Doheny & Ors v New India Assurance Company Ltd. & Ors

An insurance proposal declaration which cannot be given an ordinary grammatical meaning must be construed objectively to identify its intended commercial meaning. Where the declaration expressly refers to companies connected with the insured, references to bankruptcy may encompass corporate insolvency despite the technical legal distinction between bankruptcy and winding up.

A false declaration which the proposal makes the basis of the contract permits insurers to decline liability. Obiter, questions in a proposal form may limit the ordinary duty of disclosure where a reasonable reader would understand that the insurer had restricted the information required. That inquiry does not generally differ between consumer and business insurance.

Mrs Doheny signed two insurance proposal forms for the company operated by her and her husband, and for them personally. Following a fire, the insurers declined the claim because companies in which the Dohenys had held interests had entered liquidation or otherwise become insolvent.

His Honour Judge Kershaw QC held that declaration 5 concerned only personal bankruptcy. He nevertheless held that the corporate insolvencies were material and had not been waived by the insurers’ questions. The claimants appealed. The respondents challenged the judge’s construction by respondent’s notice.

The central issues were the meaning of declaration 5 and, if it did not cover corporate insolvency, whether the proposal form waived disclosure of that information.

Disposition

The Court of Appeal unanimously dismissed the appeal. It upheld judgment for the insurers, but on a different basis from that adopted below.

1. Declaration 5 did not have an ordinary grammatical English meaning. The court therefore construed it objectively to ascertain the parties’ intended meaning, applying the approach in [2001] Lloyds I&R 667. Read in its commercial setting, and alongside the express reference to companies in which directors or partners had an interest, the declaration required disclosure of insolvency affecting either the Dohenys or those companies.

2. The technically legal use of bankruptcy for individuals did not control the meaning of this commercial insurance document. The references to an arrangement with creditors, which may concern a company, and the use of separate proposal forms for the company and the individuals, reinforced that construction. Sir Christopher Staughton and Potter LJ reached the same conclusion by their own reasoning.

3. The undisclosed corporate insolvencies therefore breached declaration 5. The proposal expressly made the declarations the basis of any concluded contract. The insurers were entitled to decline liability, so the question of waiver did not arise.

4. Obiter, section 18(3)(c) of the Marine Insurance Act 1906 addresses waiver in the absence of inquiry. A focused proposal form is itself an inquiry. Questions may nevertheless restrict the disclosure required where a reasonable reader would infer that the insurer had consented to omission of the information in issue. Longmore LJ saw no basis for confining that approach, reflected in [1983] 2 Lloyds Rep 667, to consumer insurance. Potter LJ agreed with the test, while observing that general disclosure wording prevents an inference of waiver of every matter not specifically questioned.

• Court of Appeal (Civil Division) Dismissed the claimants’ appeal in [2004] EWCA Civ 1705. It upheld judgment for the insurers because declaration 5 itself covered the undisclosed corporate insolvencies.
• High Court of Justice, Manchester District Registry, Mercantile List His Honour Judge Kershaw QC held that declaration 5 did not cover corporate insolvency, but held that the insolvencies were material and had not been waived. Judgment was entered for the defendants. A citation for this decision was not stated in the judgment.