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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> RECLAIMING MOTION BY WAYNE STEPHEN GARDNER YOUNG AGAINST ROYAL AND SUN ALLIANCE INSURANCE PLC [2020] ScotCS CSIH_25 (19 May 2020)
URL: http://www.bailii.org/scot/cases/ScotCS/2020/2020_CSIH_25.html
Cite as: [2020] ScotCS CSIH_25, 2020 GWD 17-248, 2020 SLT 597, 2020 SC 467, [2020] Lloyd's Rep IR 388, [2020] CSIH 25
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FIRST DIVISION, INNER HOUSE, COURT OF SESSION
Lord President
Lord Brodie
Lord Woolman
OPINION OF THE COURT
[2020] CSIH 25
CA75/18
delivered by LORD BRODIE
in the Reclaiming Motion by
WAYNE STEPHEN GARDNER YOUNG
Pursuer and Reclaimer
against
ROYAL AND SUN ALLIANCE INSURANCE PLC
Defender and Respondent
Pursuer and Reclaimer: R Dunlop QC, E Campbell; Levy & McRae Solicitors LLP
Defender and Respondent: Barne QC, Morton (sol adv); BTO Solicitors LLP
19 May 2020
Introduction
[1] The pursuer and reclaimer is Wayne Stephen Gardner Young. He is the insured
under a policy of insurance entered into in March 2017 in respect of certain commercial
premises in Glasgow (“the premises”). Among the perils insured against was fire. The
defender and respondent is the insurer under that policy, Royal and Sun Alliance Insurance
plc.
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2
[2] On 22 March 2018 the premises were extensively damaged by fire and required to be
demolished. The pursuer has made a claim to be indemnified under the policy. The
defender has declined to indemnify. By letter dated 6 June 2018 it avoided the policy from
its inception on the basis that the pursuer had failed to disclose that he had been the director
of four companies that had been dissolved after an insolvent liquidation or had been placed
in insolvent liquidation in the five-year period prior to the commencement of the policy
(“the undisclosed information”).
[3] In this commercial action the pursuer concludes: (1) for declarator that the defender
is bound in terms of the policy to indemnify him for loss and damage; and (2) for payment
of the sum of £7,200,000. The defender pleads that it was entitled to avoid the policy and
should therefore be assoilzied.
The issue
[4] The pursuer accepts that, in terms of section 3 of the Insurance Act 2015, before a
contract of insurance is entered into, the insured must make a fair presentation of the risk;
and that a fair presentation of the risk is one which makes disclosure of every material
circumstance which the insured knows or ought to know. In terms of section 7(3) a
circumstance is material if it would influence the judgement of a prudent insurer in
determining whether to take the risk and, if so, on what terms. However, the pursuer
contends that, in terms of section 3(5) of the Act, in the absence of enquiry, the insured does
not require to disclose a circumstance if it is something as to which the insurer waives
information. The pursuer accepts that he did not disclose the undisclosed information but
he argues that the defender was not entitled to avoid the policy. He presented three
propositions in his pleadings: the undisclosed information was something as to which the
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3
defender waived information (waiver); it had no bearing on the risk (no materiality); and in
any event had the undisclosed information been disclosed the defender would still have
agreed to incept the policy (no inducement).
[5] Parties went to debate, effectively on the relevancy of the pursuer’s averments of
waiver. In her opinion of 3 April 2019 the Commercial Judge found that the pursuer’s
averments of waiver were irrelevant and excluded them from probation. By interlocutor of
12 April 2019 she allowed proof on the issues of no materiality and no inducement. The
proof was fixed to commence on 27 August 2019. However, on 9 August 2019, the pursuer
lodged a minute of admissions admitting that the undisclosed information was material and
that had it been disclosed the defender would not have entered into the contract of
insurance with the pursuer. The pursuer therefore conceded the issues of no materiality and
no inducement. Accordingly, on 20 August 2019 the Commercial Judge discharged the
proof on these issues and, given her previous decision on waiver, assoilzied the defender.
[6] The pursuer now reclaims (appeals). He contends that, following the debate, the
Commercial Judge should have held that the defender’s averments regarding waiver were
irrelevant and granted decree of declarator.
