Glasgow businessman’s appeal against fire insurance decision refused

The defender, Royal and Sun Alliance Insurance plc, declined to indemnify Wayne Stephen Gardner Young on the basis that he had failed to disclose that he had been the director of four companies that had entered insolvency in the five years prior to the start of the policy. The pursuer contended that the defender had waived information in respect of this.

The appeal was heard in the Inner House of the Court of Session by the Lord President, Lord Carloway, sitting with Lord Brodie and Lord Woolman.

Never declared bankrupt or insolvent

The policy was entered into in March 2017 and insured the relevant premises against a number of perils, including fire. On 22 March 2018 the premises were extensively damaged by fire and required to be demolished. The pursuer made a claim to the defender, who declined it and subsequently avoided the contract from its inception on the basis that he had failed to disclose his directorship of four companies that had either been placed into insolvent liquidation or dissolved following insolvent liquidation in the five years prior to the start of the policy.

Under the Insurance Act 2015, before a contract of insurance is entered into, the insured must make a fair presentation of the risk; and that a fair presentation of the risk is one which makes disclosure of every material circumstance which the insured knows or ought to know. In the absence of inquiry, the insured is not required to disclose a circumstance if the insurer waives information.

The pursuer made the contract of insurance through a broker, Boyd & Co Ltd. The broker contacted the defender, who replied to their prospect with an email containing an insurance contract subject to a number of conditions. Among those conditions were that the insured had never been declared bankrupt or insolvent or had a liquidator appointed.

The pursuer submitted that the commercial judge who heard the case at first instance had erred in her construction of the defender’s email. By including the conditions specified, the defender had restricted the pursuer’s obligation to disclose information. A reasonable person would construe the email as the insurer consenting to the omission of the information at issue. Further, the presentation sent to the insurer by the broker had invited further questions from them.

The pursuer also submitted that the English case R&R Developments Ltd v AXA Insurance UK plc was directly analogous to the facts in this case, and the commercial judge had erred in holding otherwise. In that case, the contract included a list of questions including whether the insured had either personally or in connection with a company been declared bankrupt or insolvent. The question was answered in the negative, and it was held that it could be inferred that the insurers had no interest in the insolvency of any party other than the insured and its directors.

The defender submitted that the pursuer had misunderstood the wording of the email. It formed part of the terms and conditions of the offer but did not waive disclosure of information. Further, waiver only applied where a known right was abandoned. The defender had not known there was a breach of the duty of fair presentation, and therefore could not have waived their right to information.

Beyond stage of enquiry

The opinion of the court was delivered by Lord Brodie. He noted generally: “[W]here it is contended, as here, that the insurer impliedly waived its entitlement to disclosure of material information by reason of the terms in which parties communicated with each other, the expectation will be that there will be something in the nature of an enquiry by the insurer directing the insured to provide certain information but no other information. We took [the pursuer] to accept that. He submitted that by including the text ‘Insured has never Been declared bankrupt or insolvent Had a liquidator appointed’ the defender was inviting the pursuer to confirm the accuracy of that statement and by restricting itself to that question demonstrating that it was not concerned to know about the pursuer’s wider experience of insolvency including the undisclosed information.”

Noting that the case turned on the construction of a single email, he said of the pursuer’s argued interpretation: “We do not consider that a reasonable reader of the email of 24 March 2017 would understand it in the way suggested by [the pursuer]. Neither the generality of the email nor the wording relied on by the pursuer are couched in the form of an enquiry. The whole tenor of the email indicates that the defender has got beyond the stage of enquiry or looking for a more complete presentation of the risk.”

He continued: “The pursuer’s brokers had made a presentation of the risk by means of the Market Presentation which they sent under cover of an email of 13 February 2017. That email requested that the defender ‘provide us with a quotation for the above prospect based on the information provided in the attached presentation’. The defender responded with an offer to insure on a variety of terms and conditions. As [the defender] submitted, that offer was capable of immediate acceptance. It is true that it was a conditional offer but it was not an enquiry. An element which was essential if the pursuer’s argument was to get off the ground was absent.”

On the defender’s submissions, he said: “We see the force of the defender’s submission that a party can only waive a right or entitlement if it is aware that it has it, whereas here the defender was not aware that it was entitled to more by way of disclosure of information than it had received; and the defender’s further submission that here the pursuer does not offer to prove that he actually relied on the terms of the email of 24 March 2017 in withholding further disclosure.”

He concluded: “However, it is sufficient for a determination of the reclaiming motion that we find that a reasonable reader of the email would not have understood it as containing an enquiry that was to be construed as an expression of limited concern about the pursuer’s past experience of insolvency such as to exclude the undisclosed information from what was required to be disclosed for a fair presentation of the risk. In all the circumstances as admitted by the pursuer, the defender was therefore entitled to avoid the policy.”

For those reasons, the pursuer’s reclaiming motion was refused.