Drake Insurance Plc v Provident Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Clarke,Lord Justice Pill,LORD JUSTICE PILL |
| Judgment Date | 17 December 2003 |
| Neutral Citation | [2003] EWCA Civ 1834,[2003] EWCA Civ 1924 |
| Docket Number | Case No: A3/2003/0298,A3/2003/0298 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 December 2003 |
[2003] EWCA Civ 1834
Lord Justice Pill
Lord Justice Clarke and
Lord Justice Rix
Case No: A3/2003/0298
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Justice Moore-Bick
Royal Courts of Justice
Strand,
London, WC2A 2LL
Mr Roger Ter Haar QC & Mr Steven Snowden (instructed by Messrs Barlow Lyde & Gilbert) for the Appellant
Mr Robert Moxon-Browne QC & Mr Alexander Hill-Smith (instructed by Messrs Greenwoods) for the Respondent
The facts of this appeal might have been set by a committee of law professors with the express design of giving rise to points of interest and difficulty. Some at least of the points are of general importance and perhaps all the more so in that they concern a consumer contract of familiarity to all car owners and drivers, namely a motor insurance policy.
There is an added complication in that these proceedings do not arise between insurer and insured, but between two insurance companies. The claimant and in this court the appellant Drake Insurance plc ("Drake") seeks to recover a contribution in equity from Provident Insurance plc ("Provident", the defendant and in this court the respondent) on the basis that both companies were insurers of the same loss. A third party, Mr Beach, was injured by a car driven by Mrs Kamaljit Kaur. Mrs Kaur was driving her husband's car. She was insured under her policy with Drake in respect of any car driven by her with its owner's consent. Her husband, Dr Prim Singh, was insured under his policy with Provident in respect of the car which Mrs Kaur was driving at the time of the accident and Mrs Kaur was a named driver on his policy. However, Provident has purported to avoid its policy on the ground of Dr Singh's non-disclosure. Drake disputes the validity of that avoidance. It is common ground that in the ordinary way double insurance of the same loss will entitle the insurer who pays the loss to recover in equity a rateable contribution from the other insurer. In this case when Mrs Kaur was sued by Mr Beach, Drake indemnified her by settling his claim. However, Provident disputes its liability to Drake to share in that loss for two reasons. First, it says that it validly avoided Dr Singh's policy, so that there was in fact no double insurance. Secondly, it says that even if its avoidance was invalid, a special clause in Drake's policy limited Drake's liability in a case of double insurance to only half of the loss: so that by paying the loss in full, Drake was a volunteer and cannot recover. At trial Moore-Bick J agreed with both those defences. Drake appeals.
Provident's policy and its avoidance
Dr Singh was in the habit of shopping around each year for low cost motor insurance. In February 1995 he made a proposal to Provident, a major provider of motor insurance. Provident offered a highly structured and automated service, under which approved brokers could accept proposals and fix the premium themselves. Such brokers were provided with detailed underwriting criteria. Using this information the brokers could open a proposal form on screen for completion electronically (followed by subsequent signature by the client of a hard copy, the only piece of paper in an essentially electronic process). The acceptability of a proposal and the rating of the premium were calculated by a rigid points system. Provident's underwriting judgment entered into the formulation of that system and the setting of fixed premium rates for feeding into it: but the operation of the system itself was formulaic and Provident's role was limited to one of monitoring the system to ensure that it was working properly, and no doubt to keeping the set premium rates under review.
A relevant example of the way in which the system worked is as follows. In order to determine whether a premium should be increased by reference to a proposer's driving history a set number of points were awarded against convictions incurred and accidents suffered within the previous five years. A conviction for speeding known as SP30 carried 10 points. A "fault" accident carried 15 points. Below 17 points the proposer was charged a normal premium, at 17–29 points his premium would be increased by 25%, and so on. At 60 points or more the risk would be declined.
