Wise (Underwriting Agency) Ltd & Ors v Grupo Nacional Provincial SA

For implied waiver under section 18(3)(c) of the Marine Insurance Act 1906, an assured must show a clear case that the information disclosed would put a reasonably careful insurer fairly on inquiry about the undisclosed material fact. An insurer may ordinarily accept a broker’s description of the goods at face value.

A contractual notice cancelling insurance can nevertheless affirm the contract where the insurer knows of its right to avoid and communicates an unequivocal, informed election to cancel. Whether affirmation occurred depends objectively on the insurer’s words and conduct.

London reinsurers avoided a cargo reinsurance after watches, principally Rolex watches, were stolen from the original insured’s warehouse in Cancun. The English slip referred to valuable “clocks”, but it had mistranslated a Spanish word which could include watches and omitted packing information expressly identifying Rolex watches.

Simon J held that the carriage of high-value branded watches was material, had not been waived, had induced the reinsurers to underwrite, and had not been affirmed by a purported 60-day cancellation notice. He gave judgment for the reinsurers.

GNP appealed on waiver, inducement and affirmation. The central issues were whether the slip put a reasonable reinsurer on inquiry about watches, and whether the reinsurers had affirmed the contract by giving notice of cancellation after learning of the loss.

1. Appeal allowed. The court was divided on waiver and affirmation. Peter Gibson LJ agreed with Longmore LJ that the reinsurers had not waived disclosure, but with Rix LJ that they had affirmed the reinsurance. That latter majority conclusion defeated the reinsurers’ claim to avoid.

2. On waiver, Longmore LJ and Peter Gibson LJ applied the majority approach in CTI v Oceanus [1984] 1 Lloyd’s Rep 476. The assured had to establish a clear case that the disclosed facts would raise at least a reasonable insurer’s suspicion of other circumstances capable of vitiating the presentation. Although watches were materially undisclosed, the reference to valuable “clocks” did not oblige a reasonable reinsurer to suspect a mistranslation or to inquire whether watches were intended. The presentation therefore did not produce an implied waiver.

3. On affirmation, Rix LJ, with whom Peter Gibson LJ agreed, held that contractual cancellation may affirm a contract if made with knowledge of the right to avoid. The contemporaneous emails recorded a 60-day cancellation notice. Mr Bennett later saw and retained the email without denying that notice had been given. The documents and surrounding evidence established an unequivocal notice and an informed election to affirm.

4. The challenge to inducement failed. The trial judge was entitled to accept that the underwriter would not have written the risk if told that high-value branded watches were being carried. That issue was not critical once affirmation was established.

5. Simon J’s order was set aside. The reinsurers’ claim was dismissed and judgment was entered for GNP on its counterclaim for US$666,216.96 plus interest.

• Court of Appeal (Civil Division): GNP’s appeal was allowed on affirmation. The Commercial Court order was set aside, the reinsurers’ claim was dismissed, and judgment was entered for GNP: [2004] EWCA Civ 962 .
• Commercial Court (Simon J): The judge upheld avoidance for material non-disclosure, rejecting waiver, inducement and affirmation defences. No citation for that decision was stated in the judgment.