Bate v Aviva Insurance UK Ltd

The Court of Appeal dismissed the appellant's challenge to the Commercial Court's decision that the insurer was entitled to rescind or avoid the household insurance policy because the insured made material misrepresentations and failed to give a fair presentation of the risk. Key grounds for the decision were: the misrepresentation that a prior fire had occurred at a "previous address" (when it had occurred at the premises to be insured), the failure to disclose ongoing works and business activities connected with the property (breach of General Condition 4), and the use of a fraudulent device in support of the claim (the backdated second letter of 4 April 2005 and an inauthentic fax).

The court applied ICOB Rule 7.3.6 and concluded that the misrepresentation was at least negligent so the insurer was not precluded from avoiding the policy under ICOB. The judge also found evidence of fraud or "evidence of fraud" in the claimant's conduct, which reinforced the insurers' position. The materiality of the nondisclosures and misrepresentations and inducement were held to have been proved.

Background and parties:

• The appellant, Mr Alan Bate, claimed indemnity and damages following an accidental fire at his home, the Long House, on 6 June 2006. The respondent insurer, Aviva, had rescinded and/or avoided the policy on grounds of material misrepresentation and non-disclosure. The claim was heard in the Commercial Court by His Honour Judge Mackie QC; this judgment is the appeal to the Court of Appeal.
• Procedural posture: appeal from the High Court (Commercial Court) decision reported at [2013] EWHC 1687 (Comm). Permission to appeal was granted on paper.

Nature of the claim and relief sought:

• Mr Bate sought indemnity under the household insurance policy and damages; he also advanced a claim under section 150 FSMA relying on alleged breaches of the Insurance Conduct of Business Sourcebook (ICOB) by the insurer.

Issues framed by the court:

• Whether the proposal forms and related communications contained material misrepresentations (notably the description of a prior fire as occurring at a "previous address");
• Whether material non-disclosures occurred concerning conversion works, business uses of outbuildings and the yard, and whether those matters were material to the risk;
• Whether the insurer was induced to accept the risk by the claimant's representations;
• Whether ICOB Rule 7.3.6 prevented the insurer from rejecting or avoiding the claim;
• Whether the claimant used fraudulent devices (the second letter dated 4 April 2005 and an alleged fax of 6 April 2005) in support of his case, and the effect of such conduct.

Court's reasoning and conclusions:

• The court agreed with the trial judge that the representation that the 2004 fire had occurred at a "previous address" was false and that, given the appellant's experience and the proximity and common ownership of the properties, it was a material misrepresentation. The misrepresentation was at least negligent, which means ICOB 7.3.6(2)(b) did not preclude the insurer from avoiding the policy.
• The judge's findings that the appellant failed to disclose significant conversion works, business activity from garages and storage in the yard, and that these features together required a fair presentation of the risk, were upheld. These failures breached General Condition 4 of the policy and were material.
• The court accepted the trial judge's finding that the second 4 April 2005 letter and the purported fax were not genuine contemporaneous documents but devices used to bolster the claimant's case. That conduct amounted to "evidence of fraud" and further justified insurer avoidance and rejection of the claim under ICOB.
• Inducement was established by evidence from underwriting witnesses and by the obvious materiality of the facts; the Court of Appeal found it was not necessary to accept only an inference from materiality because direct evidence supported inducement.

Result: the appeal was dismissed and the Commercial Court's dismissal of the claimant's claim was upheld.

Appeal dismissed. The Court of Appeal upheld the trial judge's findings that the insured made material misrepresentations (notably as to the location of a prior fire), failed to disclose significant works and business activity affecting the risk, and used a fraudulent device to support the claim; the misrepresentations were at least negligent so ICOB did not bar rescission and inducement and materiality were proved, justifying insurer avoidance of the policy.

Appeal from the High Court of Justice, Queen's Bench Division, Commercial Court (His Honour Judge Mackie QC) reported at [2013] EWHC 1687 (Comm). Permission to appeal was granted by Maurice Kay LJ; judgment of the Court of Appeal delivered 21 March 2014, neutral citation [2014] EWCA Civ 334.