RECLAIMING MOTION BY WAYNE STEPHEN GARDNER YOUNG AGAINST ROYAL AND SUN ALLIANCE INSURANCE PLC

Factual and Procedural Background

The Plaintiff, insured under a commercial property insurance policy issued by the Defendant in March 2017, suffered extensive fire damage to the insured premises in March 2018. The Plaintiff sought indemnification under the policy, but the Defendant declined, avoiding the policy from inception on the basis of nondisclosure of the Plaintiff's prior directorships in companies that had been dissolved following insolvent liquidation within the preceding five years ("the undisclosed information").

The Plaintiff initiated a commercial action seeking a declarator that the Defendant was bound to indemnify and payment of £7,200,000. The Defendant pleaded entitlement to avoid the policy due to material nondisclosure. The Plaintiff accepted the duty under the Insurance Act 2015 to make a fair presentation of the risk but argued that the Defendant waived its right to the undisclosed information, that the information was immaterial, and that the Defendant would have entered the contract regardless.

Following procedural debate, the Commercial Judge excluded the Plaintiff's averments of waiver from proof and allowed proof on materiality and inducement. The Plaintiff later admitted the undisclosed information was material and that the Defendant would not have entered the contract if it had been disclosed, conceding materiality and inducement. The Commercial Judge accordingly discharged proof on those issues and granted decree in favour of the Defendant. The Plaintiff now appeals, focusing solely on whether the Defendant waived its entitlement to the undisclosed information.

Legal Issues Presented

1. Whether the Defendant waived its entitlement to disclosure of the Plaintiff's prior involvement with insolvent companies by the nature and content of its communications prior to contract formation.

Arguments of the Parties

Appellant's Arguments

• The insurer's obligation to disclose can be limited by the questions it asks; an insurer may waive disclosure of information beyond the scope of its enquiries.
• The Defendant's email of 24 March 2017, containing a stipulation that the insured had never been declared bankrupt or insolvent, constituted an implied waiver of disclosure of the Plaintiff's prior corporate insolvencies.
• Case law such as Doheny v New India Assurance Co. and R&R Developments Ltd v AXA Insurance UK Plc support the principle that an insurer may waive disclosure by restricting its enquiries.
• The Commercial Judge erred by treating the Market Presentation as the entire presentation of risk and excluding the significance of the Defendant's email and the broker's responses.
• The Defendant's email was not a conclusive offer but a conditional offer or enquiry, thus part of the presentation of risk and relevant to waiver.
• The Commercial Judge wrongly imported wording from the Market Presentation into the Defendant's email, creating an unreasonable "moral hazard stipulation".
• Even if the email included the moral hazard stipulation, it waived disclosure of insolvencies not personally experienced by the Plaintiff, consistent with case law.
• Waiver in this context does not require full reliance as in other legal contexts; it is an equitable and flexible concept.
• The reclaiming motion should be granted to overturn the decision denying waiver.

Respondent's Arguments

• The Plaintiff had an overriding duty to make a fair presentation of the risk, which the Market Presentation fulfilled.
• The Defendant did not waive the right to disclosure; the 24 March 2017 email was a detailed offer, not an enquiry or request for further information.
• The cases cited by the Plaintiff were not applicable to the facts of this case.
• There was no proposal form, and the Defendant did not define in advance the information it wished to receive.
• The 24 March 2017 email and attachments constituted an extensive offer capable of immediate acceptance, with no request for additional disclosure.
• The Plaintiff did not aver reliance on the Defendant's email in failing to disclose the undisclosed information.
• Waiver requires an unequivocal, voluntary, and informed abandonment of a known right, which was absent here as the Defendant was unaware of any breach and did not waive its rights.
• The "subjectivity" clause in the Defendant's email was a pre-condition of liability, not a waiver of disclosure obligations.
• The Commercial Judge correctly concluded that the communications did not amount to a waiver of disclosure.
• The reclaiming motion should be refused.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court focused on the interpretation of the Defendant's email of 24 March 2017, which contained terms described as "Subjectivity". The Court emphasized that insurance contracts involve the contractual reallocation of risk, requiring a fair presentation of the risk by the insured. The Insurance Act 2015 imposes a duty on the insured to disclose every material circumstance or to give sufficient information to put a prudent insurer on notice to make further enquiries.

The Court acknowledged that an insurer may waive the insured's duty to disclose certain information by the nature of the questions it asks, commonly via proposal forms, but not exclusively. Waiver requires an enquiry or clear indication by the insurer that it is not interested in certain information.

The Court found that the Defendant's email was not phrased as an enquiry nor did it indicate any restriction on the scope of information required. Rather, it was a conditional offer based on the assumption that the insured had made a fair presentation. The email did not waive the right to information about the Plaintiff's previous involvement with insolvent companies.

The Court rejected the Plaintiff's argument that the Defendant's email contained an implied waiver by focusing on a limited insolvency history, noting that the email was neither an enquiry nor a restriction of disclosure obligations. The Court also noted the absence of any reliance by the Plaintiff on the email in failing to disclose the information.

Accordingly, the Court concluded that a reasonable reader of the email would not construe it as a waiver of the right to receive the undisclosed information, and the Defendant was entitled to avoid the policy for material nondisclosure.

Holding and Implications

The Court REFUSED the Plaintiff's reclaiming motion (appeal).

The direct effect is that the Defendant's avoidance of the insurance policy for material nondisclosure is upheld, and the Plaintiff is not entitled to indemnification. No new legal precedent was established; the decision affirms the proper interpretation of waiver and disclosure obligations under the Insurance Act 2015 in the context of commercial insurance negotiations.