Successfully negotiating claims since 1867
Melanie Chisnall, Legal Assistant at Browne Jacobson LLP
This Mercantile Court case is an interesting decision on the way in which insurers deal with claims and how a ‘kitchen sink’ defence is not always going to work.
The Claimant (W) operated a management company, which ran a portfolio of properties for a developer (S).
The property which was the subject of the claim was comprised of two buildings, one of which had tenants and the other was used for storage. W stated to their insurer (G) in the proposal form that the property was let or managed. Following the fire, the insurer declined to indemnify W on the basis that:
- W had no insurable interest because it did not own or have tenancy over the premises
- The proposal form did not state that the property was used commercially and therefore had misrepresented the use
- S’s plan to reinstate the building was commercially absurd and was concealing the true intention to sell the site to a developer.
W sought a declaration from the Court that it was entitled to be indemnified under the policy.
Judge Mackie QC granted the declaration. He found that the insurance was not granted on the basis of the proposal form, the errors on the form were not material and therefore there had been no breach of warranty. At the time of writing the risk there was no evidence of any misrepresentation which was material or that had been relied upon by G. The judge also stated that any underlying business model of the Claimant was not a concern for the insurer. The insurer had to confirm indemnity before any right to reinstatement arose and any issues regarding reinstatement could be resolved on the basis of the Tonkin v UK Insurance Limited  case.
In view of the Insurance Bill, which is currently makings its way through the final stages of Parliament, it is crucial for insurance companies to focus on what is material to the policy when evaluating claims.