Parker & Anor v The National Farmers Union Mutual Insurance Society Ltd

The court held that the fire at Crossfield was deliberately set by one or more persons acting on the direction of Mr Parker and that Mr Parker had requested others to give untrue evidence about tools allegedly loaned to him. The insurance policy was held to be a composite policy such that Mrs Parkers entitlement to indemnity was not defeated by Mr Parkers wilful misconduct as a matter of insurable interest. However Mrs Parker failed to comply with a policy condition precedent to benefit by refusing to provide bank statements requested by the insurer and the insurers repudiation on that ground was held not to be unreasonable in the circumstances. The court found that two watches were not stolen in 2007 and that the NFU was entitled to restitution of the sums paid in respect of the 2007 claim; by contrast, the 2002 loss was not shown to be fraudulent. The Unfair Terms in Consumer Contracts Regulations 1999 and ICOBS were considered and the court found the policy condition was not unfair and that ICOBS did not make the NFUs rejection unreasonable.

Background and parties: Mrs Barbara Parker (first claimant) owned Crossfield, a house insured by the National Farmers Union Mutual Insurance Society Limited (the NFU) under a policy dated 6 July 2009; Mr Michael Parker (second claimant) was added as assured on 22 September 2009. Crossfield suffered substantial fire damage on 6 December 2009.

Nature of the claim and procedural posture: Mrs and Mr Parker claimed indemnity under the policy for reconstruction costs, contents and loss of rent. The NFU denied liability on several grounds: avoidance for non-disclosure of earlier fraudulent claims (alleged claims in 2002 and 2007), that the 2009 fire was deliberately set by Mr Parker or persons acting under his direction, that the claim was supported by fraudulent documents and statements, and that the claimants breached a policy condition by refusing to provide documents requested. The NFU counterclaimed for restitution of sums paid in respect of the 2002 and 2007 watches claims and for its investigation costs, and sought declaration of subrogation against Mr Parker upon payment.

Issues framed:

• whether a watch was stolen in 2002;
• whether two watches were stolen in 2007;
• whether the lease and subsequent rent-increase agreement with Mr Steele were shams;
• whether Mr Parker or persons acting under his direction caused the fire;
• whether the NFU validly avoided or repudiated cover and whether the claimants breached a condition precedent by refusing to supply bank statements;
• whether the policy condition was an unfair term under the Unfair Terms in Consumer Contracts Regulations 1999 and whether the insurers rejection was unreasonable in light of ICOBS.

Courts reasoning and findings:

• The court applied the ordinary civil standard of proof, emphasising that allegations of fraud require cogent evidence commensurate with their gravity.
• The 2002 claim: although the NFU contended the 2002 watch claim was fraudulent, the court was not persuaded that the loss did not occur; the NFU did not discharge the burden of proof to show fraud in 2002.
• The 2007 claim: significant contemporaneous omissions and inconsistencies (notably the claimants failure to mention any watch loss in his letter of complaint to British Airways and repeated misidentification of the watches) led the court to conclude that no watches were stolen in 2007 and that the 2007 claim was fraudulent. The NFU was therefore entitled to restitution for the sums paid in respect of that claim.
• The lease dated 19 September 2009 to Mr Steele was signed and the court was not satisfied the NFU proved it to be a sham; the 27 November 2009 agreement to pay higher rent was not shown to be a sham either on the evidence before the court.
• On the cause of the fire the court accepted expert evidence of arson and, on the balance of probabilities and considering the totality of evidence (Mr Parkers presence at Crossfield on the evening in question, an improbable account of his reasons for attending, the key found in the outside lock of the conservatory door, and the evidence that a suppliers invoice and evidence had been put into circulation untruthfully at Mr Parkers behest), concluded that the only probable explanation was that the fire was set by persons acting under Mr Parkers direction. The court rejected innocent coincidence as implausible.
• On the policy form, the court found the policy was a composite policy (different insurable interests for Mr and Mrs Parker) and that the insurer could avoid cover for Mr Parker for non-disclosure of the 2007 fraudulent claim; accordingly Mr Parker was not entitled to recover for the fire (and the NFUs counterclaim against him for restitution succeeded).
• Mrs Parker: because the insurer had not proved she was aware of the 2007 fraud, the NFU could not avoid the policy as against her on that ground; however, she had refused to provide bank statements requested as part of the investigation into possible arson and motive. The condition in the policy making provision of documents a condition precedent was not an unfair term under the 1999 Regulations and, applying ICOBS (which the insurer must observe), the NFUs rejection of Mrs Parkers claim on that ground was not unreasonable.

Relief and disposition: The court dismissed the claimants claims for indemnity; it allowed the NFUs counterclaim against Mr Parker for restitution of the 2007 payments and for investigation costs. The court observed that if Mrs Parkers claim had succeeded it would have granted a declaration of subrogation in favour of the NFU on payment, but that was unnecessary given dismissal.

The claim by Mr and Mrs Parker is dismissed. The court found that the fire was caused by persons acting on the direction of Mr Parker; the NFU was entitled to avoid cover for Mr Parker for non-disclosure of the fraudulent 2007 watches claim and to obtain restitution of sums paid in respect of that claim. Although the policy was a composite policy and Mrs Parker would not be barred by Mr Parkers misconduct alone, Mrs Parker refused to provide bank statements requested under a condition precedent; the policy condition was not unfair under the Unfair Terms Regulations and, in light of ICOBS, the NFUs rejection on that ground was not unreasonable, so her claim for indemnity was dismissed.