In Markerstudy Insurance Company Ltd and others v Endsleigh Insurance Services Ltd [2010] EWCH 281 (Comm), Mr Justice Steele was asked to determine as a preliminary issue, amongst other things, the true construction of certain exclusion clauses in a number of claims handling agreements (the Agreements) between the four claimants and Endsleigh. The claimants alleged that Endsleigh had breached the Agreements, and that they had consequently suffered loss in the region of £14 million.

The relevant clauses were as follows:

“Neither party shall be liable to the other for any indirect or consequential loss (including but not limited to loss of goodwill, loss of business, loss of anticipated profits or savings and all other pure economic loss) arising out of or in connection with this Agreement.” (Art 13.1) (emphasis added)

“Endsleigh’s total liability in contract, tort (including negligence or breach of statutory duty), misrepresentation, restitution or otherwise, arising in connection with the performance or contemplated performance of the Agreement shall be limited to the aggregate amount of fees received pursuant to clause 6.1 above.” (Art 13.2) (emphasis added)

“Endsleigh will not be liable to Markerstudy [Planet] for any indirect or consequential loss or loss of profit or loss of business arising out of data input errors by Endsleigh put into Policy Schedules, Certificates of Insurance or Endorsements.” (Art 8.1) (emphasis added)

With respect to Art 13.1, the question was whether the specific heads of loss, such as loss of goodwill etc, were freestanding in that they encompassed all losses within that category (direct or indirect), or whether they were examples of the type of losses making up indirect loss. Steele J held that use of the phrase ‘including but not limited to‘ was a strong pointer that the specified heads of loss were just examples of the excluded indirect loss – and did not therefore extend to direct loss. In addition, the clause did not express clearly that the purported exclusion of the specified categories of loss applied to both direct and indirect losses.

With respect to Art 13.2, the issue was whether it included or excluded interest. Steele J held that contractual interest was included within the limitation clause, but statutory interest was of a different character. He stated that statutory interest was not a ‘liability in contract‘, but a discrete statutory liability arising from the exercise of the court’s discretion. As such, the inclusion of contractual interest did not automatically lead to the inclusion of statutory interest.

With respect to Art 8.1, Steele J held that the introductory phrase ‘any indirect or consequential loss‘ governed and defined the scope of the specified forms of loss. Therefore, only indirect loss of profit or business was excluded by this clause.

This case is a useful reminder that when using the words ‘indirect and consequential loss‘, clarity is required to ensure that references to other types of loss include both direct and indirect losses falling under the relevant heads of loss.