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case concerns Insurers' right to avoid for non-disclosure and the extent
to which that right can be limited by the doctrine of good faith; double
insurance and the position of a volunteer.
The Court
of Appeal overturned Moore-Bick J's decision that Provident had the
right to avoid a policy for material non-disclosure ([2003] EWHC 109
(Comm)). A motorcyclist was injured by a car driven by Mrs Kaur. The
car was owned by her husband, Dr Singh. Mrs Kaur was insured under a
policy with Drake in respect of any car driven by her with the owner's
consent. Dr Singh was insured under a policy with Provident which included
cover for Mrs Kaur as a named driver. Dr Singh claimed on his policy
for compensation sought by the motorcyclist but shortly after this Provident
informed Dr Singh that his policy was void on the ground of his non-disclosure,
at the time of renewal, of a conviction for speeding. Mrs Kaur therefore
made a claim under her policy with Drake, which settled the claim. Drake
then issued proceedings to seek a contribution from Provident.
The background
to the purported avoidance of the policy was not only that Dr Singh
had failed to disclose his speeding conviction to Provident, but also
that he had failed to inform Provident that an earlier accident his
wife had been involved in, previously disclosed to and treated by the
insurers as a "fault" accident, had been resolved entirely
in her favour. Disclosure would have reclassified it as a "no fault"
accident. Taken together, the facts of the conviction and the reclassification
of the accident as "no fault", would not have affected the
policy premium. Moreover, Provident had continued to collect monthly
payments in respect of the policy and this continued even after the
purported avoidance of the policy.
The main
decisions of the Court of Appeal were:
·
That Provident was not entitled to avoid the policy since it had not
been shown that Provident was induced to enter into the contract by
Dr Singh's non-disclosure of his speeding conviction. As a result of
the earlier accident in fact being "no fault", there would
not have been any increase in premium.
·
Pill LJ found that any right to avoid the policy was limited by the
doctrine of good faith. He found that Provident was sufficiently put
on notice of the true facts to make it a breach of its duty of good
faith to avoid the policy without making what would have been a simple
enquiry as to the true position so far as the earlier accident was concerned,
namely whether it was really a fault accident. Rix LJ and Clarke LJ
declined to make an express decision on this point but made general
comments in support of Pill LJ's view.
·
There had been no unequivocal avoidance of the policy on the facts of
the case. Provident continued to insure Dr Singh under the same policy
and continued to take premiums by direct debit.
·
The payment made by Drake was not voluntary. Each of the policies contained
a "rateable proportion" clause to the effect that if there
was any other insurance covering the same loss, the insurer would not
be liable to pay more than its rateable proportion of the loss. Drake
sought 50% of the claim from Provident. Drake had made clear to Provident
that it was in dispute as to Provident's liability to indemnify Mrs
Kaur, that it was reserving its position and that it would litigate
to recover what was due. Accordingly it was not barred from doing so.
Rix LJ
refers in this judgement to what he describes as "the large question":
"Ultimately
the issue seems to be: who takes the risk that the true facts as of
the time of contract, conclusively established by the time of contract,
do not support the right to avoid? I do not see why, subject to estoppel
or other such defences, the answer should not be in favour of the insured."
These comments are obiter; they are, however, very important and offer
a platform upon which future cases might be built.
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