Insurance – breach of warranty and material misrepresentation

Published Date: 11/08/2023
Source: By Donald Dinnie, Norton Rose Fulbright

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In this recent judgment the insurer unsuccessfully rejected policy liability on the basis of a material misrepresentation, alternatively, breach of a warranty.

Insurance had been obtained for a once-off all-risks transit cover for personal protective equipment face masks.

In proposing for the insurance, it was recorded that the transit would be done by professional third-party carriers. It was not. 

The insured had hired-in a truck and a driver. The truck and goods was hijacked. The truck was later recovered by the goods were not.

The insurer’s evidence was that had the insured not represented that the conveyance would be by professional third-party carriers, the proposal would have been escalated for consideration to determine whether the risk was acceptable at all. If it had been decided to accept the risk at all, it is likely that the premium rate and excess payable by the insured in the event of loss, would have been increased.

The court rejected the submission that there had been an actionable misrepresentation. On a sensible and business-like interpretation of the policy, the insurer expressly permitted the insured to convey the goods in a conveyance owned, hired, or operated by the insured. It was the insurer itself who chose to contract with the insured in the manner that gave it the choice to hire the truck and appoint its own driver instead of conveying the goods with a professional third-party carrier. The insurer had the opportunity to include all the relevant terms and conditions that deemed it essential to protect itself and did not do so.

There had been no misrepresentation inducing the contract. The insurer permitted the insured to transport the masks using a third party carrier.

It was undisputed that the policy contained an express warranty that there had to be live tracking of the relevant motor vehicle. There was no provision that the satellite tracking device had to be monitored at all times. It was common cause that after the claim the insurer changed its policy wording to insert that the requirement that the satellite tracking device had to be monitored. 

On the facts the court said that there was no basis to read in the requirement of monitoring into the warranty. 

Nowhere in the warranty was it stipulated that tracking had to be monitored. The court said that was an afterthought raised after the claim had been made. The amendment of the wording after the claim was made as a result of the realisation that the wording was ambiguous and the insurer had failed to remove that ambiguity, when it could have done so, at the time when it contracted with the insured.

A court will not easily read additional terms into a warranty where the insurer had the opportunity of clearly recording the insured’s obligations under the warranty and did not do so.