[7] The sole issue in the case is therefore a narrow one. Did the defender waive its
entitlement to be provided with the undisclosed information?
The facts as agreed
[8] The insurance was placed with the defender by insurance brokers acting for the
pursuer, Boyd & Co Ltd (“Boyds”).
[9] On 13 February 2017 Boyds emailed the defender, among other insurers, making the
following request:
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“Please can you provide us with a quotation for the above prospect based on the
information provided in the attached presentation. We require your proposed terms
not later than 24th February.”
Attached to the email were two documents. The title page of the relevant one was headed:
Boyd Insurance, … Market Presentation, and related to the premises (“the Market
Presentation”).
[10] The Market Presentation was generated by use of a digital template and extended to
20 pages. It had a column at the left of each page listing topics or cues against which, at the
right hand side, information could be entered with a view to describing the risk to potential
insurers. On completion the document could either be printed off or sent as an attachment
to an email.
[11] The first page of the Market Presentation was headed “Client Details and General
Information”. Among the cues under the sub-heading “Details” was the following:
“Select 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:”
The Commercial Judge referred to this cue as “the moral hazard declaration”. The response
given is “None”. The next cue is “Number of subsidiary companies:” The response given to
that is “0”. The next cue is “Material facts”. The response given is “None”.
[12] The defender replied to the Market Presentation by email dated 24 March 2017. That
email had the following attachments: (1) a letter of 24 March 2017, including a “Summary of
Insurance Document” for the period 20/3/2017 to 19/3/2018; (2) RSA’s Properties Insurance
Specified Perils Policy Wording; and (3) RSA’s Properties Fire & Perils Policy Summary.
[13] The defender’s email of 24 March 2017 had a section headed “Subjectivity” (a likely
typographical error intended as “Subject to”) beneath which was the following text:
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“Terms have been based on your presentation 13/02/17, our recent discussions and
that adequate Risk Management features are in place ie
Electrics Certified, Housekeeping being satisfactory, No outside storage within 10m
of buildings and where intruder Alarms Systems are in place that they are set in their
entirety when premises are closed.
Insured has never
Been declared bankrupt or insolvent
Had a liquidator appointed
Been the subject of a county court judgement
Been convicted of or charged with but not yet convicted of a criminal offence
other than a motoring offence
Had insurance cover restricted, cancelled or declared void
Annual Premium £19,000 + IPT
Commission has been based on 20%
Given nature of portfolio and recent claim we would need to pitch our terms £19k
minimum +IPT”.
[14] The defender’s letter attachment included the following:
“Your quotation request dated 13/02/2017 for the above Proposer refers.
We have pleasure in confirming that we are able to offer the following terms as
detailed below based upon RSA’s Properties wording for the period of Insurance
20/03/17 to 19/03.18. We attach a copy of our Policy Summary, which outlines the
cover provided by our standard Properties contract. Should require a copy of the
full Policy wording, this is available on request.
Please note that this quotation is valid for 28 days from the date of this letter…”
[15] Boyds responded by email on the same day:
“Thanks Lynn,
Had a quick look and all seems to be fine,
I’ll keep you updated.”
[16] On 10 April 2017 Boyds sought to change the values of a number of properties for
which cover had been sought and enquired as to whether a discount on premium levels
could be offered. A discount was indeed offered, and cover was incepted on 10 April 2017.
The defender submits that it made an offer to enter into a contract of insurance on the terms
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6
and conditions set out in its email dated 24 March 2017, together with the attachments, by
that stage, the defender having had already assessed, accepted and priced the risk. It is not
clear that this information as to events subsequent to 24 March 2017 was made available to
the Commercial Judge. At para [81] of her opinion she notes a submission from counsel for
the defender that she should ignore the email of 24 March 2017 and proceed on the basis of
the Market Presentation alone. The Commercial Judge was not prepared to do that without
proof, given that this was a point in the proceedings where the no materiality and the no
inducement lines of argument were still in issue. She observed that parties had made no
submissions on the legal character of the defender’s email, and whether it had the effect
itself of concluding the contract, or operated as a counter offer, or had some other effect (eg
as concluding the contract but imposing a suspensive condition or being suspensive of the
conclusion of the contract). Parties had simply proceeded on the basis that a contract of
insurance had been concluded between the parties, to which contract the Market
Presentation and the defender’s email of 24 March 2017 related.
