11 April 2019

In the pre-Insurance Act 2015 world, it was well established that the nature of questions in proposal forms could shape what information an insurer was entitled to receive. For example, if an insurer specifically asked about convictions in the last five years, it could not expect to be told of one that occurred six years ago, even if that would otherwise be a disclosable material fact.

Wayne Gardner Young v Royal and Sun Alliance PLC [2019] CSOH 32

Since the introduction of the Act there has been a ‘sea change’ in non-consumer policies, with the proposer now having almost complete control over the information provided to Insurers: proposal forms are out and the duty of fair presentation has arrived.

In this case, a broker provided details of a property risk in a ‘market presentation’. The Insurer offered terms in response and, when doing so, included a stipulation that the proposer had not been made bankrupt. This was correct, however, the proposer had a history of involvement with companies that had entered insolvent liquidation. That was not disclosed to Insurers, who avoided the policy on that basis.

The matter came before the court for a discussion on the procedure roll, at which it was assumed that the proposer’s insolvency history was a material fact that should have been disclosed. The question for the court was whether the narrow stipulation as to the proposer’s bankruptcy waived Insurers’ rights to be told of the wider insolvency history. Earlier cases have held that similar wording (in proposal forms) can do so. On the facts of this case, the court held there was no waiver: the pursuer’s allegation was held irrelevant and the allegation was dismissed. 

However, this was the first time the issue had been before the court since the Act’s introduction. A number of interesting issues arose, not least whether Insurers could still shape disclosure in a scenario where they no longer controlled the questions being asked and where the duty of fair presentation lay squarely on the shoulders of the proposer.

Lady Wolffe held that the law on this point had not changed and that is was still possible for Insurers to waive their rights by asking limited questions. What the Act did was to introduce a new landscape against which the existing law was to be applied. Lady Wolffe made clear that there would be no automatic assumption that correspondence by Insurers amounted to an ‘enquiry’ and that even if Insurers did ask a question it would not give rise to waiver, unless that was clear on the facts.

The ‘take-away’ point is that whilst the existing authorities remain good law, the court will not blindly apply these to excuse a proposer that has failed to meet its duty of fair presentation. This is a common-sense outcome that will provide comfort to Insurers on both sides of the border.

A fuller discussion of the case can be found here.

Contact: Matthew Raftery , Associate mra@bto.co.uk T. 0141 221 8012