Assicurazioni Generali SpA v Arab Insurance Group (Practice Note)

On an appeal after trial, the Court of Appeal conducts a review rather than a general rehearing. The degree of restraint depends on the nature of the finding, with particular caution required where credibility or expert evidence is involved.

In insurance and reinsurance, materiality and inducement are separate requirements. A fact is material if it would influence a prudent underwriter, but the particular underwriter must also show that the matter was an effective cause of entering the contract, at least on a but-for basis. It need not be the sole cause, and there is no legal presumption of inducement. A reserving policy need not be disclosed merely because it exists; it must be unusual or imprudent so as to make the figures misleading. The appeal was dismissed by a majority.

ARIG appealed from the Commercial Court judgment of Morison J, which found it liable to Generali under two quota-share retrocession contracts and rejected defences based on non-disclosure and misrepresentation.

The appeal concerned three matters: whether the contracts were concluded before the final slips were signed; whether Munich Re’s participation had been misrepresented; and whether the loss figures reflected an unusual or imprudent reserving policy operated by the claims administrator.

The Court of Appeal also considered the proper approach to reviewing findings of fact after trial. The central questions were whether any relevant representation or non-disclosure was material, whether it induced the contracts, and whether the trial judge was entitled to reject the reserving-policy case.

1. Disposition. By a majority, Clarke LJ and Sir Christopher Staughton dismissed the appeal. Ward LJ dissented on the Munich Re issue and would have allowed the appeal in that respect.
2. Appellate approach. Under the Civil Procedure Rules, an appeal is ordinarily a review. The court may draw its own inferences, but the weight given to the trial judge depends on the nature of the finding. Findings based on credibility or expert evidence attract substantial restraint. An evaluative conclusion may be reconsidered more readily, but the appellate court should not interfere merely because it would have reached a different conclusion.
3. Formation. The contracts were not concluded on 10 July 1992. Essential matters remained unresolved, including whether ARIG contracted as co-reinsurer or retrocessionaire. On an objective analysis, the parties intended the contracts to arise when ARIG signed and returned the slips on 9 September 1992.
4. Inducement. The principles stated in [1995] 1 AC 501 applied. Materiality does not itself establish inducement. The insurer or reinsurer must prove that the material non-disclosure or misrepresentation was an effective cause of entering the contract on the agreed terms. The matter must satisfy at least a but-for requirement, although it need not be the sole cause. There is no presumption of law, though inducement may be inferred from the facts.
5. Munich Re. Clarke LJ found that the July telephone conversation represented Munich Re as participating in the whole business, although it participated only in section A. Nevertheless, the evidence entitled the trial judge to conclude that ARIG would have participated on the same terms without that information. The representation therefore did not induce the contracts.
6. Reserving policy. The evidence did not establish that Gay & Taylor’s case-reserving system was unusual or imprudent in 1992 or 1993. A complex liability claim might properly remain without a reliable reserve while adequate information was obtained, provided the investigation was not taken to an unacceptable extreme and reserves were reviewed. The figures accurately reflected the books. Once the reserving-policy case failed, ARIG had no evidential reconstruction showing that the figures were otherwise misleading.
7. Dissent. Ward LJ considered that Munich Re’s participation was a material comfort factor which contributed to ARIG’s decision. In his view, a contributing cause was sufficient and the trial judge’s contrary inference fell outside the range of reasonable disagreement.

1. Court of Appeal: Appeal dismissed by a majority. Clarke LJ and Sir Christopher Staughton dismissed the appeal; Ward LJ would have allowed it on the Munich Re inducement issue.
2. High Court, Commercial Court: Morison J gave judgment for Generali for US$8,751,000 plus interest and rejected ARIG’s defences of non-disclosure and misrepresentation.