The recently published decision by the Inner House in Wayne Stephen Gardner Young v Royal and Sun Alliance Insurance PLC  CSIH 25 considers the question of when an insurer may be found to have impliedly waived an insured’s duty to disclose certain information.
In March 2018 a Glasgow nightclub was extensively damaged by fire and had to be demolished. The owner sought indemnity from his insurers who refused, citing the owner’s failure to disclose that he had previously been a director of four insolvent companies as the basis for avoidance of the policy.
The owner brought a claim against the insurer seeking Declarator that the insurer was bound under the policy and sought payment of £7.2m. The claim was unsuccessful at first instance before Lady Wolffe in the commercial court of the Court of Session. The owner subsequently appealed to the Inner House.
On 19 May 2020 the appeal was refused.
Insurance Act 2015
The dispute centred on Section 3 of the Insurance Act 2015 which requires a prospective policy-holder to disclose sufficient information to provide the insurer with a fair presentation of the risk.
As noted by the Inner House, in order to discharge this duty, the default position is that a person seeking insurance must assume that they are required to disclose every circumstance that would influence the judgement of a prudent insurer. Failure to do so allows the insurer to avoid the policy.
Whilst the owner accepted that he had failed to disclose the information regarding all four liquidations and that it would have been material to the insurer, it was his view that he was not required to do so on the basis that the insurer had waived their right to the information under section 3(5) of the 2015 Act.
The core issue was whether part of an email sent by the insurer on 24 March 2017, in response to the owner’s insurance brokers request for quotation based on an attached market presentation, was sufficient to constitute an implied waiver. As noted by the court this presentation extended to 20 pages and described the potential risk to prospective insurers.
“Insured has never been declared bankrupt or insolvent [and] had a liquidator appointed”.
The owner argued that in “inviting [him] to confirm the accuracy of that statement and by restricting itself to that question”, the insurer was not “concerned” about the fact that he had previously been a director of four insolvent companies. As a result, he argued, he was not required to disclose this information in discharging his duty to make a fair presentation of risk.
Decision on the facts
The Inner House found that the communication was not sufficient to constitute an implied waiver. Of substantial importance was the overall wording of the email and the context in which it was sent. In addition to the wording reproduced above, the insurer’s email also stated, amongst other things:
“Terms have been based on your presentation 13/02/17, our recent discussions and that adequate Risk Management features are in place ie…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”
Read in this context, in the court’s view, a reasonable reader would not have understood the email as limiting the insurer’s concern about the owner’s past experience of insolvency so as to allow him to exclude the undisclosed information.
The court accepted that an insurer can impliedly waive an insured’s duty to disclose information by virtue of the nature of the questions it asks an insured on a proposal form. However, where a proposal form is involved the insurer is in control of the questions and therefore chooses which type of information the insured is required to provide.
In contrast, in this case the email showed that the risk had already been assessed by the insurer on the basis of information provided to them in the market presentation. The insurer was therefore no longer at the stage of making further enquiry or looking for a more complete presentation of the risk. Accordingly, the wording in the insurer’s email simply confirmed that there would be no cover in the event that the policy-holder had a direct experience of insolvency.
Where reliance is being placed on email communications, it seems clear that courts will approach the issue of implied waiver on a case by case basis. Where specific questions are posed either in a proposal form or in an email exchange, arguments based on implied waiver may have more weight.