The assured’s business involved, amongst other things, recycling refrigerators. It was necessary to remove compressors, and in some cases this could be done only with the use of plasma guns. Those devices posed a risk of metal splatter and sparks which could cause fires.
A major fire occurred as the result of the use of a plasma gun, and the insurers avoided the policy on the ground that there had been non-disclosure of the use of plasma guns, of a series of small fires caused by such guns and of a fire shortly before the renewal of the policy.
The claim against the insurers was settled for £950,000, and the assured sought to recover the shortfall in its loss of some £6 million from its brokers.
David Steel J dismissed the claim.
- The brokers had been in breach of their duty to warn the assured of its duty of disclosure: it was not enough for the brokers to rely upon its written standard form explanations and warnings.
- The brokers were also in breach of duty by failing to take adequate steps to elicit the information which required to be disclosed, and if it had done so the existence of the fires would have come to light.
- However, the above breaches had not caused the assured’s loss: (a) had there been disclosure, the loss would not have been insurable at all or, if it was, then it would not have been insurable on terms and premium acceptable to the assured; (b) the assured had been in breach of its Waste Management Licence, and that was a material fact which would have been relied upon by the insurers had other grounds for avoidance not existed; and, (c) had there been renewal, the policy would have demanded that the use of plasma guns ceased, in which case there would have been no loss.
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