No Smoke Without Fire: Non-Disclosure, Materiality and Inducement in Cometsambre v Lloyd’s
This recent decision by the Commercial Court illustrates several key principles underpinning the duty of fair presentation under the Insurance Act 2015 (“the IA 2015”). In particular, it considers the concepts of knowledge, materiality, waiver, presumed knowledge and inducement, and demonstrates the courts' continued willingness to scrutinise the information disclosed to insurers.
Background
Cometsambre, a Belgian scrap metal trader, had maintained Charterers' Liability and Freight, Demurrage and Defence insurance since 2008 in respect of its activities as a voyage charterer transporting scrap (“the Policy”). The Policy was arranged through a coverholder, Antwerp Marine Insurance Claims Associates NV (“AMICA”), acting on behalf of Lloyd’s Insurance Company SA HIG 5321 (“Insurers”), and for more than a decade was renewed annually on substantially the same terms.
At inception, Cometsambre presented the risk as involving shipments of HMS 1 and HMS 1/2 steel scrap and shredded scrap, described as non-oily, non-radioactive and non-dangerous, with higher-risk materials excluded.
On 22 and 23 June 2022, fires occurred during the loading of scrap metal onto the vessel LOWLANDS MIMOSA at Ghent (“the Vessel”). The fires caused significant damage to the Vessel and gave rise to a substantial claim against Cometsambre. The Vessel's owners alleged, amongst other things, that Cometsambre had shipped dangerous cargo and had failed properly to describe and manage the cargo being loaded. Cometsambre consequently sought a declaration against Insurers in respect of both the charterparty claims and its associated legal expenses.
The Declinature
Following investigations, Insurers discovered that there had been a number of earlier fires involving Cometsambre's operations which had not been disclosed before the 2022 renewal (“the Previous Fires”).
Insurers contended that the Previous Fires were material circumstances which ought to have been disclosed pursuant to Cometsambre's duty of fair presentation under the IA 2015. They argued that, had they been disclosed, the Policy would not have been renewed and that they were accordingly entitled to avoid the Policy.
Cometsambre challenged that position. It contended, amongst other things, that the Previous Fires were not material, that Insurers were already on notice of the nature of the risk being insured, and that the Policy would have been renewed on the same terms even if the Previous Fires had been disclosed.
Issues Before the Court
The Court was required to determine:
- Whether for the purposes of its duty of fair presentation Cometsambre knew, or ought to have known, of one of the Previous Fires – a fire on 25 May 2020 at a quayside stockpile in Ghent (“the Quayside Fire”).
- Whether the Previous Fires were material and thus ought to have been disclosed.
- Whether Cometsambre had provided sufficient information to put Insurers on notice that further enquiries should be made.
- Whether Insurers were presumed to know that fires of this nature occur in scrap metal cargoes and therefore did not require disclosure.
- Whether Insurers had waived disclosure of any Previous Fires that had not resulted in claims.
- Whether the non-disclosure induced Insurers to renew the Policy in 2022 and, in particular, whether the risk would have been declined had the true position been disclosed.
Cometsambre's Knowledge of the Quayside Fire
Cometsambre argued that no member of its senior management had knowledge of the Quayside Fire. It pointed to the fact that the incident did not appear in its internal records and was identified only through documents later obtained from the Ghent fire department.
The Court rejected that argument. Mr Justice Butcher considered it inherently unlikely that a fire requiring attendance by the fire brigade at Cometsambre's premises would not have been reported to those responsible for its insurance arrangements. In any event, even if actual knowledge could not be established, the information would plainly have been revealed by a reasonable search, as required by section 4 of the IA 2015.
Materiality of the Previous Fires
Cometsambre argued that the Previous Fires were not material. It submitted that fires of this nature were a relatively common feature of the scrap metal trade and that none of the incidents had resulted in claims. Accordingly, they would not have influenced the judgment of a prudent insurer.
Insurers disagreed. They submitted that fires involving scrap cargoes and stockpiles were capable of giving rise to substantial liabilities and that the occurrence of multiple incidents over a relatively short period pointed to a material deterioration in the risk.
The Court accepted Insurers’ position. The incidents were material because they demonstrated a genuine risk of vessel fire and substantial liability exposure, whilst also suggesting a material change in the nature of the risk. The Judge attached particular significance to the fact that five fires had occurred within an 18-month period after many years without comparable incidents.
Were Insurers on notice to make further enquiries?
Cometsambre argued that, even if the Previous Fires had not been expressly disclosed to Insurers, it had provided sufficient information to put them on notice that further enquiries were required. It relied upon Insurers’ knowledge of the scrap metal trade, their awareness that Cometsambre shipped shredded scrap, and the fact that they had not sought updated proposal forms or information concerning incidents, fires, near misses or risk management procedures at renewal.
Insurers argued that this impermissibly reversed the burden imposed by the IA 2015. The duty of fair presentation rests primarily on the insured, and insurers are not obliged to make their own investigations unless the information provided indicates that further enquiries are necessary.
The Court accepted Insurers’ position. Mr Justice Butcher held that nothing disclosed to AMICA suggested that there had been a material increase in the incidence of fires or any other significant change in the nature of the risk. The information provided at renewal suggested that the business continued to operate broadly as it had when the risk was first presented.
Were Insurers presumed to know about the risk of fires in scrap metal cargoes?
Relying on section 3(5)(d) of the IA 2015, Cometsambre argued that Insurers were presumed to know, as specialist insurers, that fires occur with some frequency in scrap metal cargoes. It submitted that such incidents formed part of the ordinary background knowledge of any prudent underwriter operating in this market.
Insurers accepted that scrap metal cargoes carry an inherent fire risk, but argued that this was very different from their being presumed to know that Cometsambre itself had experienced a series of previous fires.
The Court agreed. Mr Justice Butcher held that, while an underwriter would appreciate that scrap metal cargoes are capable of self-heating or combustion, that did not mean that Insurers were presumed to know of the Previous Fires themselves. On the contrary, the information available to underwriters suggested that the risk, as originally presented, was relatively low.
Waiver of Disclosure
Cometsambre argued that Insurers had, through their conduct over many years, waived disclosure of fires that had not resulted in claims. In particular, it relied upon the fact that they had focused on claims history, had not required updated proposal forms and had not requested information about fires, incidents or near misses.
Insurers rejected that argument, maintaining that nothing in their conduct could reasonably be interpreted as dispensing with the insured's obligation to disclose material circumstances. They pointed out that enquiries had been made at inception to ensure that higher-risk cargoes were excluded, demonstrating a continuing interest in fire risk.
The Court agreed with Insurers. Mr Justice Butcher held that a reasonable observer would not have understood AMICA's conduct as indicating that they were uninterested in material incidents simply because they had not resulted in claims. Nor did the absence of renewal questionnaires amount to a waiver of disclosure. Considering the parties' dealings as a whole, the Court concluded that Insurers had not waived disclosure of the Previous Fires.
Inducement
Cometsambre argued that, even if the Previous Fires ought to have been disclosed, the non-disclosure did not induce Insurers to renew the Policy. It submitted that the incidents were relatively minor, had not generated claims, and would not have led to a refusal to continue cover. It also relied on evidence that AMICA had renewed insurance for another scrap metal operator notwithstanding previous fire incidents.
