Not upheld: breach of duty of fair presentation of risk; non-disclosure of material fact; policy voidance complaint against The New India Assurance Company Limited

Decision detail

Summary

M, a limited company directed by Mr S, complained about New India's refusal to renew its commercial insurance policies and decision to void all policies from 2019 on the grounds that M failed to disclose that its directors had been involved in a company that entered liquidation in 2009. M argued the proposal form question about 'liquidation administration' was unclear and that it had answered correctly. The ombudsman found that the question was sufficiently clear when read as a whole to require disclosure of any previous business insolvency involving directors, and that M's failure to disclose this material fact constituted a qualifying breach of the Insurance Act 2015. New India provided reliable evidence it would not have offered cover if it had known of the insolvency history. The ombudsman upheld New India's right to void the policies and endorsed its offer to waive recovery of approximately £153,000 (the net difference between claims paid and premiums across all five policies).

The Ombudsman's reasoning

The ombudsman determined that despite the absence of a comma between 'liquidation' and 'administration', the proposal form question was sufficiently clear when read as a whole to require disclosure of any previous business insolvency involving directors. The question asked about any liquidation (compulsory or voluntary) of previous companies, and M's directors' involvement in a liquidated company in 2009 was a material fact that should have been disclosed. This constituted a qualifying breach of the duty of fair presentation of risk under the Insurance Act 2015. New India provided reliable evidence it would not have offered cover if it had known of this insolvency history. As the breach was neither deliberate nor reckless (likely careless oversight), New India was entitled to void the policies but must refund premiums. New India's offer to waive recovery of the net claims amount (approximately £153,000) was reasonable and proportionate.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website