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Equity Syndicate Management Limited v (1) GlaxoSmithKline Plc; (2) Axa Corporate Solutions Assurance , 23 July 2015, HC

Equity applied for rectification of a contract of insurance between themselves and GlaxoSmithKline which covered GSK’s employee car scheme.

Equity Syndicate Management Limited (“Equity”) applied to the Commercial Court for rectification of a contract of insurance between themselves and the insured, GlaxoSmithKline (“GSK”) which covered GSK’s employee car scheme (the Scheme).

The policy, which had been intended to cover employees within GSK’s car ownership Scheme, had mistakenly and unintentionally also covered cars hired by GSK for employees outside the Scheme.
Equity and GSK agreed that the policy should be rectified.

Axa insured GSK where they hired cars for employees outside of the Scheme.  Axa resisted the claim for rectification arguing that the Equity policy did provide cover and that there was double insurance, entitling them to a 50% contribution from Equity.

The legal requirements for rectification were summarised in Swainland Builders v Freehold Properties , and approved by Lord Hoffman in Chartbrook v Persimmon.   Crucially, they require the parties to have a “common continuing intention” (an objective test).  The intention must be continuing at the time the agreement was executed and, by a mistake, the agreement must not reflect that common intention.

All of the oral evidence was unanimous that the insurance to be provided by Equity was intended to be limited to vehicles in the Scheme (not vehicles hired for employees outside the Scheme).

The judge found that there were two forceful objective reasons as to why the intention was that the Equity policy would not respond to vehicles outside of the Scheme.  First, premium for the Equity policy was charged and paid on the basis of a fixed sum per vehicle in the Scheme. Secondly, the wording of the heading and definitions in the Equity policy referred to the Scheme.

The judge held that it was only the certificate of insurance which widened the cover, and the common intention of the parties was not properly reflected in that certificate.  The judge also held, as a matter of discretion, that to refuse rectification would be unfair to Equity as it would render it liable to contribute to the liability of an employee when it had never intended, nor had it received premium, to provide such cover. This would provide a windfall to Axa, who had received premium for insuring such employees.  

Equity’s claim for rectification was allowed.