Insurance Proposal Forms – Handle with extreme care

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

Facts

Genesis Housing Association proposed to spend £4,600,000 on having an office block converted to residential apartments by Time and Tide Bedford Limited. It arranged for insurance to cover building defects and to cover failure to complete by the contractor.  The proposal form submitted to the insurer, Liberty, wrongly identified the proposed builder as Time and Tide Construction Limited.  In due course Time and Tide Bedford Limited went into insolvency and Genesis Housing Association had to spend considerable sums on a new contractor to get the job finished.  It claimed on its policy against Liberty, who rejected liability.

Court of Appeal Held

1. Liberty was not liable to Genesis, Genesis had submitted a proposal form which was materially untrue.  They had identified a different builder.  This amounted to a breach of warranty and the policy issued by the insurers was therefore void.
2. The proposal form contained the industry standard wording that would form the basis of the insurance policy.  This meant that every statement in the proposal form was a warranty of fact and any material inaccuracy would constitute a breach of such warranty.

Comment

The Court of Appeal has reminded us of the extreme importance attached to factual accuracy in proposal forms.  Although usually the signatory is only required to supply information “to the best of his knowledge and belief”, this is not a licence for carelessness or guesswork.  In this decision the Court of Appeal has demonstrated yet again the fundamental, traditional English common law approach to contract interpretation, which is to give effect to the meaning of the words, if sufficiently clear, rather than to more general considerations of fairness or proportionality.

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