Western Trading Ltd v Great Lakes Reinsurance (UK) Plc

An insured has an insurable interest where it possesses, manages, lets, insures or bears responsibility for the insured property, even though another person owns it. The court should lean in favour of finding an insurable interest after premiums have been accepted. An insurer seeking to avoid for misrepresentation must prove falsity, materiality and inducement. A proposal made for an earlier policy and insurer will not ordinarily support avoidance of a later policy, particularly where the later underwriting relied on a survey. Where a policy gives the assured an express right to reinstatement, the assured may obtain declaratory relief before incurring reinstatement costs. The obligation to reinstate with reasonable despatch does not arise until the insurer accepts or is held liable to indemnify.

The claimant sought indemnity under a fire insurance policy after fire destroyed buildings in Walsall. The defendant alleged that the claimant lacked an insurable interest because the buildings were owned personally by its principal, and alleged misrepresentation, non-disclosure and breach of warranty concerning occupation, tenancies, alarms and rent.

The claimant also sought a declaration confirming its entitlement to indemnity for reinstatement costs, together with loss of rent. The central issues were whether the claimant had an insurable interest, whether the policy could be avoided, and whether declaratory relief was available before reinstatement had occurred.

1. Insurable interest. The claimant managed the properties, arranged insurance, granted leases, dealt with rates and was accountable to the owner. It therefore had an insurable interest notwithstanding that the properties were owned by Mr Singh personally. The arrangements were genuine family-business arrangements and did not require investigation of their underlying fiscal model. The defence failed.
2. Misrepresentation and non-disclosure. The applicable inquiry was whether each alleged representation was made, was untrue, was material to a prudent underwriter and induced the defendant to write the risk. The alleged difference between two and three tenants was immaterial because the relevant issue was the level and nature of occupation. The earlier proposal form had been submitted for a different policy and insurer and was not the basis on which the defendant wrote the later policy. The defendant also failed to prove inducement. The non-disclosure allegations therefore failed with the misrepresentation case.
3. Warranty. The proposal form did not form the basis of the later policy. There was no breach of warranty. The unoccupancy issue also failed because the claimant had established tenancies and occupation.
4. Reinstatement and declaration. The policy gave the claimant an express contractual right to indemnity for reinstatement. The requirement to incur reinstatement costs with reasonable despatch did not arise while the insurer wrongfully denied liability. The claimant did not need to fund reinstatement before obtaining confirmation of indemnity. A declaration was appropriate, and disputes about the form of reinstatement could be addressed using the approach in Tonkin v UK Insurance Ltd [2006] EWHC 1120 (TCC).
5. The claim succeeded. A declaration was granted subject to payment of any unpaid rates, or an equivalent condition. The claimant recovered half its claimed loss-of-rent sum, namely £14,750.

First-instance judgment in the High Court. No prior appellate decision is stated in the judgment.