Charles Bellhouse & Anor v Zurich Insurance Plc

On an application to strike out or obtain summary judgment against an insurer’s defences, a defence with a realistic prospect of success should ordinarily proceed to trial, but defective pleading should be cured where the defect can properly be remedied. A consumer-insurance misrepresentation defence must plead how a representation was made by or on behalf of the insured and how the insurer received, considered and relied on it before inception. Adoption of an insurer-generated statement may constitute a representation or a warranty, depending on the facts. An exclusion for loss caused by contract works requires a pleaded case of causation and adequate particulars. Contract works are distinct from the property to which they are carried out.

The claimants insured their home and contents with Zurich. After a fire during substantial building works, they claimed indemnity. Zurich relied on a qualifying fraudulent misrepresentation under the Consumer Insurance (Disclosure and Representations) Act 2012 and on a policy exclusion for contract works.

The claimants applied under CPR 3.4(2) and CPR 24.3 to strike out parts of Zurich’s defence and counterclaim and obtain summary judgment. They argued that Zurich had generated the disputed answer that no contract works were planned, had not relied on any representation, and had not adequately pleaded causation or the contractual thresholds. The central issues were whether Zurich’s defences had a realistic prospect of success and whether their deficiencies could be cured by further particulars.

1. Misrepresentation. Zurich had a real prospect of establishing that the claimants confirmed and adopted the answer that no contract works were likely, instructed their brokers to place the insurance on that basis, and thereby communicated a representation on which Zurich relied when incepting cover. The evidence raised a triable issue as to the relevant communications and the timing of inception.
2. The fact that Zurich had originally generated the statement of insurance did not create a legal bar to a representation arising from subsequent confirmation or adoption. Whether the statement was adopted as a representation or a contractual warranty was a question of fact. The court declined to follow any general principle in Parallel Media LLC v Chamberlain that an insured could never make a representation by confirming an insurer-drafted statement.
3. The representee must receive and be aware of the representation when acting in reliance on it. Zurich’s case arguably satisfied that requirement. The court did not need to decide the alternative case under section 2(3) of CIDRA, although a pre-inception request relating to particulars previously given would be required.
4. Nevertheless, Zurich’s pleadings did not adequately explain how the representation was communicated or how and by whom it was relied upon. Since the defence had a realistic prospect of success, the appropriate course was to permit short particulars rather than strike it out.
5. Contract works exclusion. The first limb, excluding the contract works themselves, could not be read as treating the whole house as contract works. Contract works were works carried out to the house, not the house itself. That limb was struck out and summary judgment was entered for the claimants on it.
6. The second limb, concerning loss or damage caused by or resulting from contract works, was inadequately pleaded. Saying only that the fire occurred during the works pleaded temporal coincidence, not causation. Zurich also had to particularise the alleged excess over 20% of the buildings sum insured and any alteration to the property’s square footage. Those defects were capable of cure.
7. The application was therefore dismissed in relation to the misrepresentation defence and the second limb of the exclusion, conditional on Zurich providing particulars. The first limb of the exclusion was struck out and summary judgment was entered against Zurich on that issue. Costs were left for agreement or further order.

First-instance decision on the claimants’ application to strike out parts of Zurich’s defence and counterclaim and for summary judgment.