{"id":139,"date":"2019-05-16T00:00:00","date_gmt":"2019-05-15T23:00:00","guid":{"rendered":"https:\/\/fenchurchlaw.hostingsystems.co.uk\/sg\/blog\/2019\/05\/16\/young-v-royal-and-sun-alliance-plc\/"},"modified":"2024-08-21T16:41:26","modified_gmt":"2024-08-21T15:41:26","slug":"young-v-royal-and-sun-alliance-plc","status":"publish","type":"post","link":"https:\/\/fenchurchlaw.com\/en-sg\/young-v-royal-and-sun-alliance-plc\/","title":{"rendered":"Young v Royal and Sun Alliance PLC"},"content":{"rendered":"

The Court of Session found that an insurer had not waived disclosure under the Insurance Act 2015 (\u201cthe Act\u201d). The case is the first to be decided under the Act. <\/strong><\/p>\n

Background<\/u><\/strong><\/p>\n

A fire occurred at Mr Young\u2019s property (\u201cthe Property\u201d) causing extensive damage. Mr Young then claimed an indemnity from his insurers, Royal and Sun Alliance PLC (\u201cRSA\u201d).<\/p>\n

RSA declined Mr Young\u2019s claim on the basis that he had failed to disclose material information pursuant to section 3(1) of the Act. \u00a0Mr Young denied making a material non-disclosure, and, in any event, argued that RSA had waived disclosure of that information, pursuant to section 3(5)(e) of the Act.<\/p>\n

The Market Presentation <\/u><\/strong><\/p>\n

Mr Young\u2019s insurance was arranged by his broker by way of a 20-page Market Presentation (\u201cthe Presentation\u201d). The Presentation was completed using the broker\u2019s software, and identified the insured as Mr Young and Kaim Park Investments Ltd (\u201cKaim\u201d).<\/p>\n

The \u201cDetails\u201d section of the Presentation contained the following passage, which the judge referred to as the \u201cMoral Hazard Declaration\u201d:<\/p>\n

\u201cSelect any of the following that apply to any proposer, director or partner of the Trade or Business or its Subsidiary Companies if they have ever, either personally or in any business capacity:\u201d<\/em><\/p>\n

The Moral Hazard Declaration required the proposer to select from seven options in a drop-down menu. The answer selected was \u201cNone<\/em>\u201d.<\/p>\n

RSA emailed the broker on 24 April 2017 in response to the Presentation (\u201cthe Email\u201d). The Email contained a heading titled \u201cSubjectivity\u201d, and stated as follows:<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u201cInsured has never<\/em><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Been declared bankrupt or insolvent<\/em><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Had a liquidator appointed<\/em><\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u2026\u201d<\/em><\/p>\n

The Parties\u2019 positions<\/u><\/strong><\/p>\n

RSA asserted that Mr Young failed to disclose that he had been a director of four insolvent companies (\u201cthe Insolvency Information\u201d), and, had he done so, it would not have entered into the insurance \u201con any terms\u201d.<\/em><\/p>\n

Mr Young, in response, argued that the Presentation contained no misrepresentation, as neither he, Kaim, nor any director of Kaim had ever been insolvent. Further, by referring to \u201cthe insured\u201d<\/em> in the Email, Mr Young said that RSA had waived any entitlement to disclosure of prior insolvencies or bankruptcies experienced by anyone other than the insured themselves.<\/p>\n

RSA denied that it had waived disclosure of the Insolvency Information, as the Email did not set out any questions for Mr Young to respond to. As a result, Mr Young\u2019s failure to disclose the Insolvency Information was unconnected to the Email. Further, RSA said that it had no knowledge of Mr Young\u2019s prior breach of the duty of fair presentation, and, since there must be knowledge of the right before it can be waived, there had been no waiver here.<\/p>\n

The decision \u2013 was there a waiver?<\/u><\/strong><\/p>\n

The Judge firstly referred to the pre-Act case law, which established that an assured seeking to establish waiver would need to show a \u201cclear case\u201d (Doheny v New India Assurance Co Ltd <\/em>[2005] Lloyd\u2019s Rep I.R. 251). This could be done in one of two ways: (1) where an insured submitted information which contained something which would prompt a reasonably careful insurer to make further enquiries, but the insurer fails to do so; and (2) where an insurer asks a \u201climited\u201d question such that a reasonable person would be justified in thinking that the insurer had no interest in knowing information falling outside the scope of the question. This case concerned the latter.<\/p>\n

In considering the issue, the Judge noted that the term \u201cany business capacity\u201d <\/em>was capable of including other entities with which the insured was involved. The difficulty for RSA, however, was that the Moral Hazard Declaration was incomplete; although RSA had seen the answer of \u201cNone\u201d, <\/em>it did not know what the \u201cNone\u201d<\/em> referred to.<\/p>\n

The Judge held that the Email was aimed at clarifying Mr Young\u2019s answer to the Moral Hazard Declaration, which it achieved by stipulating the specific moral hazards that needed to be addressed. Further, the judge held that the reference to \u201cthe insured\u201d<\/em> in the Email was not limited to Mr Young and Kaim, but also covered the longer formulation contained in the Moral Hazard Declaration. <\/em>So, read in this context, the judge was satisfied that no reasonable reader would have understood the Email as waiving the part of the Moral Hazard Declaration relating to \u201cany business capacity\u201d<\/em> in which Mr Young might have acted. Accordingly, the judge held that there was no waiver.<\/p>\n

Comments<\/u><\/strong><\/p>\n

A number of themes arise in the judgment which are of relevance to policyholders and brokers.<\/p>\n

Firstly, the judgment illustrates the potential drawbacks of using bespoke software to place insurance. Here, it was to Mr Young\u2019s detriment that RSA were not using the same software as the broker, the result being that RSA were unable to determine the full extent of what was being disclosed, absent further information being provided.<\/p>\n

The judgment also demonstrates that formulations such as \u201cany business capacity\u201d<\/em>, may, in some circumstances, be broad enough to extend to any company with which an individual insured was involved. However, it is unclear whether that same analysis would apply where insurance is taken out by a business only.<\/p>\n

Finally, although the judgment sheds light on what is required to establish waiver, it did not consider issues of materiality or inducement, and so the question of whether RSA can make good their assertion that it would not have written the risk \u201con any terms\u201d<\/em> remains to be decided.<\/p>\n

Alex Rosenfield<\/a> is a senior associate at Fenchurch Law.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Court of Session found that an insurer had not waived disclosure under the Insurance Act 2015 (\u201cthe Act\u201d). 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