Genesis Housing Association Ltd v Liberty Syndicate Management Ltd

A clear basis of contract clause in an insurance proposal form gives the form contractual effect, even where the policy does not refer to it. The statements in the form thereby become warranties and cannot be treated as immaterial.

The effect of such a clause can be excluded only by clear and unequivocal policy language. A declaration that information is true to the proposer’s knowledge and belief does not qualify a separate basis-of-contract clause. Nor does a condition making the policy voidable for fraud limit the insurer’s rights for breach of warranty unless it expressly does so.

Where the contractual documents identify a particular builder, insolvency and defects cover does not extend to a substituted builder.

Genesis, a housing association, obtained insurance against latent defects and the builder’s insolvency during construction of social housing at Telecom House. The signed proposal form and the insurers’ initial certificate named TT Construction as builder, but Genesis had contracted with TT Bedford.

TT Bedford later became insolvent. Genesis completed the works through replacement contractors and sought an indemnity, limited to £460,000. The insurers denied liability, principally because the proposal form misstated the builder’s identity.

Akenhead J dismissed the claim: [2012] EWHC 3105 (TCC). Genesis appealed, contending that the proposal statements were not warranties, that the declaration was qualified by knowledge and belief, that condition 7 limited avoidance to fraud, and that cover was not confined to TT Construction.

1. Appeal dismissed. Jackson LJ, with whom Lady Justice Gloster and the Master of the Rolls agreed, held that the proposal form had contractual effect. Its separate basis-of-contract clause made its statements warranties, notwithstanding that the policy did not list or refer to the proposal form. Such effect required clear and unequivocal words to be displaced; the policy contained none.
2. The declaration’s first sentence, which spoke of the proposer’s knowledge and belief, did not qualify its second sentence. The latter imposed an unqualified warranty that TT Construction would be the builder. Both Genesis and TT Bedford knew that TT Bedford, not TT Construction, was to be the builder. The cases concerning information unknowingly inaccurate to the proposer’s knowledge and belief were therefore distinguishable.
3. Condition 7, providing that the policy would be voidable for specified misstatements made with intent to defraud, was not expressed as an exclusive or limiting condition. It conferred express rights but did not reduce the insurers’ ordinary rights arising from breach of warranty or the basis-of-contract clause. The builder misstatement therefore rendered the policy void or voidable, which was sufficient to defeat the claim.
4. Independently, the proposal form and initial certificate made it a contractual term that TT Construction would remain the builder. The insurance covered risks arising from that identified builder, not the open-ended risk of another contractor selected by Genesis. It therefore did not respond to defective work by, or the insolvency of, TT Bedford. Genesis was also not entitled to a final certificate.

• Court of Appeal (Civil Division) — dismissed Genesis’s appeal and affirmed that the insurers had no liability under the policy: [2013] EWCA Civ 1173.
• High Court, Technology and Construction Court — Akenhead J dismissed Genesis’s claim under the insurance policy: [2012] EWHC 3105 (TCC).