Young v Royal and Sun Alliance Insurance Plc
| Jurisdiction | Scotland |
| Judge | Lady Wolffe |
| Judgment Date | 19 May 2020 |
| Neutral Citation | [2020] CSIH 25 |
| Court | Court of Session (Inner House) |
| Date | 19 May 2020 |
| Docket Number | No 28 |
[2020] CSIH 25
First Division
Lady Wolffe
Armia Ltd v Daejan Developments Ltd 1979 SC (HL) 56; 1979 SLT 147
Container Transport International Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd (No 1) [1984] 1 Lloyd's Rep 476
Doheny v New India Assurance Co Ltd [2004] EWCA Civ 1705; [2005] 1 All ER (Comm) 382; [2005] Lloyd's Rep IR 251
Economides v Commercial Union Assurance Co plc [1998] QB 587; [1997] 3 WLR 1066; [1997] 3 All ER 636; [1997] CLC 1169; [1998] Lloyd's Rep IR 9; The Times, 27 June 1997
Involnert Management Inc v Aprilgrange Ltd [2015] EWHC 2225; [2016] 1 All ER (Comm) 913; [2015] 2 Lloyd's Rep 289; [2015] 2 CLC 307; [2015] Lloyd's Rep IR 661
Liberty Insurance Pte Ltd v Argo Systems FZE (The Copa Casino) [2011] EWCA Civ 1572; [2012] 2 All ER (Comm) 126; [2012] 1 Lloyd's Rep 129; [2012] 1 CLC 81; [2012] Lloyd's Rep IR 67
Millar v Dickson [2001] UKPC D4; 2002 SC (PC) 30; 2001 SLT 988; 2001 SCCR 741; [2002] 1 WLR 1615; [2002] 3 All ER 1041; [2001] HRLR 59; [2001] UKHRR 999; The Times, 27 July 2001
Noblebright Ltd v Sirius International Corp [2007] Lloyd's Rep IR 584
R & R Developments Ltd v AXA Insurance UK plc [2009] EWHC 2429; [2010] 2 All ER (Comm) 527; [2010] Lloyd's Rep IR 521
Schoolman v Hall [1951] 1 Lloyd's Rep 139
Chitty, J, Contracts (33rd Beale ed, Sweet and Maxwell, London, 2018), vol 2, para 42.036
MacGillivray, EJ, Insurance Law: Relating to all risks other than marine (14th Birds, Lynch and Paul ed, Sweet and Maxwell, London, 2018), paras 17.020, 17.089
Scottish Law Commission and Law Commission, Insurance Contract Law: Business disclosure; warranties; insurers' remedies for fraudulent claims; and late payment (Scot Law Com no 238/Law Com no 353, July 2014), Ch 3 (Online: www.scotlawcom.gov.uk/files/2814/0603/4624/Report_on_Insurance_Contract_Law.pdf (28 May 2020))
Insurance — Fair presentation of risk — Waiver of insurer's right to disclosure of a circumstance — Whether correspondence from insurer sufficient to waive right to disclosure — Insurance Act 2015 (cap 4), sec 3(4)(e)
Wayne Stephen Gardner Young brought an action under the commercial cause rules (Act of Sederunt (Rules of the Court of Session 1994) 1994 (SI 1994/1443 (S 69)), Ch 47) in the Court of Session against Royal and Sun Alliance Insurance plc seeking declarator and payment in connection with the defender's avoidance of his policy of insurance. The cause called before the commercial judge (Lady Wolffe) for a debate. At advising, on 3 April 2019, the commercial judge excluded the pursuer's averments of waiver from probation ([2019] CSOH 32). On 12 April 2019, the commercial judge allowed a proof before answer on the remaining issues in the action. On 9 August 2019, the pursuer lodged a minute of admissions conceding the remaining issues. On 20 August 2019, the commercial judge assoilzied the defender. The pursuer reclaimed.
The Insurance Act 2015 (cap 4), sec 3(1), provides, “Before a contract of insurance is entered into, the insured must make to the insurer a fair presentation of the risk.” Section 3(3) provides, inter alia, that a fair presentation is one that makes the disclosure that is required by subsection (4). Section 3(5) provides, “In the absence of enquiry, subsection (4) does not require the insured to disclose a circumstance if– … (e) it is something as to which the insurer waives information.”
