Bate v Aviva Insurance UK Ltd

In assessing an insurer’s right to avoid a policy for misrepresentation or non-disclosure, materiality and inducement must be considered against the risk as fairly presented overall. Matters which appear immaterial in isolation may become material when viewed together, particularly where the insured property is unusual and subject to building works or business use. A proposal form may restrict the duty of disclosure where, properly construed, it shows that the insurer accepted the omission of particular information. The insurer must establish that the misrepresentation or non-disclosure was an effective cause of the contract being made on the agreed terms. An insurer’s refusal to meet a claim will not breach applicable claims-handling rules where avoidance is justified by material misrepresentation, non-disclosure or breach of condition.

The claimant sought indemnity and consequential losses under household insurance policies issued by the defendant following an accidental fire which substantially destroyed Long House. The defendant alleged material misrepresentations and non-disclosures concerning the property’s use, neighbouring building works, business activities, a previous fire, and ongoing works exceeding the policy limit. It also relied on breach of a condition precedent and denied that it had waived its right to avoid.

The court determined whether the Coach House was insured, whether the alleged matters were material and induced the policies, whether ICOB applied and was breached, and whether waiver or estoppel arose.

1. Coverage. On an objective construction of the policy documents, the Coach House was a separate registered property and was not included within the cover for the buildings at Long House. Its works and the business conducted from its garage could nevertheless be relevant to the fair presentation of the risk because of the unusual physical and commercial arrangements at the Estate (paras [67]–[73], [99]–[101]).
2. Materiality and disclosure. A fact is material if it would affect the mind of the prudent underwriter, although decisive influence is unnecessary. The insured must provide a fair picture of the risk. The proposal form may limit the duty where its proper construction shows that the insurer restricted its right to receive particular information. Matters such as neighbouring works or business use may lack materiality in isolation, but become material when considered with the circumstances as a whole (paras [21]–[26], [78], [81], [100]–[101]).
3. Inducement. The defendant established that the inaccurate description of the previous fire, the failure to disclose the unusual business and building activities, and the failure to notify relevant works were material and would have affected the terms on which the insurance was granted. The claimant’s evidence that the works had been notified was rejected, and there was a breach of the policy condition concerning works exceeding £10,000 (paras [85], [100]–[107], [128]–[133]).
4. ICOB. The claimant was a retail customer and ICOB applied. Following Parker v The National Farmers Union Mutual Insurance Society Ltd [2012] EWHC 2156, the insurer could not reject the claim otherwise than in accordance with ICOB standards. Aviva’s rejection was not unreasonable in the circumstances, so there was no breach of ICOB 7.3.6 (paras [27]–[34], [134]).
5. Waiver and outcome. There was no unequivocal election by Aviva, with the relevant knowledge, not to rely on its right to avoid. The claim therefore failed. It was unnecessary to decide the disputed consequential-loss issues (paras [135]–[139]).

First-instance judgment in the High Court (Commercial Court). No appellate history was stated in the judgment.