Dalecroft Properties Ltd v Underwriters Subscribing To Certificate Number...

Under the pre-2015 insurance law, a renewal is a new contract and the insured must disclose material circumstances relevant to the renewed risk. Materiality concerns whether the fact would influence a prudent insurer’s assessment, while inducement concerns the actual insurer. A material misrepresentation or non-disclosure may entitle the insurer to avoid the policy in its entirety. An insurance policy is ordinarily indivisible, unless its wording clearly separates the insured risks. Warranties require exact compliance and breach discharges the insurer from liability, even where the breach is unrelated to the loss. On the facts, inaccurate statements about repair, flat roofing and vandalism, together with non-disclosure of an emergency prohibition order, justified avoidance. Breaches of commercial unoccupancy warranties provided an independent basis for refusing cover.

Dalecroft owned a mixed commercial and residential property insured by the Underwriters. A fire seriously damaged the property in May 2009. The Underwriters avoided the policy, relying on alleged misrepresentations, non-disclosures and breaches of commercial unoccupancy warranties. Dalecroft claimed an indemnity and contended that the November 2008 certificate was a new policy, or that the commercial and residential risks were divisible.

The court had to determine which certificate governed the relevant disclosure and warranty issues, whether the alleged matters were material and induced the insurance, whether the policy was divisible, and whether the warranties had been breached.

1. Policy and renewal. The policy in force at the fire was the policy issued at renewal in August 2008. The November 2008 certificates amended the existing contract rather than creating a new policy. The renewal was therefore the relevant time for assessing disclosure, misrepresentation and warranties.
2. Misrepresentation and non-disclosure. The court applied the pre-2015 law under the Marine Insurance Act 1906. The statement that the property was in a good state of repair was a statement of fact and was materially inaccurate in context. The answers that there was no flat roof and no history of malicious acts or vandalism were also substantially incorrect. Each misrepresentation induced the renewal because the Underwriters would not have accepted the risk on the agreed terms.
3. The emergency prohibition order was a material circumstance. It disclosed serious continuing fire-safety defects and information about the insured’s approach to maintenance and risk management. Its non-disclosure induced the renewal. The Underwriters were therefore entitled to avoid the policy as a whole.
4. Divisibility. The policy provided single overall insurance for the property for a single premium. The risks were not clearly separable. Matters concerning the residential or unoccupied parts could therefore justify avoidance of the entire policy.
5. November certificate and warranties. Alternatively, if the November certificate had been a new policy, the same misrepresentations and non-disclosure would have justified avoidance. Dalecroft also breached the commercial unoccupancy warranties by leaving loose combustible materials in the basement and Disco Building and by failing adequately to secure parts of the premises and seal the Charity Shop’s letterbox. Those warranties addressed risks affecting the property as a whole.
6. The claim was dismissed and declarations of non-liability were made in favour of the Underwriters. The court invited counsel to agree a Minute of Order.