IHC (a firm) & Anor v Amtrust Europe Ltd

Waiver by estoppel requires a clear and unequivocal representation that an insurer will not exercise an identified contractual right, together with reliance making withdrawal inequitable. The representation must show awareness, or apparent awareness, of the right being abandoned. Both parties must at least know the facts giving rise to that right. The inquiry concerns actual knowledge, not what a reasonable person might have discovered. A payment or increase in policy cover, without more, will not ordinarily establish waiver. Equity will not assist an insured seeking to rely on conduct procured through its own fraudulent misrepresentation.

The claimants, an insurance-broker partnership and its associated company, sought £180,000 from the defendant insurer under section 1 of the Third Parties (Rights Against Insurers) Act 1930. The sum represented unpaid costs incurred by Consortium, the insured, in earlier proceedings. Consortium had become insolvent after its claims against the claimants failed.

It was accepted that the insurer had grounds to repudiate the ATE policy for fraudulent misrepresentation and other contractual breaches. The issue was whether the insurer had waived those rights by paying £10,000 towards costs and later increasing the policy limit to £190,000.

1. The claim was dismissed. Under section 1(1) of the Third Parties (Rights Against Insurers) Act 1930, the third party enforces the insured’s contractual rights against the insurer. It acquires no independent statutory right. The insurer may rely on any defence which would have defeated the insured’s claim for indemnity.
2. Waiver by estoppel requires a clear and unequivocal representation, in words or conduct, that the insurer will not exercise the relevant contractual right, together with reliance making it inequitable for the insurer to withdraw the representation. The representation must itself carry some apparent awareness of the right being abandoned.
3. Both insurer and insured must know at least the facts giving rise to the relevant right. The court must assess actual knowledge, not what a reasonable person might have discovered or concluded.
4. The payment and increase in the policy limit did not communicate the necessary awareness that the insurer knew of, and would not rely on, its right to avoid the policy. There was also no evidence that Consortium relied on any such representation.
5. Even if representation and reliance had been established, it would not have been inequitable to permit the insurer to rely on its contractual rights. Consortium knew the true position and could not rely on an apparent waiver obtained through its own fraudulent misrepresentation.

First-instance decision of the High Court (Queen’s Bench Division). No subsequent appellate history is stated in the judgment.