Insurance Proposal forms – handle with care!

Genesis Housing Association v Liberty Syndicate [2013] BLR 565. Court of Appeal

Genesis contracted with “TT Bedford Limited” to convert an office block into residential housing. It was agreed that the contractor would take out decennial building insurance in the joint names of the contractor and the employer. Unfortunately the contractor filled in the proposal form and by mistake named the contractor as “TT Construction”.  This was the wrong name.  Subsequently the contractor went into liquidation and Genesis claimed £460,000, the cost of appointing a new contractor to complete the works.

The insurer denied liability because the proposal form, which was agreed to form the basis of the insurance policy, was factually wrong.

Held

1. Even though the employer did not know the mistake had been made, and did not sign the proposal form himself, the name given on the proposal form was wrong and this amounted to a breach of an insurance contract warranty so that the policy was void.

Comment

1. The employer did not know the mistake had been made, and the contractor certainly had been careless but did not intend any harm.  Nevertheless this is a strict rule of the interpretation of insurance contract.  Proposal forms must be treated with great seriousness.
2. The Judges commented that “TT Construction” was in fact an established company with a reasonable credit rating whereas “TT Bedford” was a recently formed shell with no assets.  This however was not the point.  It was the fact that the proposal form was wrong that mattered.
3. This harsh rule no longer applies to consumers, after the Consumer Insurance (Disclosure and Representations) Act 2012.

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