Norwich Union Insurance Ltd. v Meisels & Anor

In insurance non-disclosure cases, materiality is assessed objectively by asking what would influence the judgment of a prudent insurer, having regard to the complete picture available to the insured at the time of placement. An allegation or adverse circumstance is not automatically material. Its age, seriousness, connection with the insured risk, moral hazard and available exculpatory evidence may all matter. Evidence showing that an apparent adverse fact is mistaken may affect materiality as well as inducement. Appellate courts should not readily interfere with trial findings based on witness evidence. Inducement requires proof that the non-disclosure or misrepresentation was an effective cause of entering the contract on its terms.

The defendant insurer appealed from the judgment of HHJ Higgins in the Central London County Court, which had found for the claimants on liability under a buildings insurance policy. The insurer alleged that the claimants had failed to disclose matters concerning tax assessments, dissolved companies, historic creditors’ voluntary liquidations, and the use of an alias in property ownership records.

The fraud defence had been rejected below and was not appealed. The appeal concerned non-disclosure, including whether the matters were material and, if so, whether they induced the insurer to enter the policy.

1. Appeal dismissed. The judge below had applied the correct legal test and was entitled to find that the alleged non-disclosures were immaterial.
2. Materiality under section 18 of the Marine Insurance Act 1906 is objective. The question is what would influence the judgment of a prudent insurer fixing the premium or deciding whether to accept the risk. The assessment must consider all information known to the insured at placement, including coherent and cogent evidence bearing on an apparently adverse allegation or circumstance.
3. The court accepted that proportionality has a role, having regard to the nature of the insured risk and the moral hazard in issue. Circumstances may be too old or insufficiently serious to require disclosure. Exculpatory material need not satisfy a universal threshold of proof beyond doubt; the degree of conviction required depends on all the circumstances known to the insured.
4. The trial judge was entitled to find that an unjustified tax assessment, historic dissolution of companies, historic family-business conduct, and the explained use of an alias did not materially affect the prudent underwriter’s assessment. An insured cannot disclose a fact not known to him. Innocence does not excuse non-disclosure of a known material fact, but knowledge is necessary.
5. The appellate court declined to revisit the judge’s factual findings. The judge had seen the witnesses, and the challenged findings were open to him on the evidence. The issue of inducement therefore did not arise. In any event, applying Assicurazioni Generali SpA v Arab Insurance Group, the insurer must prove that the non-disclosure was an effective cause of entering the contract on the terms agreed; there is no presumption of inducement.

1. High Court (Queen's Bench Division): appeal from the Central London County Court dismissed. The judgment of HHJ Higgins was upheld on the issues of non-disclosure and materiality.