Insurers relied principally on the evidence of Mr Hoek, the AMICA underwriter responsible for the 2022 renewal. He stated that, had the Previous Fires been disclosed, he would not have renewed the Policy on any terms. In his view, the incidents demonstrated a significant deterioration in the risk, particularly when considered against the backdrop of many years without comparable events. He also pointed to the mismatch between the modest premium being charged and the potentially catastrophic exposure arising from vessel fire claims.
The Court accepted Insurers’ case. Mr Justice Butcher recognised the need to exercise caution when considering retrospective underwriting evidence, but nevertheless found Mr Hoek to be a careful, honest and reliable witness.
Outcome
Cometsambre's claim failed. The Court held that, had a fair presentation been made on the 2022 renewal, Insurers would have declined the risk and were therefore entitled to avoid the Policy.
Conclusion
The result in Cometsambre will come as little surprise to most insurance practitioners. A pattern of repeated fires was always likely to be regarded as information that a prudent underwriter would wish to know before deciding whether, and on what terms, to write the risk.
More generally, the decision sits comfortably alongside other post-IA 2015 authorities concerned with materiality, including Berkshire Assets (West London) Ltd v AXA Insurance UK plc. It is a further reminder that the courts will focus on whether an undisclosed circumstance would influence the judgment of a prudent insurer, rather than permitting policyholders to rely on technical or speculative arguments to excuse non-disclosure.
Perhaps the most important lesson from the case is that, notwithstanding the reforms introduced by the IA 2015, the duty of fair presentation remains first and foremost a duty owed by the insured. Whilst insurers continue to bear the burden of proving materiality, inducement and the availability of a remedy, policyholders cannot assume that those hurdles will be insurmountable where genuinely material information has not been disclosed.
Alex Rosenfield is a partner at Fenchurch Law
Ten years on: has the Insurance Act 2015 actually delivered for policyholders?
The Insurance Act 2015 (“the IA 2015”) was introduced to level the playing field for insurers and policyholders, and to move away from outcomes that were perceived as outmoded.
As the IA 2015 approaches its 10-year anniversary, this article will examine whether it has achieved those objectives – with particular focus on property damage claims – as well as the areas where uncertainty remains.
Duty of fair presentation: a shift in framework, as well as insurer behaviour?
One of the central reforms introduced by the IA 2015 was the introduction of proportionate remedies for breaches of the duty of fair presentation, which replaced the previous draconian “all or nothing” regime. In principle, this marked a significant and welcome shift. In practice, however, disputes concerning fair presentation and remedies remain common, particularly in the context of property damage claims.
A common example arises where, for example, following a fire, insurers allege that the policyholder failed to disclose historic alterations to the property, deficiencies with electrical compliance, or that one of its directors had previously been involved with insolvent companies. Had these matters been disclosed, insurers may assert that they would have only agreed to insure the policyholder on different terms or, as is more often the case, that they would not have agreed to insure the policyholder at all.
Insurers have increasingly sought to characterise alleged breaches of this nature as deliberate or reckless, thereby entitling them to avoid the policy outright (as well as keep the premium and refuse all claims), whilst sidestepping a detailed analysis of what they would have done differently. The result is that, rather than reflecting a fundamental change in behaviour, some claims handling practices have adapted tactically to fit within the structure of the IA 2015.
As a matter of law, the evidential burden remains firmly on insurers. It is for them, not policyholders, to prove how the alleged non‑disclosure or misrepresentation influenced their underwriting. In practice, insurers are frequently reluctant to disclose the evidence said to support their position, such as contemporaneous underwriting guidelines, contemporaneous exchanges at the time of placement, or a witness statement from the underwriter involved. In those circumstances, policyholders are left with an invidious choice: they can either accept the insurer’s position at face value, or commence litigation without fully understanding the strength of the case they must meet. Neither outcome sits comfortably with the intended purpose of the IA 2015, particularly in high‑value property damage claims where the consequences of avoidance can be severe.
Section 11 – a causation test, or not?
Section 11 of the IA 2015 (“s.11”) was intended to prevent insurers from declining claims on the basis of technical breaches of policy terms that had no connection with the loss. In straightforward cases, its application is uncontroversial. A breach of a fire alarm warranty should not entitle an insurer to avoid liability for a flood loss, just as a failure to maintain a burglar alarm should not defeat a claim for storm damage.
More complex property damage claims, however, expose the underlying difficulty in applying s.11 ie., where the breach can be shown not to have caused the loss per se, but it is harder to say that compliance could not have reduced the risk of that loss in different circumstances. So, for example, a failure to comply with a condition to store combustible waste in a particular place might not have caused a fire, but it nonetheless could have done. This gives rise to a fundamental question: does s.11 require a strict causation test, or is it sufficient that compliance with the term could theoretically have reduced the risk of the loss occurring?
The Law Commission appeared to favour a non‑causation approach ie., they said that the test is whether compliance could realistically have affected the loss that actually occurred, rather than requiring a strict causation analysis. However, the wording of s.11 focusses on whether the breach “could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred”. That language strongly suggests that there is, in fact, an element of causation, because the emphasis is on the way in which a particular loss occurs. In practice, this shifts the inquiry toward a counterfactual assessment of whether compliance with the relevant term could have made a difference. So, in the context of an alleged breach of a requirement to carry out a 30‑minute fire watch following hot work, it would be open to a policyholder to assert that the breach could not have made any difference if fire did not break out until three or four hours later.
The High Court’s decision in Mok Petro Energy Ltd v Argo (No.2) [2024] EWHC 1935 (Comm) is the first decision on s.11. However, the provision was dealt with only briefly, and no more than a few paragraphs. The court’s observation – that the correct question is whether compliance with the term as a whole could have reduced the risk of the loss – was obiter, and not central to the outcome of the case. While the comments are nonetheless of interest (and are now frequently relied upon by insurers to reject a causation analysis), they fall short of providing definitive guidance. As a result, considerable uncertainty remains.
Damages for late payment: the theory and the reality
Section 13A of the IA 2015 (“s.13A”) introduced a statutory right for policyholders to recover damages for the late payment of insurance claims. For example, following a major fire loss, an insurer may decline cover and take many months to investigate and maintain that position, during which time the policyholder is unable to fund reinstatement and suffers continuing business interruption losses. If it is later established that the insurer had no reasonable basis for its declinature, s.13A would, in principle, entitle the policyholder to claim damages for losses flowing from that delay, such as additional loss of profits, or increased reinstatement costs.
In theory, s.13A represents a significant shift in the balance between insurers and policyholders, with the aim of discouraging unreasonable delays. In practice, however, its impact has been limited so far.
The threshold for a successful claim under s.13A is a demanding one. It is not enough for a policyholder to establish that an insurer was wrong to deny or delay payment of a claim; the policyholder must also prove that the insurer acted unreasonably. Where an insurer can demonstrate that it had “reasonable grounds” for disputing the claim, liability under s.13A will not arise, even if the coverage position is later shown to be wrong. This creates something of an asymmetry: a relatively low bar for insurers to resist liability, and a correspondingly high bar for policyholders seeking to recover losses caused by delay.
That imbalance is particularly acute in property damage claims. Following fires, or escapes of water, insurers often rely on extended investigations into causation, compliance with policy terms, or alleged non‑disclosure as giving rise to “reasonable grounds” to investigate a claim. While some degree of investigation is plainly required, the availability of “reasonable grounds” as a defence under s.13A offers insurers considerable latitude to justify prolonged delay.
There are also significant practical constraints. Claims for s.13A damages are evidence‑heavy, requiring detailed scrutiny of the insurer’s decision‑making process and the reasonableness of the time taken. Policyholders must also continue to comply with their duty to mitigate loss, which can be particularly challenging where reinstatement cannot happen without funding. As a result, the remedy is costly to pursue and, in many cases, commercially unattractive. It also raises the question as to whether well-resourced policyholders, who might be able to mitigate more easily, are able to establish claims for s.13A damages at all.
The case law reflects these difficulties. For example, in Quadra Commodities SA v XL Insurance Co SE [2022] EWHC 431 (Comm), the court suggested that a period of “not more than about a year” was reasonable for a complex claim. While that is helpful in principle (particularly as a benchmark against which delay in straightforward claims might be assessed), the policyholder ultimately lost its s.13A claim because the insurer was found to have had reasonable grounds for disputing coverage.
To date, there have been no successful reported claims under s.13A, and its effectiveness in future claims will depend, amongst other things, on the courts’ willingness to draw firmer lines around what constitutes an unacceptable delay. Until then, damages for late payment claims are likely to remain more of a strategic lever than a routinely deployed remedy.
A developing framework
While there has been meaningful case law in relation to the duty of fair presentation, other aspects of the IA 2015 remain comparatively underdeveloped. In particular, further authoritative case law on s.11 is needed to resolve the continuing uncertainty as to its proper application, especially in complex property damage claims where issues of causation and risk frequently overlap.
Similar uncertainty surrounds s.13A, and in particular the threshold for what constitutes “unreasonable” grounds for refusing or delaying payment of a claim. Absent any successful reported claims under s.13A, its true potential as a remedy for policyholders remains to be seen.
A decade on from its introduction, the IA 2015 has unquestionably reshaped the legal framework governing commercial insurance disputes. However, it has not eliminated all of the underlying tensions between insurers and policyholders. Further case law, particularly in relation to s.11 and s.13A, will be critical in determining how the IA 2015 operates in practice over the next decade.
Author
Alex Rosenfield, Partner
When can an insurer join the party? Managed Legal Solutions v Mr Darren Hanison (trading as Fortitude Law) and HDI Global Specialty SE [2025]
This recent High Court judgment sheds light on the circumstances under which an insurer may be joined as a party to underlying liability proceedings. The case explores the nuanced question of when, and in what situations, an insurer is deemed to have “an interest” in a liability dispute, and carries significant implications for claims brought under the Third Parties (Rights Against Insurers) Act 2010 (“the TPRAI”).
Background
Managed Legal Solutions Limited (“MLS”), a litigation funder, commenced proceedings against Darren Hanison trading t/a Fortitude Law (“Mr Haninson”) in 2021 seeking damages (“the Liability Proceedings”).
Although Mr Hanison initially defended the Liability Proceedings in their entirety, including an allegation that he owed MLS an independent tortious duty (“the Tortious Duty”), he was debarred from defending them from 1 November 2024, having failed to comply with an Unless Order.
Separately, HDI Global Specialty SE (“HDI”), which provided Mr Hanison with professional indemnity insurance with a limit of £2m, initiated confidential arbitration proceedings against Mr Hanison in relation to coverage (“the Arbitration”).
As the Arbitration was unresolved at the time of the current application, HDI had an interest in the outcome of the Liability Proceedings. That interest was particularly acute given the risk that Mr Hanison could become bankrupt if he lost the Liability Proceedings, thus triggering an automatic transfer of his rights under the insurance policy to MLS under the TP(RAI) 2010. Accordingly, HDI applied under CPR 19.2 to be added as a second defendant to the Liability Proceedings.
The central argument advanced by HDI was a conflict-of-interest point. While it was in Mr Hanison interest for the Tortious Duty to be established, since that would enable him to pursue an indemnity from HDI – HDI had a clear interest in demonstrating that no such duty existed, as that would absolve them of any obligation to indemnity Mr Hanison. In light of this inherent conflict, HDI argued that its joinder to the Liability Proceedings was necessary to safeguard its interests.
The application
Did CPR 19.2 apply?
MLS opposed the application, contending that the relevant rule was, in fact, CPR 19.6. That provision addresses the substitution or addition of parties after the limitation period has expired, which, according to MLS, was the case here because the limitation period for the alleged Tortious Duty claim had already lapsed.
HDI, however, argued that the relevant claim was only a potential future claim by MLS against it under the TP(RAI) 2010, because that claim was contingent on Mr Hanison becoming bankrupt. On that basis, the limitation period had not expired (and strictly speaking had not even commenced).
The Court agreed with HDI. It concluded that the claim in the Liability Proceedings was not time-barred and that HDI’s joinder did not amount to a “change of parties”. Rather, it would simply permit it to make submissions in relation to the Liability Proceedings. Accordingly, the only question for the Court to decide was whether the requirements of CPR 19.2 were satisfied.
CPR 19.2
CPR 19.2 provides that a Court may permit the addition of a new party where either: (a) it is desirable to do so to enable the Court to resolve all matters in dispute within the proceedings; or (b) there exists an issue involving the new party and an existing party connected to the matters in dispute, such that it is desirable to add the new party to resolve that issue.
The Court accepted that there was “an issue” involving HDI and relied on several authorities, notably Wood v Perfection Travel [1996], which established that it may be appropriate, in certain cases, to add an insurer to liability proceedings and allow them to make submissions.
The Court was also satisfied that the ‘desirability’ threshold was made out. Given that Mr Hanison had been debarred from defending the Liability Proceedings, the Tortious Duty claim was effectively uncontested. The Court therefore found it ‘desirable’ for HDI to be added, unless there were compelling factors to the contrary.
In the Court’s view, no such factors existed. Although MLS argued that the application was delayed, pointing out that the Tortious Duty issue had been ‘in play’ since October 2023 (HDI’s application, by contrast, was made in June 2025), the Court found that the decisive trigger was Mr Hanison being debarred from defending the Liability Proceedings. Until that point, Mr Hanison had maintained his defence. As it was no longer possible for him to do so, it was necessary for HDI to be joined to the Liability Proceedings to protect its interests.
MLS further contended that joining HDI would place it in a more advantageous position than its insured, since Mr Hanison had already been debarred from defending the claim. The Court, however, was not persuaded by that argument. It recognised that HDI had its own distinct interest in the Tortious Duty claim and, if it were not permitted to participate, it would be exposed to the risk of providing an indemnity for an uncontested liability.
Comment
This case raises several noteworthy issues, particularly in relation to the TP(RAI) 2010. While HDI’s application was not itself a TP(RAI) 2010 claim, it was clearly made with the prospect of such a claim in mind.
In this context, it could be argued that permitting an insurer to find itself in a more advantageous position than its insured is out of step with the TP(RAI) 2010 given that, conversely, recent decisions under the TP(RAI) 2010 make it clear that a claimant’s rights are no better than those of an insolvent insured in whose shoes they stand. See, in particular, Makin v QBE and Archer v Riverstone.
That said, it is perhaps unsurprising that HDI was so determined to safeguard its interests. Without the opportunity to participate in the Liability Proceedings, HDI faced the prospect of an uncontested claim against its insured, and a subsequent judgment, which, following Makin v QBE, it would likely be unable to challenge.
This case also brings into focus a vexed issue facing insureds who are required to defend liability claims on one hand, while pursuing claims for indemnity from their insurers on the other. Notably, an insured will usually seek to deny liability in proceedings brought against them, yet, paradoxically, must establish that liability in order to secure an indemnity from their insurer.
MLS has been granted permission to appeal, so its opposition to HDI’s joinder will now be considered by the Court of Appeal. Watch this space.
Alex Rosenfield is a Partner at Fenchurch Law
Timing is everything Part II – Archer v Riverstone and (a reminder of) the cost of not complying with a condition precedent
In our article on Makin v QBE last month, we highlighted the importance of complying with conditions precedent, and noted that claimants pursuing claims under the Third Parties (Rights Against Insurers) Act 2010 (“the 2010 Act”) inherit both the rights and obligations of the insured. This case serves as yet another clear reminder of that principle, underlining the risks claimants face when policy conditions are not strictly observed.
Background
The Claimant, Hannah Archer, issued proceedings against R’N’F Catering Limited (“R’N’F”) on 5 July 2022, seeking damages for personal injury following a meal at R’N’F’s restaurant (“the Proceedings”).
R’N’F filed a defence in December 2020 and then entered into a members’ voluntary liquidation in February 2023 (“the Insolvency”). It played no active role in the Proceedings thereafter.
By a consent order dated 9 July 2024, Riverstone Insurance (Malta) SE (“Riverstone”), the successor to ArgoGlobal SE, which insured R’N’F under a restaurant insurance policy from 18/09/18 – 17/09/19 (“the Policy”), was added to the Proceedings.
The Proceedings
Miss Archer claimed that she was entitled an indemnity from Riverstone by virtue of the 2010 Act. Specifically, she said that:
- The Insolvency meant that R’N’F’s rights under the Policy had automatically transferred to her; and
- By reason of s.9(2) of the 2010 Act – which stated that anything done by a third party which, if done by the insured, would amount to fulfilment of the condition as if done by the insured – she complied with the Policy.
The question of Riverstone’s liability to Miss Archer was disposed of at a preliminary issues trial. There were two issues to be determined:
- Could Riverstone prove that R’N’F was not entitled to an indemnity under the Policy (“Issue 1”)?
- Could s.9(2) of the 2010 Act assist Miss Archer to render Riverstone liable on proof of R’N’Fs liability (“Issue 2”)?
Issue 1
The breaches of condition precedent
Riverstone asserted the following breaches of condition precedent by R’N’F:
- A failure to “On the happening of any event which could give rise to a claim … as soon as reasonably possible give notice to the insurer” (“the First Breach”)
- A failure to “supply full details of the claim in writing together with any evidence and information that may be reasonably required by the Insurer for the purpose of investigating or verifying the claim … within … 30 days of the event or circumstances …” (“the Second Breach”).
- A failure to “take all reasonable precautions to prevent or diminish loss destruction damage or injury” (“the Third Breach”).
- A failure to “provide all help and assistance and cooperation required by the Insurer in connection with any claim” (“the Fourth Breach”).
(Collectively, “the Breaches”).
The Breaches were all largely based on the same facts.
In a nutshell, Miss Archer first contacted R’N’F on 29 November 2019 to advise that she had become seriously unwell following a meal at its restaurant. Her solicitors then wrote to R’N’F on a several occasions, which included their sending a Claim Notification Form (“CNF”) and a letter on 10 January 2020 which requested R’N’F’s insurance details. R’N’F did not respond.
Miss Archer’s solicitors then sent a letter of claim to R’N’F on 30 October 2020. That prompted R’N’F belatedly to notify Riverstone on 17 November 2020.
Sedgwick, Riverstone’s claims handlers, thereafter emailed R’N’F asking for information about the claim. That included, notably, a chaser email on 20 July 2021 which stated: “failure to assist us with this matter is a breach of policy terms so if we fail to receive your response your insurer may take the decision to decline indemnity”. Indeed, it was not until October 2022 that R’N’F’s Director, Mr Ali, engaged with Sedgwick, at which point he blamed the delay on the fact that emails had gone into a spam folder.
The parties’ positions
Riverstone said there was no case for R’N’F to answer in respect of the Breaches. It described R’N’F as “burying its head in the sand for months and indeed years, before coming up with a ‘dog ate my homework’ series of excuses’.
Miss Archer, perhaps unsurprisingly, did not advance a positive case as to R’N’F’s actions. She simply said that Sedgwick took only limited steps to contact R’N’F for information, and that “alarm bells should have rung” when R’N’F did not respond.
The decision
The court had no difficulty in finding that Riverstone was right.
As to the First Breach, it said that any and all of the initial communications from Miss Archer and/or her solicitors to R’N’F were “circumstances” which should have prompted R’N’F to notify Riverstone, and that R’N’F was “thoroughly disengaged with the threatened claim, maybe hoping that by ignoring it, it will go away”. So, because R’N’F did not notify Riverstone of the “circumstance” until 17 November 2020, the First Breach was made out.
As to the Second Breach, the court agreed with Riverstone that R’N’F repeatedly ignored Sedgwick, and had no good reason for doing so. Further, the timing of its belated engagement was redolent of a policyholder that “panicked that its prior tactic of ignoring the threatened claim had failed”. The court also rejected Mr Ali’s “spam folder” explanation; that lacked any sort of cogency, and even if it did, the court found that R’N’F ought to have had proper procedures in place for checking important emails.
Based on the same factual matrix, the court found that the Third and Fourth Breaches were also made out.
As R’N’F was in breach of conditions precedent to liability, Riverstone was entitled to refuse to indemnify it.
Issue 2
Miss Archer asserted that even if R’N’F was in breach of condition precedent, she was nonetheless entitled to an indemnity. The gist of her argument was that R’N’F only became a ‘relevant person’ within the meaning of the 2010 Act at the point of the Insolvency. Thereafter, she “stood ready” to comply with the Policy, as shown by the fact that notifying and corresponding with Sedgwick and Riverstone’s solicitors. So, her position was that anything done by her was to be treated as done by R’N’F, thus entitling her to an indemnity.
She also argued that it was impossible for her to comply with the conditions precedent in the Policy before the Insolvency, as her rights only arose at that stage. That was also consistent, she said, with the 2010 Act’s policy of protecting third parties in circumstances where an insured becomes insolvent.
Riverstone disagreed. It said that any actions taken by her after the Insolvency, however reasonable, were too late, and were incapable of leading to a conclusion that she complied with the Policy.
Although the court had considerable sympathy with Miss Archer, it found that she was nevertheless wrong. In short, it was not possible to “resurrect” her right to an indemnity in circumstances where that same right had already been invalidated by R’N’F. If it was, that would effectively mean that the conditions precedent to which was subjected were entirely different from those to which R’N’F were subjected. The court found no authority for such a proposition.
The court was also unpersuaded by Miss Archer’s impossibility argument. It noted that over three years passed between the first circumstance in November 2019 and the Insolvency, and no impossibility prevented R’N’F complying with its obligations in that time. So, as R’N’F had already lost its rights under the Policy when it was not faced with an impossibility, Miss Archer could not take the benefit of them now.
Summary
The decision in Archer is another important illustration that where an insured has already lost its rights under a policy, a claimant pursuing a 2010 Act claim stands in no better a position. Even if the failure was not of the claimant’s making, that is of no consequence – the claimant does not get a second chance.
Finally, although the judgment does not explore the point in detail, it reinforces the principle that conditions precedent, and particularly notification requirements, must be complied with strictly.
The full judgment can be found here:
https://www.bailii.org/ew/cases/EWHC/KB/2025/1342.html
Author:
Timing is everything – Makin v QBE and the cost of not complying with a condition precedent
This recent decision from the High Court provides a powerful reminder of the consequences of not complying with a condition precedent to liability, and that a claimant pursuing a claim under the Third Parties (Rights Against Insurers) Act 2010 inherits both the rights – and the pitfalls – of the insured’s policy.
Background
The Claimant, Daniel Makin, attended a Bar and Restaurant on 6 August 2017. At around 08:30pm he threw a glass on the floor while apparently in “high spirits”, and was then forcibly ejected by two door supervisors (“the Incident”).
Although Mr Makin was seemingly unaffected by the Incident (he walked away and took a taxi home), he later suffered a stroke rendering him unable to work and requiring long-term care.
The Proceedings
Acting by his mother and litigation friend, Mr Makin issued proceedings against (1) the Restaurant Muse Limited (“the Restaurant”); (2) Protec Security Group Limited (“Protec”), the employer of the two doormen; and (3) QBE Insurance (Europe) Limited (“QBE”), who insured Protec under a “Security and Fire Protection” insurance policy (“the Policy”). QBE was joined to the proceedings under the Third Parties (Rights Against Insurers) Act 2010 (“the 2010 Act”).
At a preliminary issues hearing (which Protec did not attend, having entered into administration on the preceding day), the Judge, HHJ Sephton KC, gave judgment that Protec were liable to Mr Makin for assault and his consequent injury (“the Judgment”).
At trial, the parties agreed that pursuant to the 2010 Act: (1) Mr Makin was entitled to claim against QBE directly; and (2) Mr Makin’s rights were no better than those of Protec ie., if QBE had a good defence to a claim for indemnity by Protec, it would also have a good defence to Mr Makin’s claim.
QBE asserted that it had no liability to Mr Makin because Protec breached the claims condition in the Policy – a condition precedent – which required it to notify, “… as soon as practical but in any event within thirty (30) days in the case of other damage, bodily injury, incident accident or occurrence, that may give rise to a claim under your policy …” (“the Condition”).
Mr Makin disagreed. He contended that even if there was a breach of the Condition, it was not a condition precedent which entitled QBE to automatically refuse cover. Rather, it only gave QBE only the discretion to decline the claim, which it could not exercise “arbitrarily, irrationally or capriciously”.
Finally, an issue arose as to whether the Judgment was binding in these proceedings.
The issues to be decided, therefore, were:
- Did Protec breach the Condition? (“Issue 1”)
- If so, was QBE entitled to refuse cover for a breach of a condition precedent, or did it merely have a discretion to decline the claim? (“Issue 2”)
- If QBE was not automatically entitled to refuse cover, was it nevertheless entitled to do so on the facts? (“Issue 3”)
- Was the Judgment binding on QBE? (“Issue 4”).
Issue 1
Following the incident in 2017, neither the correspondence passing between the Restaurant and Protec, the Police’s investigations, nor the Letter of Claim sent in 2020 were disclosed to QBE contemporaneously. In fact, there was no suggestion that QBE were aware of the Incident at all before July 2020. Against that background, QBE said that Protec breached the Condition.
Mr Makin argued that a reasonable person would not have thought that the Incident, on its own, might give rise to a claim. He also argued that any suggestion that Protec may have come under an obligation at a later point to notify the Incident was contrary to the proper meaning and effect of the Condition. He relied in that regard on Zurich v Maccaferri [2016], in which the Court held that the likelihood of a claim eventuating is assessed at the time the event occurs.
QBE, by contrast, held that it would have been apparent to a reasonable person in Mr Lucas’ position that a claim might be made against Protec arising out of the Incident. It also distinguished the present case from Zurich v Maccaferri, because the requirement in that case was to notify a circumstance that was “likely” to give rise to a claim, whereas the Condition required Protec to notify a circumstance “might” give rise to a claim, which was a much lower threshold.
Although the Court accepted that the Incident, in isolation, would not have led a reasonable insured to form the view that there might be claim, there was nevertheless “a clear point in time” when the matters known to Mr Lucas, which included the police investigation, and that Protec were potentially open to criticism for injuring a customer, gave rise to an obligation to notify. Having not done so, Protec was in breach of the Condition.
Issue 2
On Mr Makin’s case, the Condition was not a condition precedent. That is because, he said, it was not expressed in that way (by contrast, there were other terms in the Policy that were so expressed), and if there was any doubt as to the correct interpretation, the Condition should be construed contra proferentem in his favour.
QBE disagreed. It said the Condition did not need to be labelled as a condition precedent in order to have that effect. It also referred to the introductory section of the Condition, which stated: “The following conditions 1-10 must be complied with after an incident that may give rise to a claim under your policy. Breach of these conditions will entitle us to refuse to deal with the relevant claim”. So, QBE said, the Condition made clear at the outset that its obligation to meet a claim was conditional upon Protec’s compliance. Further, and importantly, QBE contended that the use of the word “will” was consistent with an absolute right, not a contractual discretion.
As with Issue 1, the Court agreed with QBE. The true meaning of the Condition was clear, even without the label of “condition precedent”. The Court also agreed with QBE’s analysis that the word “will”, in the introductory section of the Condition, did not merely import a discretion to decline indemnity. To hold otherwise, in the Court’s view, would do an injustice to the language used. There was also good commercial sense in that conclusion: an early notification enables an insurer to investigate claims at a time when witnesses will be easier to contact and memories are likely to be better, as well as to consider the early settlement of the claim, minimising any delays.
So, on the basis that the Condition was indeed a condition precedent to QBE’s liability, and in circumstances where that condition was breached, QBE was entitled to refuse indemnity under the Policy.
Issue 3
Given the Court’s earlier findings, this point was academic: QBE had already prevailed in light of the Protec’s breach of a condition precedent to liability. However, had the Court found that the Condition did not have that status, then, applying the well-established Braganza principles – namely, that a decision must be lawful, rational and made in good faith – it would have found that QBE was not entitled to refuse cover. The breaches in this case were trivial and of no meaningful consequence for QBE’s ability to deal with the claim.
Issue 4
The final issue was whether the Judgment establishing Protec’s liability was binding on QBE in circumstances where it was given (a) at a hearing which Protec did not attend; and (b) before QBE were a party to the proceedings.
Mr Makin contended that the Judgment was binding on QBE as establishing Protec’s liability. He relied in particular on Scotland Gas Networks plc v QBE UK Ltd, in which the Court of Session held that where a policyholder’s liability was established by way of a judgment of the court in previous proceedings, “it is not open to the [insurer] to require either the existence or the amount of that liability to be proved in the present action”.
QBE argued the contrary. It referred to AstraZeneca Insurance Co Ltd v XL Insurance (Bermuda) Ltd and Omega Proteins Ltd v Aspen Insurance UK Ltd, both of which established that neither a judgment nor an agreement are determinative of whether a loss is covered by a policy – it is open to an insurer to dispute that the insured was in fact liable.
The Court agreed with Mr Makin. The present case was distinct from Omega Proteins and AstraZeneca v XL Insurance, because those cases did not involve the 2010 Act, which was focussed on placing a claimant in the same position as the insolvent insured. It would therefore be incongruous with that objective if an insured’s liability could be determined definitively, only for the insurer to later challenge it.
Summary
There are a number of salutary lessons from Makin:
Firstly, the decision provides a convenient reminder of the distinction between “likely to” and “may / might” wordings in the context of notification conditions. Whereas the former requires an insured to notify circumstances which are at least 50% likely to lead to a claim, the latter requires only a real, as opposed to fanciful, risk of a claim eventuating. Policyholders would be well advised to check which wording appears in their policies, and to ensure that the requirements are met.
Secondly, the decision reinforces that a condition precedent need not be labelled as such in order to have that effect. Where the consequences of breaching a condition are clearly spelt out, namely, that an insurer will not be liable for a claim, the courts will likely treat the condition as a condition precedent to liability. It should never be assumed, therefore, that a condition precedent does not have that status simply because the words “condition precedent” are not included.
Thirdly, and finally, although the Court’s application of the 2010 Act did not assist Mr Makin on the facts, it is likely to be helpful for policyholders generally: where an insured’s lability is definitively determined in earlier proceedings, then, applying Makin, it will not be open to an Insurer to unravel that Judgment later down the line.
Author:
URS v BDW: a milestone decision from the Supreme Court – but does it break new ground?
The Supreme Court has handed down its long-awaited judgment in URS v BDW. The judgment considers a number of important issues for construction professionals including limitation, liability in tort, and the interplay between the Defective Premises Act 1972 (“the DPA”) and the Building Safety Act 2022 (“the BSA”).
Background
BDW, a well-known developer (whose brand names include Barratt Homes and David Wilson Homes) engaged URS, a designer, to carry out design work on two apartment blocks called Capital East and Freemans Meadow (“the Blocks”). Practical completion of the Blocks took place in 2012, and the apartments were then sold to individual purchasers.
Following the tragic Grenfell Tower fire in 2017, BDW undertook a wholesale review of its developments and discovered that the Blocks’ design was seriously defective, and that they were at risk of structural failure.
It is relevant to note that, at the time the defects were discovered:
a) There was no damage or cracking at the Blocks, even though it was accepted that that they were dangerous.
b) BDW had sold all the flats in the Blocks (thus retaining no interest in them).
c) BDW’s contractual limitation period for defective design had expired, and the then applicable six-year limitation period to bring a claim under the DPA had also expired.
Despite not owing the Blocks, nor facing claims from their owners or occupiers, BDW felt that it could not ignore the problems once they came to light, and incurred costs running to “many millions” to carry out investigations, temporary works, evacuation and a permanent remedial solution. Accordingly, in 2020, BDW issued proceedings against URS to recover the cost of the remedial works, which at the time was confined to a claim in negligence.
At a preliminary issues hearing, Fraser J held that BDW’s alleged losses were recoverable in principle, and agreed with BDW that its cause of action accrued on practical completion, not, as URS contended, when the defects were discovered.
In 2022, following the advent of the BSA, s135 of which extended the limitation period to claim under section 1 of the DPA from 6 to 30 years, BDW was permitted to add new claims under (1) Section 1 of the DPA; and (2) the Civil Liability (Contribution) Act 1978 (the “CL(C)A”).
URS appealed both decisions unsuccessfully, and was then granted permission to appeal to the Supreme Court on the basis of certain “assumed facts”.
The Grounds of Appeal
URS’ grounds of appeal were as follows:
(1) As to BDW’s claim in negligence, had BDW suffered actionable damage, or was the damage too remote because it was voluntarily incurred? If the damage was too remote, did BDW already have an accrued cause of action in tort at the time it sold the Developments? (“Ground 1”)
(2) Did s135 of the BSA apply here, and if so, what was its effect? (“Ground 2”)
(3) Did URS owe a duty to BDW under s1 of the DPA, and if so, are BDW’s alleged losses of a type which are recoverable? (“Ground 3”)
(4) Was BDW entitled to bring a claim against URS under s1 of the CL(C)A, notwithstanding that there had been no judgment or settlement between BDW and any third party? (“Ground 4”).
The appeal was heard by seven Justices, who unanimously dismissed it.
Ground 1
As a preliminary point, the Supreme Court explained that BDW’s claim against URS was for pure economic loss ie., compensation for financial loss (because the Blocks has a lower value and required repair), not physical damage. Nevertheless, it was accepted that there was an “assumption of responsibility” by URS to BDW, such that, if URS was in breach of its duty by its negligent design, BDW’s losses would be recoverable.
The issue to be decided here, however, was whether BDW’s losses could be recovered in circumstances where BDW had “voluntarily” repaired the Blocks, it being noted that any claims by the Blocks’ owners would, by that time, have been time-barred.
The Court rejected a principle of voluntariness which established a “bright line” rule of law which would render BDW’s losses too remote. In any event, there were powerful features of the case to suggest that BDW’s actions were not ‘voluntary’ in the true sense of the word. Those included that: (1) if BDW had not repaired the Blocks, there was a risk that they would cause personal injury (or at worst death) to the owners; (2) even though any claims by the owners would have been time barred, that would only provide BDW with a limitation defence, which it was not obliged to take – it did not extinguish the owners’ rights altogether; and (3) BDW would be exposed to reputational damage if it ignored the problems, including the danger to homeowners, once they had been discovered.
On the basis that there was no automatic “voluntariness principle”, the Court declined to consider when the tortious cause of action accrued. As such, the much-maligned decision in Pirelli - in which it was held that limitation in negligence against a designer runs from the date of the damage, not when it was discovered - remains, for now at least, good law.
Ground 2
The question here was whether s135 of the BSA could apply to claims which, although not claims under the DPA, were dependent on the time limits under the DPA e.g., claims by homeowners against a developer, designer or contractor.
In grappling with that question, the Court firstly set out that a key objective of the BSA was “to identify and remediate historic building safety defects as quickly as possible, to protect leaseholders from physical and financial risk and to ensure that those responsible are held to account.” S135 of the BSA, which created a “backward-looking” 30-year limitation period for claims under s1 of the DPA, was written with that objective in mind.
Against that background, the Court found that s135 applied to cases such as the present one. A finding to the contrary would seriously undermine the scheme of s135 of the BSA, and effectively create two contradictory “parallel universes” – one for claims by homeowners against developers, and another for onward claims by developers against the designers or contractors responsible for the defects, each of which would bear different limitation periods. Plainly, the Supreme Court found, that would be an incoherent outcome.
Ground 3
S1 of the DPA imposes a duty on those who “take on work” for in connection with the provision of a dwelling to ensure that the work is done in a professional manner, and that the dwelling is fit for habitation when completed. The duty is owed to the person who commissioned the dwelling, ie., “to the order of any person”, and any person who acquires a legal or equitable interest in the dwelling.
It was common ground that BDW owed the s1 duty on the basis that it took on work. The question raised by Ground 3 was whether BDW could also be owed the s1 duty, because URS took on work to BDW’s order.
Unsurprisingly, the Court held that BDW was owed the s1 duty. As a matter of normal meaning, the words “to the order of any person” did not confine the recipients of the duty to lay purchasers, but were capable of embracing the “first owners” who order work ie., developers. Accordingly, the Court found, “there is no good reason why a person, for example, a developer, cannot be both a provider and person to whom the duty is owed …”.
Ground 4
S1 of the CL(C)A 1978 establishes a right of a person who is liable for damage to seek a contribution from others who are also liable for the same damage. There is a two-year limitation period that applies to such claims, running from the date that the right accrues.
URS asserted that BDW was not entitled to bring a claim for a contribution. That was because, it said, there had been no judgment against BDW, a settlement, or an admission of liability on BDW’s part. BDW, by contrast, contended that the right to claim a contribution under the CL(C)A arose as soon as the damage was suffered.
The correct answer, the Court found, was somewhere in between: when (1) there is damage suffered for which two defendants are each liable; and (2) the first of the defendants “has paid or been ordered or agreed to pay compensation in respect of the damage”. It was at that point, and not before, that the first defendant would be entitled to recover a contribution.
Accordingly, BDW was not prevented from bringing a contribution simply because there was no judgment against it, nor a settlement with any third-party claimants.
Conclusion
Although the Supreme Court stopped short of breaking new ground in some respects (Pirelli, notably, being left for another day), the decision in BDW v URS brings welcome clarification on a number of important issues. Those include, in particular, that claims under s1 of the DPA are not confined to lay purchasers: developers and other construction professionals may be owed precisely the same duties by professionals responsible for design and construction. That the Supreme Court came to that conclusion is unsurprising, and is on all fours with the BSA’s central purpose of holding those responsible for building safety defects accountable.
The corollary is that liabilities under the DPA will be considerably broader in scope. That will inevitably open the floodgates for more claims against construction professionals.
How the insurance market will respond remains to be seen. Watch this space.
Alex Rosenfield is a Partner at Fenchurch Law.
The Good, the Bad & the Ugly: #24 The (mostly) Ugly: Tynefield Care Ltd (and others) v the New India Assurance Company Ltd
Welcome to the latest in the series of blogs from Fenchurch Law: 100 cases every policyholder needs to know. An opinionated and practical guide to the most important insurance decisions relating to the London / English insurance markets, all looked at from a pro-policyholder perspective.
Some cases are correctly decided and positive for policyholders. We celebrate those cases as The Good.
In our view, some cases are bad for policyholders, wrongly decided and in need of being overturned. We highlight those decisions as The Bad.
Other cases are bad for policyholders but seem (even to our policyholder-tinted eyes) to be correctly decided. Those cases can trip up even the most honest policyholder with the most genuine claim. We put the hazard lights on those cases as The Ugly.
#24 The (mostly) Ugly: Tynefield Care Ltd (and others) v the New India Assurance Company Ltd
Background
A substantial fire broke out at a care home which was owned and operated by the insured Claimants. At the time of the fire, the Claimants had a policy of insurance with New India Assurance co Ltd (“New India”), under which New India agreed to indemnify them against various losses.
Following the fire, the Claimants claimed from New India the cost incurred of having to move residents out of the care home for four weeks in order to carry out remedial work, as well as the cost of the remedial work itself.
New India refused to indemnify the Claimants on the basis that they misrepresented and failed to disclose that their Mr Khosla, a de facto director (a director who performs the duties and functions of a director, but without being legally appointed as such), was a de jure director (a legally appointed director) of a company that previously went into administration (“the Khosla Insolvency”).
The Claimants accepted that Mr Khosla was a de facto director at all relevant times, but denied making a misrepresentation or failing to disclose the Khosla Insolvency.
Although the Claimants had been taken out policies with New India from 2013 onwards, this article will address the parts of the Judgment that deal with the post-Insurance Act 2015 (“the IA 2015”) position.
The Good – was there a misrepresentation?
The relevant question in the Proposal asked: “Have you or any director or partner been declared bankrupt, been a director of a company which went into liquidation, administration or receivership. If so give details” (“the Insolvency Question”).
The Claimants answered the Insolvency Question in the negative. New India asserted that their answer was a misrepresentation, because any person who had the status of a director, if not the title, was nevertheless a director for the purposes of the Companies Act. It also argued that any reasonable person completing the Proposal would have realised that “what was being asked related to the reality of the position”.
The Claimants disagreed. They said that the word ‘director’ should be restricted to its plain meaning, i.e., a legally appointed director, and that to hold otherwise would create uncertainty and confusion because a policyholder needs to understand precisely what is being asked of it.
The Judge, Judge Rawlings, agreed with the Claimants: the Claimants were not taken to be qualified lawyers who understood the concepts of de facto and shadow director (and he accepted their evidence that they didn’t even know what those terms meant). The Judge also held that while one could determine if a person had been appointed as a de jure director with certainty, that was not the case with de facto directors, which would turn on a number of factors, including that individual’s role and responsibilities and how they were perceived by others in the organisation.
So far, so Good. But that was not the end of the story.
The Ugly – Was there a failure to disclose a material circumstance under s. 3 of the IA 2015
The duty of fair presentation requires an insured to disclose to an insurer every material fact which it knows or ought to know, in a manner which would be reasonably clear and accessible. A circumstance will be material if it would influence the judgment of a prudent insurer in determining whether to take the risk and, if so, on what terms.
Therefore, quite apart from the Insolvency Question – which the Judge found did not embrace the Khosla Insolvency – the question was whether the Khosla Insolvency was material, and therefore disclosable, in any event.
Applying the summary of the law provided by Lionel Percy QC in Berkshire Assets (West London) Ltd v AXA Insurance UK PLC (see our article on that decision here), and particularly the principle that facts which raise doubt as to the risk, without more, are sufficient to be material, the Judge found that the Khosla Insolvency was a material fact. Specifically, the Judge held:
“Whist I cannot say whether a prudent underwriter would, if asked to provide insurance for the first time, refuse to provide that insurance, or only agree to do so on more stringent terms than would otherwise be the case, because of those concerns, it seems to me clear that a prudent underwriter would, at least be influenced or affected by those concerns and would.”
The Judge also considered – but had no hesitation in rejecting – the Claimants’ further argument that New India waived disclosure of the Khosla Insolvency because the Insolvency Question only used the term “director”. That argument was wrong, the Judge found, because a reasonable person would have appreciated that New India had not waived the requirement to disclose that Mr Khosla controlled the management of the Claimants, and was their director in all but name. Accordingly, the case was distinguished from cases such as Ristorante v Zurich (see our article on that decision here), because the insolvency question in that case enquired only about “owners, directors, business partners or family members of the business” i.e., unlike in this case, it did not extend to other business with which those individuals were involved.
Having found that the Claimants failed to disclose a material circumstance, and thus breached their duty of fair presentation, the next issue to be decided was whether that failure was deliberate, reckless, or innocent. The judge held it was the latter. In particular, he accepted the Claimants’ evidence that they did not, at the relevant time, understand what “de facto director” and “shadow director” meant, and therefore would not have understood the Insolvency Question to be referring to Mr Khosla. The Judge also accepted Mr Khosla’s evidence that he had not read the proposal forms, and was unlikely to have read the Statement of Facts, either. While the Judge was satisfied that those failings were negligent, we can see how a different Judge could just as easily have found it to have been reckless (i.e., where a claimant “does not care” whether or not it was in breach of the duty).
