Brit UW Ltd v F & B Trenchless Solutions Ltd

In insurance, a fact is material if it would influence the judgment of a prudent insurer when assessing the risk, fixing the premium or deciding whether to provide cover. The test is objective and concerns the court’s own appraisal of the facts. The insured’s view of their significance does not determine materiality.

Inducement requires proof that the non-disclosure or misrepresentation was an effective cause of the insurer entering the contract on the agreed terms. An insurer may infer inducement from clear materiality. Affirmation requires an unequivocal election, made with knowledge both of the facts and of the legal right to avoid. A reasonable period for investigation does not ordinarily amount to affirmation.

Brit sought declarations that it had validly avoided a contractors’ combined liability policy issued to FBTS. Brit relied on non-disclosure of substantial and progressive settlement and a road void following tunnelling works, and on a representation that FBTS did not undertake tunnelling under active railway lines.

FBTS denied materiality, falsity and inducement. It also contended that Brit had affirmed the policy through its conduct after learning of the relevant events. The central issues were whether the information was material to a prudent underwriter, whether the alleged representation was made and false, whether Brit was induced, and whether its right to avoid had been lost.

1. Material non-disclosure. FBTS had to disclose every material circumstance known to it, or which ought to have been known in the ordinary course of its business, before the policy was concluded. Materiality was assessed objectively under sections 18(1) and 18(2) of the Marine Insurance Act 1906. The relevant facts included settlement substantially exceeding FBTS’s predicted 2–4mm, continuing uncertainty about the eventual level, MS’s concern, and the appearance of a void near the tunnel route. Those matters would influence a prudent insurer, irrespective of FBTS’s own assessment or the fact that settlement remained below Network Rail’s intervention level.
2. Inducement. Brit established that, had proper disclosure been made, it would not have written the risk on the same terms. It would have excluded the Site and required information about preventing similar problems. Inducement was therefore proved.
3. Active railway lines. Construed objectively and commercially, the risk presentation represented that FBTS had not carried out, and would not carry out, tunnelling under or near an active railway line. The representation was false because the railway at the Site was active during the works. That fact was also material, and Brit proved that it would have affected the premium or other terms.
4. Affirmation. FBTS failed to establish an unequivocal election by Brit to affirm the policy with knowledge of its legal right to avoid. Brit was entitled to investigate for a reasonable period. The broker’s acts did not bind Brit, and the September documentation, endorsement, letters of indemnity and January emails did not amount to affirmation. The oral warning at the October meeting and the written reservation in December also defeated the case on subsequent conduct.
5. Brit had validly avoided the policy for material non-disclosure and misrepresentation. FBTS’s counterclaim was dismissed. Consequential matters, including costs, were left for agreement or further ruling.