Misrepresentation and Non‐disclosure in Insurance Law — Identical Twins or Separate Issues?

Publication Date01 Mar 1996
AuthorNorma J. Hird,John Birds
DOIhttp://doi.org/10.1111/j.1468-2230.1996.tb02080.x
March
19961
Misrepresentation
and
Non-disclosure in Insurance
Law
acceptance of the ‘middle way.’ In
G
W
Atkins Ltd
v
Scot,86
rather than award cost
of reinstatement for minor defects in tiling under
a
small building contract, the
Court of Appeal awarded
2250.
The basis for this was professed to
be
damages for
bad workmanship, but in effect it amounts to awarding damages of what
Farnsworth would term a ‘reasonable sum.’ The significance of
Ruxley
may well
be the fact that the House of Lords has expressly recognised the existence of the
‘middle way’ approach, even though the exact basis for awarding such
compromise damages still requires further elaboration.
Misrepresentation and Non-disclosure in Insurance Law
-
Identical Twins or Separate Issues?
John
Birds” and Norma
J.
Hird””
In
Pan Atlantic Co Ltd and Another
v
Pine Top Insurance Co Ltd,’
the House of
Lords again tackled the vexed question of the meaning of materiality in English
insurance law. The main point at issue was to determine the exact meaning of
section
18(2)
of the Marine Insurance Act
1906,
which states:
Every circumstance is material which would influence the judgment
of
a prudent insurer in
fixing the premium,
or
determining whether he will take the risk.
Although
Pun
Atlantic
was not itself a marine insurance case, it is now accepted
that the law in this area for non-marine insurance is provided for in the MIA.* The
last major
case
to
be
decided in this area
was
Container Transport International
Inc
v
Oceanus Mutual Underwriting Association (Bermuda) Ltd.3
There, the Court
of Appeal decided that it did not have to be shown that the misrepresented or non-
disclosed fact had had a ‘decisive influence’ on the mind of the insurer, in the
sense that he would have acted differently if he had known the true facts; it was
enough to prove that a prudent insurer would ‘have wished to know’ the facts
when
making his assessment of the risk. This decision has been much criticised and
many saw
Pan Atlantic
as
an opportunity for the House of Lords to set the law of
insurance back on the right track on the issue of materiality; their Lordships, on a
bare majority, rejected the opportunity and approved the
CTI
decision.
Their Lordships did not, though, feel inclined to let all opportunities go to waste.
In a painstaking and scholarly judgment which examined almost all the early
authorities on this issue, Lord Mustill held that the rules relating to
misrepresentation and non-disclosure, at least as they affect materiality and
subsequent avoidance, should be, and indeed always have been, the same:
even
though most insurance companies, judges and modem academic commentators
may have thought otherwise. Whilst Lord Mustill’s proposition may be a desirable
86 (1980) 7 Const
LJ
215.
*Dibb Lupton Broomhead Professor
of
Commercial Law, University of Sheffield.
**Lecturer
in
Law, University of Sheffield.
1
[1994]
3
All
ER 581.
2
See
Lumbert
v
Co-operative Insurance Society
[
19751
2
Lloyd’s Rep 485.
3
[1984]
1
Lloyd’s Rep 476.
4
See
Lord
Mustill’s judgment, at pp588-619.
0
The
Modern
Law
Review
Limited
1996
285

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT