Pan Atlantic Insurance Company Ltd v Pine Top Insurance Company Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 03 March 1993 |
| Date | 03 March 1993 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Sir Donald Nicholls, Vice-Chancellor, Lord Justice Farquharson and Lord Justice Steyn
Insurance - contract - no full disclosure
When determining an insurer's entitlement to avoid a contract of insurance by reason of the insured's failure to make full disclosure, the question was whether a prudent insurer would view the undisclosed material as probably tending to increase the risk. It was not necessary to prove that the underwriter would have taken a different decision about acceptance of the risk had he been aware of that material.
The Court of Appeal so held in a reserved judgment dismissing an appeal by the plaintiff reinsureds, Pan Atlantic Insurance Co Ltd and Republic Insurance Co, against the order of Mr Justice Waller made in the Commercial Court ([1992] 1 Lloyd's Rep 101), whereby he found that a treaty of insurance between the reinsureds and the reinsurer, Pine Top Insurance Co Ltd, had been validly avoided by Pine Top.
Mr Michael Beloff, QC and Mr Steven Berry for Pan Atlantic; Mr Adrian Hamilton, QC and Mr Timothy Saloman for the defendant reinsurer.
LORD JUSTICE STEYN said that Container Transport International Inc v Oceanus Mutual Underwriting Association (Bermuda) LtdUNK ([1984] 1 Lloyd's Rep 476) was a decision of great importance on non-disclosure.
The Court of Appeal had there held: (a) that there was no requirement that the particular underwriter should have been induced to take the risk or to charge a lower premium than he would otherwise have done as a result of the non-disclosure; the sole yardstick was the impact on the judgment of a hypothetical prudent underwriter
(b) that it was not necessary to show that the non-disclosure would probably have had a decisive influence in the sense that the prudent underwriter would have declined the risk or would have written the risk on different terms in respect of the rate of premium or otherwise.
The decision had proved to be remarkably unpopular not only in the legal profession but also in the insurance markets. It had been argued that it had been based on an erroneous view of the case law before the Marine Insurance Act 1906; that the approach of the Court of Appeal to the interpretation of the 1906 Act had been wrong; that inadequate attention had been paid to the common law framework into which the decision had to fit; that it imposed an...
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