Summary
In commercial insurance, a statement made before renewal may be impliedly repeated at renewal where it concerns a material feature of the risk and remains uncorrected. A statement made shortly before renewal that work will be completed may carry an implied representation that the work is already under way. Waiver of disclosure depends on whether a reasonable person would construe the insurer’s questions or declaration as restricting the right to receive other material information. That question arises only after a fair presentation of the risk. Avoidance also requires proof that the underwriter was induced to contract on the relevant terms.
Factual background
The claimant insured a group of laundry businesses under a commercial policy written by the first four defendants and placed through the fifth defendant brokers. After a fire at the claimant’s Dunstable premises, the insurers sought to avoid the policy for material misrepresentation or non-disclosure concerning an intruder alarm which had not been installed.
The claimant sought an indemnity for material damage and business interruption loss. It also claimed damages from the brokers in the alternative, alleging failures concerning disclosure advice, risk improvements, renewal enquiries and the policy wording. The court determined the validity of the policy, the alternative broker claim, contributory negligence, quantum and interest.
Held
- The statement that the alarm would be completed by the end of December was assessed when communicated to the insurers, not when drafted. Sent on 28 December, with only two working days remaining, it represented that installation was under way and nearly complete. That representation was false and material.
- A material misrepresentation made four months before renewal was impliedly repeated at renewal because it concerned a material feature of the risk and had not been corrected. The insurers therefore established misrepresentation at renewal.
- The declaration concerning moral hazard and previous declinature did not waive disclosure of other material facts. Waiver required a fair presentation of the risk, which had not been made. The insurers were not put on inquiry merely because the standard alarm specification had not been supplied. The relevant renewal terms did not become contractual warranties.
- Avoidance still required proof that the responsible underwriter would not have renewed on the same terms with fair disclosure. The court approached the underwriter’s hypothetical evidence cautiously. The insurers had treated the insured as a good risk, had repeatedly dealt with risk improvements without contractual conditions, and had shown flexibility to retain the account. Inducement was not proved.
- The policy remained valid and the insurers were liable to indemnify the claimant. Some breaches of the brokers’ duties were established, but none caused loss. The relevant failure resulted from the insured’s internal communication breakdown.
- For business interruption, necessary and reasonable expenditure could in principle remain recoverable beyond the indemnity period. On the evidence, the additional machinery maintenance costs were limited to £85,000. Savings in depreciation were deductible because the policy provided an indemnity, not a recovery exceeding the loss.
- Interest was awarded at 1% above base rate from 1 April 2007.
The court’s approach to earlier authorities
Available to signed-in members.
Key cases cited
15 authorities cited.
- DOHENY v NEW INDIA ASSURANCE CO LTD [2005] Lloyd's Rep IR 251
- Wise (Underwriting Agency) Ltd & Ors v Grupo Nacional Provincial SA [2004] EWCA Civ 962
- Sahib Foods Ltd v Paskin Kyriakides Sands (a firm) [2003] EWCA Civ 1832
- Jones v Environcom Ltd & Anor [2010] EWHC 759 (Comm)
- North Star Shipping Ltd & Ors v Sphere Drake Insurance Plc & Ors [2005] EWHC 665 (Comm)
- GLENCORE INTERNATIONAL A.G. v. ALPINA INSURANCE COMPANY LIMITED [2003] EWHC 2792 (Comm) [2004] 1 Lloyd's Rep 111
- Astley v Austrust Limited [1999] HCA 6
- J W BOLLOM & CO LTD v BYAS MOSLEY & CO LTD [2000] Lloyd's Rep IR 136
- Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd (No 2) [1995] 1 AC 501
- ANTHONY JOHN SHARP AND ROARER INVESTMENTS LTD. v. SPHERE DRAKE INSURANCE PLC MINSTER INSURANCE CO. LTD. AND E. C. PARKER & CO. LTD. (THE “MOONACRE”) [1992] 2 Lloyd's Rep 501
- CONTAINER TRANSPORT INTERNATIONAL INC. AND RELIANCE GROUP INC. v. OCEANUS MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD. [1984] 1 Lloyd's Rep 476
- McNEALY v. THE PENNINE INSURANCE CO. LTD. WEST LANC. INSURANCE BROKERS LTD. AND CARNELL [1978] 2 Lloyd's Rep 18
- Glicksman v Lancashire and General Assurance Co Ltd [1925] 2 KB 593
- Dennistoun v Lillie (1821) 3 Bligh 202
- Dawson v Atty (1806) 7 East 367
Sign in to see how the court treated each authority. A free account is enough.
Cases citing this case
9 later cases · 6 positive · 2 neutral · 1 negative
Most senior citing decisions:
- Gatwick Investment Ltd and others v Liberty Mutual Insurance Europe SE; Bath Racecourse Company Ltd and others v Liberty Mutual Insurance Europe SE and others [2026] UKSC 14 approved
- Liberty Mutual Insurance Europe SE & Ors v Bath Racecourse Company Limited & Ors [2025] EWCA Civ 153 approved
- Stonegate Pub Company Limited v Amlin Corporate Member Limited & Ors. [2022] EWHC 2548 (Comm) applied
- Avondale Exhibitions Ltd v Arthur J. Gallagher Insurance Brokers Ltd [2018] EWHC 1311 (QB)
- Schenk v Cook & Ors [2017] EWHC 144 (QB)
- AXA Versicherung AG v Arab Insurance Group (B.S.C.) [2015] EWHC 1939 (Comm)
- Western Trading Ltd v Great Lakes Reinsurance (UK) Plc [2015] EWHC 103 (QB)
- Bate v Aviva Insurance UK Ltd [2013] EWHC 1687 (Comm)
- Novoship (UK) Ltd & Ors v Mikhaylyuk & Ors [2012] EWHC 3586 (Comm)
Sign in for the full treatment table. A free account is enough.