Genesis Housing Association Ltd v Liberty Syndicate Management Ltd

A proposal form may create an enforceable insurance warranty where it is made the basis of the contract. An innocent inaccuracy can therefore render the insurance contract void, unless the policy clearly modifies or displaces the warranty. A declaration made to the best of the insured’s knowledge and belief requires honesty, but a corporate insured is also responsible for information actually known to it. The contractual identity of the builder is determined from the insurance documents read as a whole. An insolvency endorsement covering the builder does not ordinarily extend to a subcontractor or to successive replacement builders where the policy identifies a specific builder.

The claimant, a housing association, sought indemnity under a social-housing insurance policy for additional completion costs after a development contractor and its subcontractor encountered financial difficulties. The proposal form named the wrong builder and stated an incorrect contract cost. The defendant relied on the proposal as a basis-of-contract warranty and disputed whether the insolvency endorsement was engaged.

The court considered the identity of the policyholder and builder, the effect of the proposal form and policy wording, the meaning of the insolvency endorsement, the consequences of the builder’s insolvency, and entitlement to a final certificate.

1. Judgment for the defendant. The claimant had acted through the contractor as its agent in obtaining the insurance and was bound by the proposal form.
2. A declaration that information is correct to the best of the insured’s knowledge and belief is not merely a declaration of honesty. For a corporate insured, the question includes what the organisation actually knew when the declaration was made. The proposal stated that its information formed the basis of the insurance contract. The statement identifying TT Construction as builder was therefore a warranty, and was inaccurate because the building contract was with TT Bedford.
3. The quotation and initial certificate repeated the identification of TT Construction. The policy definition of “Builder” did not override those documents. Construed commercially as a whole, the insurance covered the specifically identified builder, rather than any later builder selected by the policyholder.
4. The basis-of-contract warranty and the policy’s fraud and misrepresentation condition operated cumulatively. The former rendered the contract void for breach, while the latter gave the insurer a contractual right to avoid for fraudulent conduct. Clear words would have been needed to displace the warranty, and none existed.
5. The residual findings were that TT Bedford became insolvent no earlier than about November 2009 and that its insolvency caused its failure to complete. The insolvency endorsement would otherwise have been engaged, and the recoverable amount would have been £460,000. However, TT Bedford was not the builder identified in the insurance. The insolvency of the subcontractor 3Sixty did not itself provide an additional defence.
6. Once the named builder became insolvent and failed to complete, the claimant would not have been entitled to the policy’s final-certificate or certificate-of-approval benefits, even though the development was later completed by others.