Noblebright Ltd v Sirius International – burden of proof

[2007] EWHC 868 (QB)

There was a serious fire at Noblebright’s premises in 2005 and Noblebright claimed under its combined material damage and business interruption policy with Sirius. It had not disclosed three attempted armed robberies during the four years before the inception of the policy, claiming that none had led to significant loss or claims under previous insurance policies. Noblebright also relied upon the fact that the proposal form did not require disclosure of incidents which could have led to an insurance claim but merely asked for details of claims made for an amount over £10,000.

The judge held that Sirius was entitled to avoid the policy for material non-disclosure. Once materiality and inducement were established by the insurer, the burden of proof to establish waiver of the right to disclosure rests on the insured. Here no reasonable person reading the proposal form could have been justified in concluding that Sirius did not wish to hear about the robberies.

Comment: this decision highlights once again the dangers of badly-worded proposal forms where the information sought is requested in too specific terms. A similar problem arose in Doheny v New India Assurance Co Ltd where the proposal form referred to “bankrupt” and “bankruptcy” but did not state that this was intended to mean both personal and corporate insolvency. The court considered when waiver could arise out of the wording of a proposal form. By asking certain questions an insurer can show that he is not interested in certain other matters and could, therefore, be said to have waived disclosure of them. For example, a question asking for details of convictions within the last five years will be taken as a waiver of disclosure of earlier convictions.

The question to ask is “would a reasonable man reading the proposal form be justified in thinking that the insurer had restricted his right to receive all material information, and consented to the omission of the particular information in issue?” At present this approach applies equally to business and consumer policies but consumers are likely to be treated differently once the Law Commission’s review of insurance contract law is transformed into legislation. Under the present proposals, the duty to disclose material facts will be replaced by an obligation on insurers to ask questions.