Submissions
Pursuer and reclaimer
[17] The pursuer’s grounds of appeal set out six respects in which it is contended that the
Commercial Judge erred in her understanding of the law and its application to the facts, but
the essential contention is that the Commercial Judge had erred in her construction of the
defender’s email of 24 March 2017. She ought to have construed it as waiving any
entitlement to disclosure of the undisclosed information.
[18] Mr Dunlop developed his submissions as follows. It is well-established that an
insured’s obligation to disclose information can be restricted by the questions posed by an
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insurer. An insurer, as a result of asking certain questions, for example in a proposal form,
may show that he is not interested in certain other matters and can therefore be said to have
waived disclosure of them, the test being would a reasonable man reading the proposal
form be justified in thinking that the insurer had restricted his right to receive material
information and consented to the omission of the particular information in issue: Doheny v
New India Assurance Co. [2005] 1 All ER (Comm) 382 at paras 17 to 21, under reference to
Schoolman v Hall [1951] 1 Lloyds Rep 139. In R&R Developments Ltd v AXA Insurance UK Plc
[2010] 2 All ER (Comm) 527 the insurance contract included a list of questions which
included: “Have you or any …Directors either personally or in connection with any business
in which they have been involved …[e]ver been declared bankrupt or are the subject of any
bankruptcy proceedings or any voluntary or mandatory insolvency?” The question was
answered in the negative. The insurers thereafter sought to rely on the fact that one of the
directors of the insured had been the director of a company that had been placed in
administrative receivership. The argument on material non-disclosure was rejected. The
court ruled that there had been no failure to disclose: the proper inference for the insured to
draw from the relevant question was that the insurer had no interest in the insolvency of any
party other than the insured and its directors. The Commercial Judge had distinguished
R&R Developments Ltd from the present case on the facts, as she had distinguished Doheny.
She had been wrong to do so. R&R Developments Ltd was directly analogous.
LJ (as he then was) said:
“Where, as here, material facts duly are dealt with by specific questions in the
proposal form and no sustainable case of misrepresentation arises, it would be
remarkable indeed if the policy could then be avoided on grounds of non-
disclosure”.
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That, Mr Dunlop submitted, was unarguably correct. The point applied to the present case.
The Commercial Judge had distinguished Economides for four reasons: that it concerned the
interpretation of a proposal form, that it was a consumer contract, that it proceeded on the
assumption that the subject matter of the question was material, and that the court was
considering the truthfulness of the statements made. None of these reasons were sound; the
present case falls squarely within the dictum of Simon Brown LJ. There was no difference in
the principles to be applied as between, on the one hand, insurance contracts with
consumers and, on the other, insurance contracts with non-consumers (see Doheny at
para [20]).
[20] The Commercial Judge had wrongly taken as her starting point the assumption that
the Market Presentation was intended as the totality of the information the pursuer had put
forward in fulfilment of its duty to make a fair representation. The Market Presentation had
been accompanied by an email inviting “any questions”. The defender did in fact require
further information by requesting confirmation of the various points set out in its email of
24 Mach 2017, to which the brokers responded, albeit tersely. To argue that the defender’s
email did not contain a question was to take a purely technical point; it made no sense and
did not reflect the reality. There was no difference between asking a question and setting
out an assumption for confirmation or otherwise. The flaw in the defender’s position was
that everything depended on the proposition that the process of giving information stopped
with the delivery of the Market Presentation. It was not the case, as contended for by the
defender, that the defender’s email with its attachments was a detailed offer based on the
Market Presentation that was capable of immediate acceptance; it was a conditional offer.
