| Insurance — Non-disclosure — Material facts — Contract for buildings insurance — Insured completing proposal forms prior to contract and supplying incorrect information regarding previous involvement in other companies — Insured not disclosing information of disputed tax assessment — Whether non-disclosure of material facts — Whether insurers induced into entering contract — Whether contract validly avoided by insurers
Meisels and another v Norwich Union Insurance Ltd
Queen’s Bench Division: Tugendhat J: 9 November 2006
The test of materiality for disclosure of facts when entering into an insurance contract was by reference to what would influence the judgment of a prudent insurer. There might be things which would be too old or insufficiently serious to require disclosure, whether or not there was exculpatory material to show there was nothing in a particular allegation.
Tugendhat J so held in dismissing an appeal by Norwich Union Insurance Ltd against the decision of Judge Higgins in the Central London County Court who found in favour of the insured, the first claimant, Mr M Meisels, in respect of his claim under a contract for buildings insurance, which he had entered into with the defendant insurers, Norwich Union, on 14 January 2002.
TUGENDHAT J said that the first claimant was a property dealer and had been the director of a number of companies, some of which had been removed from the register for failure to file accounts and some of which had gone into liquidation. On 14 January 2002 the parties entered into a contract of buildings insurance, which covered a portfolio of some 48 of the claimant’s properties, one of which was the claimant’s home, the others being commercial and residential lettings. Prior to entering into the contract, the claimant had completed two proposal forms: the first contained questions concerning bankruptcy or insolvency proceedings; the claimant admitted that his answers to those questions were incorrect at the time of signing the form. The second form contained a declaration that the forgoing statements were, to the best of the insured’s knowledge, true and complete and allowed for disclosure of any other facts which the insured felt might affect acceptance or assessment of the insurance cover sought. Subsequently he made a claim under the contract for the benefits payable in the event of water damage to a property. The insurers resisted the claim on the ground that it had validly avoided the contract, alleging, inter alia, that the claimant was guilty of non-disclosure of material facts, namely, facts relating to (i) a disputed tax assessment and to accounts and returns which had not been filed, (ii) other companies which had been dissolved for failing to file accounts, (iii) four companies which had been the subject of creditors liquidation and (iv) the fact that in relation to the property on the schedule to the policy, the first claimant was the registered owner but was referred to in the schedule under an alias. On their appeal the insurers submitted that, where there was information such as an allegation of dishonesty or of other criminal conduct, which would on its face be material and so disclosable, there was an obligation on the part of the insured to disclose, except where there was exculpatory material, from which it could be seen that it was so clear that there was nothing in the allegation. His Lordship said that the test of materiality was by reference to what would influence the judgment of a prudent insurer. That was an objective test and the characteristics of a prudent insurer were, in substance, a matter for the courts to decide. There was room for a test of proportionality, having regard to the nature of the risk and the moral hazard under consideration. It was possible that there might be things which would be too old or insufficiently serious to require disclosure, whether or not there was exculpatory material. In cases where the information would be material and disclosable if there was no exculpatory material, the degree of conviction that the exculpatory material must carry, must depend on all the circumstances known to the insured. The judge did not misdirect himself in law and, on the evidence before him, was entitled to find that the claimant had not failed to disclose material information in relation to his other business dealings.
|
