Bate v Aviva Insurance UK Ltd

This was a first instance trial of a claim for an indemnity and consequential losses following an accidental fire. The court applied established principles on material non-disclosure and misrepresentation (materiality judged by the effect on the prudent underwriter and causation assessed by inducement), considered the relevance of ICOB and FSMA remedies, and addressed alleged breaches of a policy condition requiring prior notice of works costing over £10,000. The judge found that the Coach House was not covered by the Long House policy, that the claimant had made material misrepresentations and failed to disclose material facts (notably the true circumstances of a prior fire and the scale and character of building works and business activity on the site), and that Aviva was induced to enter the contract on the basis of the information provided. The court also found deliberate dishonesty in relation to post-transaction documents and file manipulation and rejected arguments of waiver, estoppel and breach of ICOB by the insurer. The claim was dismissed on the basis that Aviva lawfully avoided the policy.

Background and parties: The claimant, Alan Bate, sued Aviva for indemnity and consequential losses after an accidental fire destroyed Long House. The policies were placed by Aviva through Home & Legacy. The trial concerned liability and certain principles of damages; factual issues were disputed and the trial involved multiple lay and expert witnesses.

Nature of the claim: The claimant sought indemnity for rebuilding and consequential losses; Aviva denied liability, alleging material non-disclosure and misrepresentation at proposal/renewal and breach of a condition precedent (failure to notify building works over £10,000). The claimant also relied on ICOB/FSMA remedies and alleged waiver.

Issues framed:

• Whether the Coach House formed part of the insured Long House policy;
• whether the proposal forms contained material misrepresentations or omissions (including the location and circumstances of a prior fire, business use of outbuildings/garage/yard, and ongoing building works);
• whether any non-disclosure or misrepresentation was material and induced Aviva to enter the contract on the terms agreed;
• whether Aviva breached ICOB or FSMA duties or had waived the right to avoid;
• whether any breach of general condition 4 was connected with the loss.

Court’s reasoning and findings: The judge construed the policy documents objectively and held that the Coach House was not covered by the Long House policy. On the facts he found that the claimant’s proposal forms gave a false picture about a prior fire (wrong location and misleading description of the contractor position), failed to disclose continuing relevant works and the business activity in the garage/yard, and that these matters when taken together were material. Expert evidence on materiality supported the view that insurers would have been prompted to ask further questions and that Aviva was induced by the misrepresentations/non-disclosures. The court rejected the claimant’s contention that ICOB required Aviva to meet the claim: given the circumstances and the claimant’s knowledge, Aviva’s avoidance was not unreasonable and no actionable breach of ICOB was made out. Allegations of waiver and estoppel failed. The judge also made adverse credibility findings, concluding deliberate dishonesty in relation to an after-the-event letter/fax scheme and other non-disclosures. Because liability was defeated, the court did not determine consequential damages in detail.

Claim dismissed. The court held that Aviva was entitled to avoid the policies because the claimant had made material misrepresentations and omitted material facts which induced the insurer; the Coach House was not within the insured Long House policy; breaches of the policy condition requiring prior notice of significant works occurred; ICOB did not prevent avoidance in the circumstances; and allegations of waiver or estoppel were rejected. The judge also found deliberate untruths in respect of certain post-transaction documents and related evidence, undermining the claimant's credibility.