Where in the Market Presentation had there been anything about storage arrangements or
the bankruptcy of anyone? Nor was Boyds’ email of the same date any more than a holding
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response. It was ludicrous to suggest that the latter email, with its confirmation “all seems to
be fine” was not part of the presentation of the risk. The email exchange occurred before the
contract of insurance was entered into. That is the relevant punctum temporis (see 2015 Act
section 3(1)). It was incorrect to argue that what was contended for was the conversion of an
unfair presentation into a fair presentation, there was only one point in time when the
presentation was to be judged: immediately before entering into the contract. Had the
pursuer made a misrepresentation in the exchange of emails on 24 March 2017 it could not
be argued that this could not be founded on by the defender and yet this was the logical
conclusion of the argument that the defender’s email was not part of the presentation of risk.
The email exchange, including the “subjectivity” clause, was part of the presentation of risk.
To contend that Boyds’ email of 24 March 2017 was irrelevant was to ignore its importance
as showing that the broker had relied on the defender’s email by giving the reply that the
brokers did.
[21] The Commercial Judge had stated in her opinion that the case law on the
construction of proposal forms (such as what was to be found in Doheny and R&R
Developments) may require to be approached with a degree of circumspection in a case such
as the present, which did not involve a conventional proposal form. This was wrong. The
only question under the 2015 Act was whether there had been a fair presentation of risk and,
more particularly, whether the insurer had restricted his right to receive the information in
issue. The form which the pre-inception communications took was irrelevant; there was no
“magic” in a proposal form. The question was whether the insurer had narrowed the scope
of the inquiry. As part of her reasoning the Commercial Judge had held that the 2015 Act
had shifted the burden of identifying what is material to the insured. There was no
discernible basis for any such legislative intent.
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[22] Neither was there a basis for the Commercial Judge’s suggestion that the pursuer’s
argument would require insurers, faced with a brief presentation, to ask a large number of
questions lest it be argued that they had waived the right to receive information on any
matter on which they had not sought assurance. If an insurer, given a presentation which
contains no misrepresentation but leaves certain questions unanswered (as was the case
here) chooses to seek further information in a way that narrows the scope, it thereby waives
any entitlement to information falling outwith the scope of its own inquiry.
[23] The Commercial Judge had erred by importing the wording from the Market
Presentation which she had chosen to describe as “the moral hazard declaration” (ie “any
proposer, director or partner of the trade or business or its subsidiary companies have never
either personally or in any business capacity”) into the email of 24 March 2017, with the
result that the email was to be understood, by imposing a “moral hazard stipulation”, as
directed to eliciting the content of the declaration. This had not been argued for by either
party, as the defender accepts, and therefore for that reason alone the Commercial Judge’s
decision was open to review. Such a construction was not reasonable. The terms of the
email were clear and simple. Had the defender truly wished confirmation that no
insolvency events had been experienced by the insured or any other entities through which
they had previously traded or been associated, it would have been very simple to say so. In
any event, had the wording been incorporated that would have been to import an ambiguity
as to what was intended and it is settled law that an insurer cannot pose ambiguous
questions and then complain about the answers given in response.
[24] Were it correct to construe the email of 24 March 2017 as including the moral hazard
stipulation (and therefore as a request for confirmation that the insured and any proposer,
director or partner of the trade or business or its subsidiary companies have never either
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personally or in any business capacity: been declared bankrupt or insolvent or had a
liquidator appointed) then the Commercial Judge was nevertheless wrong to have
concluded that this did not waive the requirement to disclose the undisclosed information.
On the Commercial Judge’s (erroneous) construction, the pursuer’s response would have
amounted to a misrepresentation, which had never been argued, but the prior insolvency of
a company of which the pursuer was a director does not mean that the pursuer had either
personally or in any business capacity, been declared bankrupt or insolvent or had a
liquidator appointed (see R&R Developments at paras 29 to 36). Restricting the request for
confirmation in that way is to waive the right to rely on non-disclosure of insolvencies not
experienced personally by the insured. On the Commercial Judge’s view of the meaning of
the email, the defender had made it plain that it was not interested in insolvencies of the
corporate vehicles through which the insured had been trading.