When in February 1995 Dr Singh approached his brokers, Hexagon Insurance Service Limited ("Hexagon") for new insurance for his Renault car, he wanted third party, fire and theft cover for himself and in addition for his wife, Mrs Kaur, as a named driver. Neither of them had any convictions, but Mrs Kaur had suffered an accident just over a year before on 6 January 1994, when a third party had driven into the back of Dr Singh's car when she was driving it. The accident was not her fault, but under Provident's system it had to be recorded as a "fault" accident, despite its circumstances, until the matter had been settled by the third party in the insured's favour. The accident had occurred when Dr Singh had been insured by another insurer (the Bradford & Pennine), and thus Provident was not at risk, but it was recorded by Hexagon on the proposal form as a "fault" accident in any event, as Provident's system demanded. The following details were entered on the form: " Add[itional] Driver 1, Hit by T[hird].P[arty]. in rear, P[ersonal I[njury] No, Fault Yes, £2000 Own cost, £0 TP cost, NCB [no claims bonus] disallowed". Thus Dr Singh rated on Provident's points system at 15 points and was entitled to be charged premium at the normal level. Hexagon was itself authorised by Provident to accept the proposal and to set the premium by reference to Provident's fixed underwriting criteria.
The proposal form was completed by Hexagon on screen, printed off and sent to Dr Singh for signature. The hard copy is dated 6 February 1995. In signing Dr Singh expressly confirmed that the broker was acting as his agent in providing information on the form and that that information was true to the best of his own information and belief. He also signed a direct debit form for payment of the premium in monthly instalments.
In February 1996 Dr Singh renewed his insurance with Provident. The certificate of insurance for the second year states that the insurance ran from 17 February 1996 to noon 17 February 199The policy number was 0ADC2195188. His premium remained at a normal rate.
Two relevant events had occurred in the previous year. The first was that Mrs Kaur's January 1994 accident had been settled by the third party's insurers entirely in the Singhs' favour. Cheques in settlement were forwarded to them on 11 July 1995. The second was that on 18 December 1995 Dr Singh received an SP30 speeding ticket, which he paid, thus admitting the conviction, in January 1996. His licence was endorsed three points. When renewing his cover with Provident in February 1996 Dr Singh failed to disclose the conviction. He also failed to inform Hexagon that the January 1994 accident had been settled satisfactorily. Had he informed Hexagon of both those matters, the conviction would have counted 10 points against him, but the information about the settlement of the accident would have meant that that would have been reclassified as a "no fault" accident and thus would not have counted against him at all. In the circumstances he would still have been entitled to renewal at a normal rate. No documents recording the renewal have survived, other than the second year's certificate of insurance, but it is accepted that Dr Singh was sent a renewal notice which, to quote from it, would have highlighted his –
"duty to disclose to the Company the existence of any factor which may affect the risk and to notify the Company of any driving convictions which may have arisen during the period of insurance now ending. Failure to do so may invalidate your policy."
The first critical question raised on this appeal is thus whether Dr Singh's non-disclosure of his speeding conviction entitled Provident to avoid his insurance, as it subsequently did.
On 20 May 1996 Dr Singh changed his Renault for a Mercedes and he was charged an additional premium. This was, I think, in part because he had now obtained comprehensive cover: his Mercedes was valued at £2000, whereas his Renault had only had a value of £500. He did not disclose his conviction. However, the papers do not disclose any paperwork or other evidence of a formal policy amendment, or indeed a new certificate.
On 2 July 1996 Mrs Kaur while driving the Mercedes collided with a motor-cyclist, Mr Beach. Unfortunately, it was a serious accident. Both of Mr Beach's legs were broken, and ultimately he needed to have one leg amputated. Provident was immediately notified of a claim, first by telephone and then in writing. Dr Singh provided the telephone information: he was asked whether he had any convictions and said that he did not. The written claim form is dated 18 July 1996: this form merely asked whether the driver had any prosecutions pending, to which the correct answer given was no. As part of the claim procedures, Provident asked to be sent Dr Singh's driving licence. This disclosed his SP30 conviction with its offence date of 18 December 1995. On 24 July 1996 Provident's computer record shows a notation that "Non-disclosure of SP30 12/95, would have resulted in 25% load at renewal". Although the record does not elucidate further, that was on the basis that the conviction together with the "fault" accident of January 1994 would have had that automatic effect....
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