“Why on earth do Insurers want so much information about my business? We’re Ground Workers, surely they know what that means!?”
In reality, most insurance underwriters have never been near a construction site and don’t understand what goes on behind that Heras fencing. Underwriters are also able to rely upon the fact that the policy they provide for you has certain terms and conditions within it that they use to avoid the policy entirely if you haven’t told them everything that could influence their decision to give you a quotation.
In a recent High Court decision Brit UW Ltd managed to entirely avoid their liability under a contractor’s policy for a Yorkshire based tunnelling company for material non disclosure of information and misrepresentation.
Background
The company was contracted to install a micro-tunnel underneath a railway track at a building site (the “Site”) in the summer of 2013. On 27 August 2013 a freight train derailed when passing through the Site. It was established that this was the result of a severe dip in the track caused by a void in the ground underneath the track, which had developed due to the company’s tunnelling, resulting in several third party claims.
Brit avoided the policy on the basis of material non-disclosure and misrepresentation on the part of the company and sought a declaration from the Court that it had validly avoided the Policy.
High Court Decision
1. Material non-disclosure
The court found that the company had failed to disclose the existence of a significant earth settlement and road void at the Site prior to entry into the Policy and that this information would have influenced the judgment of a prudent insurer in fixing the premium or determining whether to take the risk.
2. Misrepresentation
The court found that a representation by the companies broker that the company had not conducted (and would not, during the forthcoming policy period conduct) tunnelling works under, or in close proximity to, an active railway line was false. This misrepresentation was deemed to be a material misrepresentation as tunnelling under active railway lines would attract a higher premium as it was a more hazardous activity.
The material misrepresentation and the material non-disclosure were found to have induced Brit into entering the Policy as the court believed that Brit would have acted differently had it been told that the company had been tunnelling under active (rather than inactive) railway lines.
Now whilst you may not be involved in a high risk activity like tunnelling, there are lots of other examples where insurers try to avoid liability due to non disclosure of material information. It is therefore of paramount importance that your broker knows what kind of work you have done in the past, what you are doing now and what you plan to do in the future. This way the correct representations can be made to insurers on your behalf and an unexpected declinature by an insurer can be avoided.
If you are unsure whether you have declared everything you should have or would like some more advice on this subject please contact your Account Executive at ProAktive or feel free to contact me on 01302 341 344.