[25] As for an argument, based on traditional concepts of waiver as discussed in cases
reliance was missing, Mr Dunlop submitted that albeit the term “waiver” had been used to
describe the situation where an insurer has narrowed the scope of the inquiry, that did not
import the entirety of the law as developed in other contexts. “Waiver” was a convenient
label but the concept could be put in different ways (see Doheny at para 19). In any event, as
already argued, there was reliance here in the pursuer answering the question in the email
as it was posed. There was no suggestion that the law of Scotland should be different from
that of England in this context. The position therefore should be as was figured in Doheny
and as was patent in R&R Developments. Waiver was an elastic concept born of equity. It
would not be fair to allow an insurer to complain of limitations on the scope of disclosure
which it itself had imposed.
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[26] The reclaiming motion should accordingly be granted.
Defender and respondent
[27] Mr Barne invited the Court to refuse the reclaiming motion. There was an over-
riding duty on the part of an insured to make a fair presentation of the risk in order to allow
the insurer to price that risk and to provide terms. The defender had been entitled to regard
the Market Presentation as making such a presentation. In response it offered terms. It was
submitted on behalf of the pursuer that the defender had asked questions. That was not so.
The Commercial Judge had correctly characterised the key issue in the case as being whether
the matters relied on by the pursuer in the defender’s email of 24 March 2017 constituted the
kind of enquiry which might instruct waiver; and she had been correct to conclude that the
email did not instruct such a case. The defender did not argue that a proposal form was
imbued with any “magic”. Waiver might arise by reliance on something other than a
proposal form, but there had been no waiver of the relevant right in this case. The cases
principally relied on by the pursuer, Doheny and R&R Developments, were not apposite to the
facts of the present case. Economides was too widely stated.
[28] In summary, the defender’s case was as follows. (1) The undisclosed information
was a material circumstance that should have been disclosed in the pursuer’s market
presentation, and had it been disclosed the defender would not have offered cover. This is
now accepted by the pursuer. (2) There was no proposal form in this case and accordingly
the defender did not define in advance the information which it wished to receive. (3) There
was nothing in the correspondence passing between Boyds (on behalf of the pursuer) and
the defender that amounted to a relevant waiver of the obligation on the pursuer to disclose
the undisclosed information. (4) In particular there was nothing in the defender’s email of
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24 March 2017 which clearly and unequivocally waived disclosure of the undisclosed
information. (5) In any event, the pursuer does not offer to prove it relied on the defender’s
email of 24 March 2017 in failing to disclose the undisclosed information.
[29] There were four key points that the court should keep in mind from the relevant
factual background. There was no proposal form. The original inquiry from Boyds, by
email of 13 February 2017 requested a quotation “based on the information provided in the
attached presentation”. It was therefore clear that the pursuer had provided all the
information that it intended to provide. The defender’s email of 24 March 2017 with its four
attachments extending over 62 pages was a direct response to that inquiry. It comprised an
extensive and detailed offer that was open for immediate acceptance. No further
information was requested or anticipated. That was because, by the stage the offer had been
made, the defender had already assessed, accepted and priced the risk. Boyds’ email in
response was not part of the pursuer’s presentation of risk; it was a holding response to the
offer that had been made. Furthermore, on the pursuer’s analysis, the pursuer’s holding
response was irrelevant as by this stage the defender is said to have waived its right to
receive the undisclosed information.
[30] Waiver in insurance law is not to be treated as legally distinct from waiver in other
areas of the law; the fundamentals are the same. At its heart waiver involves the
unequivocal abandonment of a right (see Armia Ltd v Daejan Developments Ltd, at 67 and 72;
Argo Systems FZE v Liberty Insurance (Pte) (The Copa Casino) [2012] Lloyd's Rep IR 67 at
It is not readily to be inferred (see Container Transport International Inc v Oceanus Mutual
Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476 at 511; MacGillivray on
Insurance Law, 14th edit, para 17-089). Waiver also requires reliance (see Armia Ltd v Daejan
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Developments Ltd at 69 and 71; Argo Systems FZE v Liberty Insurance (Pte) at para 39,
Noblebright Ltd v Sirius International Corporation [2007] Lloyds Rep IR 584 at para 8). Where,
depending on the nature of the questions, an insured completes an insurer’s proposal,
reliance will be inferred. Where, however, a proposal form has not been used, reliance must
be averred and proved.