The final issue to be decided was the remedy to which New India was entitled. New India’s evidence, which the Judge accepted, was that it had a strict policy of refusing to incept policies if it was disclosed to it that a director (which included Mr Khosla) had been a director of a company which had gone into liquidation. Accordingly, pursuant to the IA 2015, New India was entitled to refuse the Claimants’ claim, but had to refund the premiums.
Conclusion
We think Tynefield is a paradigm example of an ugly decision. In particular, while we sympathise with the Claimants given the wording of the Insolvency Question, the position in this case was that Mr Khosla was essentially “running the show”, such that his insolvency history was disclosable.
The decision is a salutary reminder that there is a critical difference between a misrepresentation and a non-disclosure, and that even an honest and correct answer to a question in a Proposal will not avail an insured of its duty under the IA 2015 to disclose material facts.
Alex Rosenfield is an Associate Partner at Fenchurch Law
Webinar - Too Hot to Handle – a cautionary tale about Hot Works Conditions
Agenda
Hot Works Conditions are a staple of contractors’ public liability policies. They require certain precautions to be taken before, during and after the carrying out of Hot Work activities, each of which are designed to reduce the risk of a fire breaking out.
The language and requirements of Hot Works Conditions vary across the market, and difficult questions often arise as to whether a particular activity engages the precautions, the meaning of “combustible”, and whether the precautions are even capable of being satisfied.
Speaker
Alex Rosenfield, Associate Partner
Seven things a good Insurer will never do
- Give You Up: Are you looking to your existing insurance provider to renew your cover and continue supporting your business through the good times and bad? A good insurer will always do that.
- Let you down: Under ICOBS rule 8.1.1, a good insurer will handle claims promptly and fairly, provide reasonable guidance to help a policyholder make a claim, provide appropriate information on its progress, and not unreasonably reject a claim (including by terminating or avoiding a policy).
- Run around: When investigating a claim, an insurer will never run around trying to find reasons not to pay. It will always treat its customer fairly.
- Desert you: In the case of liability insurance, a good insurer will always step up and pay defence costs, even where coverage might be under the microscope, and will not leave its policyholder in the lurch.
- Make you cry: Following a heavy loss, a good insurer will always take an even-handed approach to its claims process, rather than taking the opportunity to carry out a ‘post-loss underwriting process’.
- Tell a lie: A good insurer will never tell its policyholder that a claim is not covered by a policy when it clearly knows otherwise.
- Hurt you: Quick, lastly – A good insurer will always investigate and pay a claim quickly, lest it be on the wrong side of S13A damages for late payment claim, and will never add to the pain often felt by policyholders at such difficult times.
Alex Rosenfield is an Associate Partner at Fenchurch Law
“Just and equitable” under section 124 of the Building Safety Act 2022 – Triathlon Homes LLP v SVDP, Get Living and EVML [2024]
The First Tier Tribunal (“the FTT”) has decided that it was “just and equitable” to make a Remediation Contribution Order (“RCO”) against the respondent developers under section 124 of the Building Safety Act 2022 (“the Act”).
The decision is the first to consider an RCO under the Act, and raises some interesting implications for Building Liability Orders (“BLOs”), another type of order available under the Act.
What is an RCO?
RCOs can be issued by the FTT to require present or former landlords, developers, or other persons “associated” with the aforementioned to contribute towards the cost of remediation work “incurred or to be incurred” by someone else.
RCOs are “non-fault” based, and are amongst the suite of measures introduced by government to protect leaseholders from the costs of repairing building safety defects that cause a “building safety risk” – meaning “a risk to the safety of people in or about the building arising from the spread of fire, or the collapse of the building or any part of it”.
If the relevant qualifying conditions are met, the FTT may make an RCO if it considers it “just and equitable” to do so. That term is conspicuously not defined in the Act, albeit the Explanatory Notes state that it is intended to afford the Tribunal “a wide decision-making remit which it is expected will allow it to take all appropriate factors into account when determining whether an order shall be made”.
Background
The case concerned a number of residential blocks in East London which were developed by the first respondent, Stratford Village Development Partnership (“SVDP”), to house athletes participating in the 2012 Olympic Games in London. The blocks are now occupied by tenants on long leases.
The applicant, Triathlon Homes (“Triathlon”), is the co-owner of the blocks, which brought proceedings against the respondents after discovering significant building defects which included unsafe ACM cladding.
The respondents were (1) SVDP; (2) Get Living PLC (“Get Living”), which acquired an interest in the blocks long after the blocks were constructed; and (3) East Village Management Limited (“EVML”), the management company with responsibility for the repair and maintenance of the blocks, and which was invited to participate solely as the entity to which Triathlon had paid the costs of taking various interim fire safety measures.
The decision
The respondents argued that the Act had no application in this case as the relevant costs were incurred before 28 June 2022 i.e., prior to the Act becoming law. The FTT had no difficulty in quashing that argument, finding that, as a matter of statutory language, section 124 encompassed both historic and future costs.
The FTT was equally satisfied that the other grounds for making a RCO were met i.e., there was a “relevant defect” in a “relevant building” (as those terms are defined in the Act), and that the respondents were amongst the class of persons against whom an RCO could be made.
Fundamentally, the FTT was also satisfied that the “just an equitable” test had been made out. That aspect of the decision is of particular interest in relation to Get Living. In particular, despite it being accepted that Get Living was not involved in the blocks’ design or construction, and that it derived no financial benefit from its earlier disposals, the FTT found that those factors were irrelevant to the question of whether it was “just and equitable” to make the order. That is because, in the FTT’s view, Get Living acquired not only the assets of EVML, but also its liabilities, which included latent and consequential liabilities.
Fundamentally, the FTT found that it was “not open [to Get Living] to ask that the timing and circumstances in which they made their investment in those assets be taken into account in determining whether it is just and equitable for the companies in which they invested to be the subject of contribution orders.”
Accordingly, the FTT granted the orders sought by Triathlon, which required both SVDP and Get Living to reimburse the expenditure paid by Triathlon thus far, as well as to fund further liabilities which had not yet been paid.
Implications for BLOs
Although made under a different section of the Act, the decision raises some interesting implications for BLOs, which employ precisely the same “just and equitable” test.
In particular, if one assumes that the same wide decision-making remit is afforded to the High Court as it would the FTT, then a BLO is capable of being made against parent companies (and potentially those higher up the corporate chain) even where they were not involved with the work at the time it was carried out.
That thinking would appear consistent with the fact that BLOs can be made against corporate entities that have been “associated” with the entity that undertook the work during the very widely drafted “relevant period” i.e., from the date of the commencement of the work to the date any BLO would be made.
Conclusion
The decision in Triathlon Homes is a sobering reminder to those involved in construction that simply being “plugged in” to a corporate structure months or years after the work has been done by another entity will not constitute sufficient grounds to resist an RCO, and the same principles are likely to apply in relation to BLOs.
It remains to be seen precisely how the High Court will approach BLOs, albeit the first decision on that is expected shortly in the matter of 381 Southwark Park Road RTM Company Ltd & Ord v Click St Andrews Ltd & Ors.
Alex Rosenfield is an Associate Partner at Fenchurch Law