International Management Group(UK) Ltd v Simmonds

In contingency insurance, a warranty requiring the assured to ensure that necessary permits are obtained must be strictly complied with. A government approval required in practice for an event to proceed may constitute a permit, even if domestic law does not expressly require an application. Failure to obtain it may discharge the insurer.

The assured must fairly present every circumstance which would influence a prudent underwriter. This includes information received from others, the circumstances of an earlier cancellation, differences between apparently similar events, and uncertainty about whether governmental approval has been obtained. Material non-disclosure, misrepresentation and breach of a condition precedent may independently entitle insurers to avoid the policy.

IMG claimed under a cancellation policy for losses arising from the cancellation of the 2000 Sahara Cup, a cricket tournament between India and Pakistan in Toronto. The tournament was cancelled after the Government of India advised the Board of Control for Cricket in India not to participate.

The policy contained ordinary cancellation and political-risk sections, a warranty requiring necessary licences, visas and permits to be obtained, and conditions precedent concerning fair presentation and undisclosed circumstances. The central issues were whether governmental approval was a necessary permit, whether the policy covered the cancellation, and whether IMG had breached the warranty, its duty of disclosure, or the conditions precedent.

1. Outcome. IMG’s claim failed. The insurers were discharged from liability by breach of warranty and were also entitled to avoid for material non-disclosure, misrepresentation and breaches of the conditions precedent.
2. The proximate cause of cancellation was the Government of India’s letter of 10 August 2000, not the hostilities in Kashmir. The Government’s intervention prevented participation; the underlying hostilities did not themselves cancel the tournament.
3. Although no legislation required BCCI to seek permission, permission was necessary in practice. BCCI routinely applied for it, treated the Government’s response as decisive, and would not undertake the tour without approval. The Government’s letter therefore constituted a permit for the purposes of the warranty.
4. The warranty required strict compliance. IMG had not ensured that the permit was obtained, and the warranty applied to both sections of the single policy. Section 1 did not cover an initial refusal of an Indian permit: its wording concerned permits to enter or remain in Canada and the withdrawal of a previously issued permit. Section 2 would otherwise have provided cover for a cause beyond IMG’s control, but the breach of warranty defeated the claim.
5. Under the established materiality test, a circumstance was material if it would influence the judgment of a prudent insurer. IMG failed to disclose the 1999 refusal, the need for approval in 2000, the Government’s role, the distinction between bilateral and triangular tournaments, and information received from well-connected sources. The communications sent to underwriters also conveyed a materially false or misleading account.
6. The underwriters were induced to write the risk. The followers were also entitled to rely on the non-disclosure of the unfair presentation made to the leading underwriters. The conditions precedent required truthful disclosure and disclosure of known circumstances increasing or potentially increasing the possibility of loss.