[31] The form of waiver relied on by the pursuer in this case might be referred to as
“question limiting waiver”. The defender accepts the formulation of the test for question
limiting waiver given by MacGillivray in its 14th edit at 17-020. Waiver will only arise
where, viewed objectively, the insured has not provided material information by reason of
his reliance on the fact that, by the questions it has asked, the insurer has in advance shown
itself clearly to be uninterested in that information. It was not the case that a different
approach was to be adopted depending upon whether the insurance was incepted on the
basis of a proposal form or a market presentation; that the risk had been presented by way
of the insurer’s proposal form was not a sine qua non for the operation of waiver. The
Commercial Judge had not taken that approach. However, in the present case the defender
had not defined in advance the information it wished to receive. The Market Presentation
had not disclosed the undisclosed information. The undisclosed information was material.
The Market Presentation was intended to fulfil the pursuer’s duty of fair presentation in its
entirety. The pursuer had disclosed all the information he intended to disclose. The
defender’s email of 24 March 2017 was a direct response to the pursuer’s invitation to
provide a quotation based on the Market Presentation. By offering terms the defender did
not expressly or impliedly waive disclosure of information not disclosed in the Market
Presentation. Neither the defender’s email nor its attachments were seeking to elicit further
information or to ask a question. The fairness of the presentation of risk should be assessed
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before the underwriter’s reaction is taken into account. The pursuer’s approach must be to
argue that an unfair presentation was rendered fair by the very offer that was based on an
unfair presentation. Such an approach was illogical. No reasonable reader of the defender’s
offer could divine in it an implied representation that disclosure of any material
circumstance was being waived. The pursuer had no averments of reliance on the email in
deciding not to disclose the undisclosed information. The pursuer’s case on waiver failed.
[32] The pursuer’s approach proceeds on a misunderstanding of the “subjectivity”
wording in the defender’s email of 24 March 2017. It formed part of the terms or
stipulations of the defender’s offer; it did not waive the disclosure of information. In
particular, it included terms that served as a pre-condition of liability under the contract
because the contract had been priced on the basis that the assumptions in those terms were
accurate. The most that could be said was that if the assumptions or stated state of affairs in
the subjectivity wording were known by the insured to be incorrect, they should be
corrected. The defender’s offer did not state (or imply) that any other material
circumstances which could possibly be related to those stipulations was waived or was of no
relevance. The offer was made subject to those terms on the understanding that there had
been a fair presentation of the risk.
[33] There was an alternative way of demonstrating that the pursuer’s case on waiver
was unsound. Waiver involves abandonment of a known right:
“a voluntary, informed and unequivocal election by a party not to claim a right or
raise an objection which it is open to that party to claim or raise” (see Millar v Dickson
2002 SC (PC) 30 at para 33).
The defender had not known that there had been any breach of the duty of fair presentation.
It could not, therefore, make an informed decision to waive that breach.
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[34] Before the Commercial Judge, the defender did not argue that the “Moral Hazard
declaration was incomplete” or that wording from the Moral Hazard declaration should be
read into the “Moral Hazard stipulation” in the email of 24 March 2017. It is the defender’s
position that, properly construed, the Market Presentation confirmed that there was no
disclosure of material circumstances relating to moral hazard. If the defender is wrong on
that, then the defender adopts the Commercial Judge’s reasoning at paras 89 to 92 of her
opinion. On either approach, the defender supports the Commercial Judge’s ultimate
conclusion at para 92 that this is not a “’clear’ case of waiver.”
[35] It is accepted that, as was said on behalf of the pursuer, no case of misrepresentation
is pled. However, contrary to what was submitted on behalf of the pursuer,
misrepresentation does not form part of the Commercial Judge’s analysis. The Commercial
Judge’s point was that the stipulation, as she construed it, was not restricted only to the
pursuer but included entities with which the pursuer was involved “in any business
capacity”. On this approach, the stipulation did not waive information about insolvencies
that had occurred with entities with which the pursuer had an involvement “in any business
capacity”. On this approach, the Commercial Judge was correct to reach that view.