The pursuer was the insured under a policy of insurance for risks, including fire, in respect of commercial premises in Glasgow. The defender was the insurer. In February 2017, the brokers had emailed insurers including the defender with a market presentation. The market presentation contained declarations about the proposer specified to apply “personally or in any business capacity”. Each declaration was marked as “none”. On 24 March 2017, the defender replied with its quotation. The email indicated that the quotation was subject to terms, including that the pursuer had never been declared bankrupt or insolvent or had a liquidator appointed. A contract of insurance was subsequently entered into between the pursuer and the defender. In March 2018, the premises were damaged by fire and required to be demolished. The defender avoided the policy from its inception on the basis that the pursuer had failed to disclose that he had been the director of four companies that had been dissolved after an insolvent liquidation or had been placed in insolvent liquidation in the five-year period prior to the commencement of the policy. The pursuer brought an action against the defender seeking declarator that the defender had been bound to indemnify him and seeking payment. The pursuer contended that the defender had waived entitlement to disclosure of the information in question, that the information had no bearing on the risk and was not material, and that, in any event, had the information been disclosed, the defender would still have offered cover. Following a debate, the commercial judge held that the pursuer's averments as to waiver were irrelevant and allowed a proof before answer on the other issues. The pursuer subsequently conceded the other two issues. The commercial judge thereafter assoilzied the defender. The pursuer reclaimed.
The pursuer contended that the commercial judge ought to have concluded that the defender's email of 24 March 2017 impliedly waived any entitlement to disclosure of the undisclosed information.
Held that while it was possible for an insurer to waive its right to disclosure of information other than by using a proposal form, where it was argued that an insurer had impliedly waived its entitlement to disclosure, the expectation would be that there would be something in the nature of an enquiry by the insurer directing the insured to provide certain information but no other information, and a reasonable reader of the 24 March email would not have understood that email to be waiving the defender's entitlement (paras 42, 43); and reclaiming motion refused.
Economides v Commercial Union Insurance Co plc [1998] QB 587 and Doheny v New India Assurance Co Ltd[2005] 1 All ER (Comm) 382considered.
The cause called before the First Division, comprising the Lord President (Carloway), Lord Brodie and Lord Woolman, for a hearing on the summar roll, on 23 April 2020.
At advising, on 19 May 2020, the opinion of the Court was delivered by Lord Brodie—
Opinion of the Court—
[1] The pursuer and reclaimer is Wayne Stephen Gardner Young. He is the insured under a policy of insurance entered into in March 2017 in respect of certain commercial premises in Glasgow (‘the premises’). Among the perils insured against was fire. The defender and respondent is the insurer under that policy, Royal and Sun Alliance Insurance plc.
[2] On 22 March 2018 the premises were extensively damaged by fire and required to be demolished. The pursuer has made a claim to be indemnified under the policy. The defender has declined to indemnify. By letter, dated 6 June 2018, it avoided the policy from its inception on the basis that the pursuer had failed to disclose that he had been the director of four companies that had been dissolved after an insolvent liquidation or had been placed in insolvent liquidation in the five-year period prior to the commencement of the policy (‘the undisclosed information’).
[3] In this commercial action the pursuer concludes: (1) for declarator that the defender is bound in terms of the policy to indemnify him for loss and damage; and (2) for payment of the sum of £7,200,000. The defender pleads that it was entitled to avoid the policy and should therefore be assoilzied.
[4] The pursuer accepts that, in terms of sec 3 of the Insurance Act 2015 (cap 4), 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 terms of sec 7(3) of the Act a circumstance is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms. However, the pursuer contends that, in terms of sec 3(5), in the absence of enquiry, the insured does not require to disclose a circumstance if it is something as to which the insurer waives information. The pursuer accepts that he did not disclose the undisclosed information but he argues that the defender was not entitled to avoid the policy. He presented three propositions in his pleadings: the undisclosed information was something as to which the defender waived information (waiver); it had no bearing on the risk (no materiality); and in any event had the undisclosed information been disclosed the defender would still have agreed to incept the policy (no inducement).
[5] Parties went to debate, effectively on the relevancy of the pursuer's averments of waiver. In her opinion of 3 April 2019 the commercial judge found that the pursuer's averments of waiver were irrelevant and excluded them from probation. By interlocutor of 12 April 2019 she allowed proof on the issues of no materiality and no inducement. The proof was fixed to commence on 27 August 2019. However, on 9 August 2019, the pursuer lodged a minute of admissions admitting that the undisclosed information was material and that had it been disclosed the defender would not have entered into the contract of insurance with the pursuer. The pursuer therefore conceded the issues of no materiality and no inducement. Accordingly, on 20 August 2019 the commercial judge discharged the proof on these issues and, given her previous decision on waiver, assoilzied the defender.
[6] The pursuer now reclaims (appeals). He contends that, following the debate, the commercial judge should have held that the defender's...
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