In Brit UW Ltd v F&B Trenchless Solutions Ltd  EWHC 2237 (Comm) the Commercial Court provided guidance on the circumstances or information that are “material” to an insurer for the purposes of underwriting a risk.
The F&B Trenchless installed a tunnel under a road and railway level crossing and had estimated that after the work was complete, the track above the tunnel would settle by 2-4mm. In the event, it settled by 15-18mm, and a crack appeared in the road. At this point, F&B Trenchless took out a combined liability policy with Brit, but failed to disclose that the track in question had settled by 15-18mm, or that the tunnel was under an active railway line. Subsequently, an accident occurred due to the settlement of the track, and F&B Trenchless claimed under the policy. Brit sought to avoid the policy.
Mr Justice Carr had little difficulty in deciding that the facts which F&B Trenchless had failed to disclose were material, stating that they “were matters which clearly would influence the judgment of a prudent insurer in determining the terms of any policy or in deciding whether to take the risk on at all”. As such, it was held that Brit was entitled to avoid the policy in question.
Avoidance of an insurance policy is a draconian remedy. The Insurance Act 2015 will make significant changes to the availability of the remedy of avoidance when it comes into force in August next year. You can read more about those changes here.