Decision
[36] This case turns on the construction of a single email. The applicable law, although
generously cited by parties, is uncontroversial.
[37] The context is the nature of the commodity which is insurance: the contractual
reallocation of risk for a price; and the market for that commodity. This is discussed in
chapter 3 of the joint report of the Law Commissions Insurance Contract Law, Law Com
No 353/ Scot Law Com No 238 of July 2014 which was the basis of the 2015 Act. A
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prospective policy-holder knows his business and therefore the risk he wishes to insure. By
contrast the insurer knows which facts are relevant to assessing and pricing that risk and
determining the terms upon which it will take it. The onus is therefore on the prospective
policy-holder to disclose sufficient relevant information to allow the insurer to offer terms,
or, to put it otherwise, to make to the insurer “a fair presentation of the risk”.
[38] As has already been mentioned, a duty to make to the insurer a fair presentation of
the risk before the contract is entered into is imposed on the insured by section 3(1) of the
2015 Act. A fair presentation of the risk is one which makes disclosure, in a manner which
would be reasonably clear and accessible to a prudent insurer, of every material
circumstance which the insured knows or ought to know or, failing which, which gives the
insurer sufficient information to put a prudent insurer on notice that it needs to make
further enquiries for the purpose of revealing these material circumstances (section 3(3) and
(4)). A circumstance is material if it would influence the judgement of a prudent insurer in
determining whether to take the risk and, if so, on what terms (section 7(3)).
[39] Accordingly, a proposer seeking the insurance of a risk must assume that any
prospective insurer will wish to know every relevant circumstance which would influence
the judgement of the notional prudent insurer, and if the proposer is to discharge his duty to
make a fair presentation, he must therefore disclose everything that the notional prudent
insurer would want to know. A failure to discharge this duty to make a fair presentation
will allow the insurer to avoid the policy for material non-disclosure.
[40] Now, for whatever reason, a particular insurer may consider that it does not need or
want to know everything which the notional prudent insurer would want to know. If it
communicates that fact to the insured, it can hardly complain that it has not received a fair
presentation of the risk if the information which it indicated that it was not interested in is
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18
not disclosed. Recognition of such a consideration long preceded the enactment of the 2015
Act. It is however specifically accommodated by the statute. In terms of section 3(5)(e) the
duty of fair presentation does not require the insured to disclose a circumstance if “it is
something as to which the insurer waives information.” That is what the pursuer contends
happened here. He maintains that the defender, by setting out in its email of 24 March 2017
the stipulation that the insured had never been declared bankrupt or insolvent or had a
liquidator appointed, had indicated that it was not concerned to know about the pursuer’s
previous experience with insolvent companies. Accordingly, that information did not need
to be disclosed. Had the defender been concerned to know about the pursuer’s previous
experience of corporate insolvency, it should have made an enquiry about that. The pursuer
does not say that the defender expressly communicated that it was not concerned to know
the undisclosed information. He contends that it did so by implication; by showing that it
was interested in one aspect of the pursuer’s experience of insolvency, the defender was
impliedly showing that it was not interested in others and thereby restricted the pursuer’s
duty of disclosure.
[41] It is clear that an insurer can impliedly waive an insured’s duty to disclose certain
information by virtue of the questions it asks. A usual way of asking questions is by means
of a proposal form, and cases about proposal forms and statements about proposal forms
feature in the authorities. For example, the pursuer founds on what was said by Simon
Brown LJ in Economides v Commercial Union Insurance Co plc at 648j:
“Where, as here, material facts duly are dealt with by specific questions in the
proposal form and no sustainable case of misrepresentation arises, it would be
remarkable indeed if the policy could then be avoided on grounds of non-
disclosure.”
Chitty on Contracts (33rd edit) states the principle at para 42-036 as follows:
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“… the question which the insurer may ask the assured (usually in a proposal form)
may be so framed as to indicate that the insurer does not require further information
on the matters in question, thus relieving the assured from doing more than
answering the specific questions.”
