Lloyd's Maritime and Commercial Law Quarterly
NON-DISCLOSURE AND AVOIDANCE: LIES, DAMNED LIES, AND “INTELLIGENCE”
Brotherton
v. Aseguradora Colseguros
In Brotherton
v. Aseguradora Colseguros SA and La Previsora SA
, Compania de Seguros
1
the Court of Appeal addresses issues as to whether allegations of criminal conduct which are not in fact correct have to be disclosed by a person proposing for insurance. The court held2
that such allegations are “material circumstances” and have to be disclosed, and also rejected the approach of Colman J who had held in The Grecia Express
3
that, although such allegations were “material’” still it should be open to the insured to prove at a trial that the allegations were in fact untrue, and if this were proved then the insurers should not be entitled to avoid the insurance.
The defendants (“the reinsured”) had issued bankers’ package policies including fidelity insurance to a Colombian state-owned bank. Between January 1997 and late November 1997 (prior to the placing of the reinsurance contracts, which was done in late November 1997) there were reports in Colombia of allegations of misconduct against the President of the bank. These reports were not disclosed to the claimants (“the reinsurers”), who were seeking a declaration that they had validly avoided the reinsurances.
The Court of Appeal was deciding whether to uphold the judgment of Moore-Bick J who had struck out parts of the reinsured’s defence.4
The reinsurers had applied (at a restored case management conference) for the reinsured to be debarred from using any evidence which was not available to them at the time when the contracts of reinsurance had been written, in order to prove that the allegations against the President of the bank were without foundation.5
The order appealed against struck out parts of the defence which, before the Court of Appeal, were represented by denials that there was “any proper basis for” the investigation and charges against the President of the bank (and others) and the statement that the reinsured would rely upon “the fact that the allegations … were baseless”.6
Mance LJ who gave the leading judgment (with which Ward and Buxton LJJ agreed) expressed the exact issues arising as:
1. [2003] EWCA Civ 705; [2003] 2 All ER (Comm) 298.
2. Contrary to the view adopted by Fisher J in the High Court of New Zealand in Gate
v. Sun Alliance Insurance Ltd
[1995] LRLR 385, 399, col 2 and 408, col 1.
3. Strive Shipping Corp
v. Hellenic Mutual War Risks Association (The Grecia Express)
[2002] EWHC 203 (Comm); [2002] 2 Lloyd’s Rep 88.
4. Brotherton
v. Aseguradora Colseguros
[2003] EWHC 335 (Comm); [2003] 1 All ER (Comm) 774.
5. Ibid.
, at [9].
6. [2003] EWCA Civ 705, at [8].
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