Clarendon Dental Spa LLP & Anor v Aviva Insurance Limited & Anor

Insurance proposal questions are construed objectively in their contractual and commercial context. A question referring to partners or directors involved in the business will ordinarily concern the policyholder’s current partners or directors, unless its wording clearly extends further. Genuine ambiguity in an insurer’s question is resolved in favour of the insured.

By asking specifically about insolvency, an insurer may waive disclosure of insolvencies concerning persons outside the identified class. The same principles apply to a statement of fact or declaration. A party need not disclose a prior non-disclosure to another insurer where the underlying declaration, properly construed, did not cover the relevant former office-holders.

The second claimant operated a dental practice and claimed under a Zurich policy after a fire. Zurich alleged that the claimant had breached the duty of fair presentation by answering an insolvency question incorrectly, failing to disclose liquidations of predecessor companies, and failing to disclose an alleged earlier misrepresentation or non-disclosure to Aviva by the first claimant.

The claimant applied to strike out those parts of Zurich’s Defence or obtain partial summary judgment. Zurich applied for permission to amend its Defence. The parties agreed that the applications turned on whether the pleaded cases had a real prospect of success.

1. Applications and applicable test. The court applied the real-prospect-of-success test in [2009] EWHC 339 (Ch). Since the issues turned on construction and no unresolved factual dispute affected them, it was appropriate to determine them summarily.
2. Zurich insolvency question. Read objectively, the standard-form question concerned the policyholder and its current directors, or current partners where the policyholder was a partnership. The references to partners, directors and family members were disjunctive and did not extend, without clear wording, to former office-holders or persons connected with predecessor entities. The Company had therefore answered the question correctly. Permission to add paragraph 44A was refused.
3. Waiver of disclosure. By asking about insolvency in relation to specified persons, Zurich waived disclosure of insolvencies concerning other persons. The Company was consequently not required to disclose the liquidations of PDS, JHP or BTB. Paragraphs 44 and 45 were struck out.
4. Aviva declaration. The Aviva declaration was directed to the LLP and its current directors or partners. It did not reasonably confirm the insolvency history of other companies with which the LLP or its members were involved, nor did the reference to insolvencies in the preceding ten years extend the declaration to former directors or partners. Any remaining ambiguity had to be resolved in favour of the LLP. Aviva had likewise waived disclosure of other insolvencies.
5. Prior misrepresentation case. The court assumed, without deciding, that a prior failure to make a fair presentation to another insurer could arguably constitute a matter requiring disclosure to Zurich on moral-hazard grounds. Zurich nevertheless had no real prospect of proving the alleged Aviva misrepresentation or non-disclosure under the proper construction of the Aviva declaration. Permission to amend paragraphs 60 and 61 was refused, and those paragraphs were struck out. The proposed amendment to paragraph 66 was left to an agreed order and directions.