And the current edition of MacGillivray (14th edition, 2019), repeating the text of the
10th edition of 2002, which was approved by Longmore LJ in Doheny v New India Assurance
Co. at para [17], has this:
“17-018 Effect of questions in proposal form. The questions put by insurers in their
proposal forms may either enlarge or limit the applicant’s duty of disclosure
…
17-19 It is possible that the form of the questions asked may make the applicant’s
duty more strict.
…
17-020 It is more likely, however, that the questions asked will limit the duty of
disclosure, in that, if questions are asked on particular subjects and the answers to
them are warranted, it may be inferred that the insurer has waived his right to the
information, either on the same matters but outside the scope of the questions, or on
matters kindred to the subject-matter of the questions.
…
Whether or not such waiver is present depends on a true construction of the proposal
form, the test being, 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?”
[42] The significance of a proposal form is that by directing the insured to provide
material information by the means of answering specific questions the insurer has taken
control over the process of communicating information between it and the proposer. It has
chosen the matters as to which it wishes information by asking questions directed at that
information and, by implication, the matters as to which it does not wish information, by not
asking questions which are so directed. That is not to say that the only way in which an
insurer can waive information is by using a proposal form. Mr Barne accepted that.
However, where it is contended, as here, that the insurer impliedly waived its entitlement to
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disclosure of material information by reason of the terms in which parties communicated
with each other, the expectation will be that there will be something in the nature of an
enquiry by the insurer directing the insured to provide certain information but no other
information. We took Mr Dunlop to accept that. He submitted that by including the text
“Insured has never Been declared bankrupt or insolvent Had a liquidator appointed” the
defender was inviting the pursuer to confirm the accuracy of that statement and by
restricting itself to that question demonstrating that it was not concerned to know about the
pursuer’s wider experience of insolvency including the undisclosed information.
[43] We do not consider that a reasonable reader of the email of 24 March 2017 would
understand it in the way suggested by Mr Dunlop. Neither the generality of the email nor
the wording relied on by the pursuer are couched in the form of an enquiry. The whole
tenor of the email indicates that the defender has got beyond the stage of enquiry or looking
for a more complete presentation of the risk. The email indicates that the defender considers
that the presentation of the risk has been sufficient and that the defender has assessed and
priced it, as the risk is further defined by the stated terms, conditions and limitations. For
the pursuer to succeed with his plea of waiver he has to establish that the defender, which
had an entitlement to disclosure of information which included the pursuer’s more general
experience of insolvency, is to be held to have (inadvertently, because the no inducement
line of argument has been abandoned by the pursuer) waived that entitlement by
confirming that there would be no cover in the event that the policy-holders had a direct
experience of insolvency. We do not accept that contention. It is simply not a reasonable
interpretation of the communications between the parties. The pursuer’s brokers had made
a presentation of the risk by means of the Market Presentation which they sent under cover
of an email of 13 February 2017. That email requested that the defender “provide us with a
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quotation for the above prospect based on the information provided in the attached
presentation”. The defender responded with an offer to insure on a variety of terms and
conditions. As Mr Barne submitted, that offer was capable of immediate acceptance. It is
true that it was a conditional offer but it was not an enquiry. An element which was
essential if the pursuer’s argument was to get off the ground was absent.
[44] We see the force of the defender’s submission that a party can only waive a right or
entitlement if it is aware that it has it, whereas here the defender was not aware that it was
entitled to more by way of disclosure of information than it had received; and the defender’s
further submission that here the pursuer does not offer to prove that he actually relied on
the terms of the email of 24 March 2017 in withholding further disclosure. However, it is
sufficient for a determination of the reclaiming motion that we find that a reasonable reader
of the email would not have understood it as containing an enquiry that was to be construed
as an expression of limited concern about the pursuer’s past experience of insolvency such
as to exclude the undisclosed information from what was required to be disclosed for a fair
presentation of the risk. In all the circumstances as admitted by the pursuer, the defender
was therefore entitled to avoid the policy.
[45] The reclaiming motion is accordingly refused.