Group employees who were killed were not covered by the 24Hr All Risk Hazard (Business Only) section and were thus also outside the Reinsurance. 
188.	It follows that the claimant is entitled to a declaration to this effect.  
189.	Even by the very high standards of the Commercial Court this case has been conducted during the hearing in an exemplary manner by counsel and solicitors for the parties.  I am grateful for the assistance afforded to the Court.