Alan Bate v Aviva Insurance UK Ltd [17.06.13]
Commercial Court considers insured's duty to give full disclosure and fair presentation of risk under domestic property policy following accidental fire.
This decision demonstrates that the court will not simply consider in isolation what questions insurers have asked on a proposal form when deciding if a point, taken on its own, is material but will look at all the facts and the matter as a whole.
The outcome in this case is not surprising: this was not an unsophisticated insured but one who understood, or should have understood, his duty to disclose all material facts. The decision highlights the importance of providing full and honest information to insurers when seeking or renewing insurance. There will be no room for deceit or giving untruthful evidence to the court.
Mr Bate’s premises were largely destroyed by an accidental fire on 5 June 2006. He was in the process of redeveloping his former family home, the Long House, into residential units and garages for resale. The work was carried out by his building company.
At the time of the fire, Mr Bate and his brother lived in parts of the conversion, as did his daughter who lived in the Coach House, which had been created from the back of the Long House forming a separate property. In addition, Mr Bate used the Coach House’s garage for his building company and another garage for his loss assessing business. He also used the yard behind the outbuildings for storing building materials. Having arranged insurances for his companies over the years and through his work as an assessor, Mr Bate had considerable experience and knowledge of insurance matters.
Aviva refused to indemnify alleging non-disclosure and/or misrepresentation of material facts including in relation to past claims, use of the premises for a business and development for commercial purposes. Alternatively, Aviva relied on breach of a condition precedent entitling it to repudiate liability under the policy.
Mr Bate denied these allegations and contended Aviva had waived its right to avoid having paid his claim for damage to a camera and equipment. He also disputed the Coach House was included under Aviva’s policy.
At the material time, Aviva was bound to comply with the Insurance Conduct of Business Sourcebook (ICOB). Under ICOB 7.3.1, Aviva must not, "... unreasonably reject a claim made by a customer". Mr Bate relied on this and also argued he was a retail customer, meaning ICOB 7.3.6(2) applied and, in the absence of evidence of fraud, Aviva must not:
"... refuse to meet a claim ... on the grounds ... of non-disclosure of a fact material to the risk that the retail customer ... could not reasonably be expected to have disclosed ... of misrepresentation of a fact material to the risk, unless the misrepresentation is negligent and ... in the case of a general insurance contract, of a breach of warranty or condition, unless the circumstances of the claim are connected with the breach ..."
The Judge held Mr Bate was a retail customer and Aviva did not insure the Coach House. The premises had various uses and a home insurance proposal form was not sufficient to provoke disclosure of all material facts. Although some alleged non-disclosures/misrepresentations were found not to be material, the Judge found it was obvious that disclosure of particular matters, such as Mr Bate using the garage of the adjoining Coach House to carry on his business and the development works at the Coach House, was necessary to give insurers a fair presentation of the risk. Although the Coach House was a neighbouring property, this was only in a literal sense and these unusual arrangements should have been disclosed.
The Judge also held Mr Bate had materially misrepresented the position in relation to past claims by suggesting in the proposal form that an earlier fire had been caused by a contractor at a previous address. In reality, that fire was caused by his company at his current address. In addition, he should have disclosed he was conducting business as an assessor from the premises.
Importantly, the Judge found (based on late disclosure Mr Bate gave during the trial and contrary to his case), that he had not disclosed to Aviva that the Long House was being developed for commercial purposes. The Judge considered that a memo dated 4 April 2005, which Mr Bate relied on as evidence he had given proper disclosure, was probably created by him and his broker after the fire.
Taking these findings into account, the Judge held it would not be appropriate or fair to characterise Aviva’s rejection of the claim as unreasonable. Accordingly, there was no breach of ICOB 7.3.6. There was nothing in the waiver defence.