A key question in many insurance cases is how and in what circumstances can an insurer void a policy of insurance where there has been the provision of incorrect information. This Commercial Court case decided in 2010 gives some guidance.
The Facts
The Claimants operated a laundry business in Dunstable. In late 2005 the Claimant said that the premises would very shortly be protected by an alarm. The Claimant’s material damage and BI policy were renewed some four months later. In February 2007 the Claimant’s premises were damaged by fire and a claim was made under the terms of the insurance policy.
The insurers attempted to avoid the policy on the grounds of the false statement made. The assured had made the statement innocently based on incorrect information.
The Findings
The matter ran to trial and the Judge made the following findings:
- The Claimant had misrepresented matters.
- Further, there was non-disclosure – the fact that there was no alarm ought to have been disclosed pursuant to s18 of the Marine Insurance Act 1906.
- The non-disclosed fact was material.
- However the court found that the policy could not be avoided as there was no inducement.
- Interestingly the insurers had not provided any evidence as to what their stance would be had they known the true facts, for instance as to whether this would have resulted in a higher premium.
Comment
Whilst on this occasion the court held that there had been no inducement to enter into the insurance contract, insureds or potential insureds must be very careful as to the information which they provide to their brokers and/or insurers. The court found that by telling their insurers four months before renewal that an alarm was being installed this went beyond a mere intent to install a system and sent out a message that work was underway. An insurance contract is a contract of utmost good faith and therefore if a fact looks relevant or may influence the terms of the insurance contract then it must be disclosed to insurers.
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