Waiver of disclosure under the Insurance Act 2015
The High Court recently handed down Judgment in Clarendon Dental Spa LLP & Anor v Aviva Insurance Ltd & Zurich Insurance Plc [2025] EWHC 267 (Comm) in which the Claimant policyholder successfully struck out parts of its insurer’s avoidance defence on the basis the insurer, Zurich, had impliedly waived a requirement to disclose certain matters before the insurance policy was incepted.
The judgment joins a line of case law starting with the Court of Appeal in Doheny v New India Insurance Co [2005] 1 Lloyd’s Rep IR 251 and is useful reading for insurance practitioners.
In this article, Hamish Fraser examines the judgment in the context of the law relating to the duty of fair presentation and implied waivers of disclosure under the Insurance Act 2015.
Hamish, led by Ben Quiney KC, acted for the successful Claimant in Clarendon Dental Spa v Zurich.
What are the requirements of disclosure under the Insurance Act 2015?
An insurance contract is a contract of utmost good faith which obliges its contracting parties to satisfy certain obligations above and beyond those required under standard contractual principles. Amongst these is the insured’s pre-contractual duty to give a fair presentation of the risk which is to be insured. The rationale for that duty is that insurance is a contract predicated on the insurers’ estimation of the risk to be insured, and that such estimation is based on facts commonly known only by the insured. The duty was codified by the Insurance Act 2015 (“IA 2015”).
Pursuant to s.3 IA 2015, an insured must make a fair presentation of the risk to its insurer before a contract of insurance is entered into.
A fair presentation of risk requires an insured not to make any material misrepresentation (s. 3(3(c) IA 2015) and positively to disclose every material circumstance which the insured knows or ought to know (s. 3(3)(a) and s.4 IA 2015).
A circumstance or representation is material if it would influence the judgment of a prudent insurer in determining whether to take the risk and, if so, on what terms (s.7(3) IA 2015).
The risks to the insured of failing to satisfy this pre-contractual duty are severe. Where the insurer can show the non-disclosure of information induced it to contract, and depending on what it would have done if fair disclosure had been given, it may avoid the contract and refuse all claims, or proportionately reduce the amount to be paid on any claim consistently with the higher premium it would have charged, or treat the contract as if it had been entered into on different terms (see paras. 1 – 6, Sch. 1, IA 2015).
However, pursuant to s. 3(5)(e) IA 2015, an insured is not required to disclose a circumstance to its insurer if it is “something as to which the insurer waives information”. This essentially replicates Section 18(3) of the Marine Insurance Act 1906 which was previously applicable.
When will an insurer be taken to have waived information to be disclosed?
Broadly, waiver under s. 3(5)(e) IA 2015 can arise in three ways.
First, an insurer can positively waive circumstances needing to be disclosed by expressly indicating to an insured that it need not disclose certain matters. This is likely to be rare given it generally benefits insurers to be provided with as much material information as possible.
Second, an insured might submit some information which puts an insurer on notice that it needs to make further enquiries. Where the insurer does not then make any such further enquiry, it may impliedly indicate to the insured that further disclosure on that matter is not required (see e.g. WISE (Underwriting Agency) Ltd v Grupo Nacional Provincial SA [2004] 2 Lloyd’s Rep. 483, but which has arguably been subsumed within s. 3(4) A 2015).
Third, the insurer may impliedly waive disclosure by asking questions (usually on a proposal form or statement of fact) aimed at a targeted class of information which reasonably suggests that insurers are not interested in related information outside of the scope of that targeted class. A common example would be questions which are temporally limited. If an insurer asks for disclosure of criminal convictions within the last 10 years, it is reasonably understood that insurers do not require disclosure of convictions prior to the last 10 years.
The issues which arose in Clarendon Dental Spa v Zurich related to this third category of implied waiver.
Previous Case Law
Clarendon Dental Spa v Zurich joins a line of case law running from the Court of Appeal in Doheny v New India Insurance Co [2005] 1 Lloyd’s Rep IR 251 through R&R Developments Ltd v Axa Insurance UK plc [2009] EWHC 2429 (Ch) and Ristorante Ltd v Zurich Insurance plc [2021] EWHC 2538.
Like the instant matter, each of those decisions dealt with implied waiver arising from questions posed by insurers on proposal forms or statements of facts, and each time in relation to the alleged non-disclosure of insolvency events connected in some way to the policyholder business (usually the liquidations of companies sharing a common director as the policyholder business).
In Doheny, the proposal form had a “DECLARATION”, the fifth of which was:
“5. No director/partner in the business, or any Company in which any director/partner have had an interest, has been declared bankrupt, been the subject of bankruptcy proceedings or made any arrangement with creditors.”
In fact, the directors of the insured had been directors of three insolvent companies. The Court of Appeal held that there had been a misrepresentation because the question – although it referred to the legally incorrect concept of a bankrupt company – was sufficiently clear in its meaning to require disclosure of the liquidations. This made it unnecessary for the Court of Appeal to decide whether there had been any waiver of disclosure by the limited nature of the question asked, although the Court of Appeal was unanimous that had the question been ambiguous and construed as applying to individual bankruptcy only, there would have been waiver. See Longmore LJ at [21], Sir Christopher Staughton at [29] and Potter LJ at [37].
The Court of Appeal there established the key underlying principle that ([15]): “if questions are asked on particular subjects and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or on matters kindred to the subject matter of the questions”
In R&R v AXA the insured was asked: “Have you or any …Directors either personally or in connection with any business in which they have been involved …[e]ver been declared bankrupt or are the subject of any bankruptcy proceedings or any voluntary or mandatory insolvency?” The insured answered in the negative. Insurers sought to rely on the fact that one of the directors of the insured had been the director of a company that had been placed in administrative receivership. The court held that on a proper construction of the question, it related to the insured company and its directors alone [30]-[32]. Further, the Court held that any requirement to provide information about the insolvency of companies with which the directors had been involved had therefore been waived [42].
In Ristorante, the policyholder was required upon renewal to indicate responses to various statements of fact, including the following: “No owner, director, business partner or family member involved with the business… has ever been the subject of a winding-up order or company/individual voluntary arrangement with creditors, or been placed into administration, administrative receivership or liquidation”. The policyholder answered ‘agree’.
The court held that on a proper construction of the statement of fact, the question related to the insured company and its directors alone [44 – 59]. The court therefore determined that, having specified the persons in respect of whom a previous liquidation would be disclosable, Zurich thereby limited its right of disclosure in respect of other unspecified persons or companies which had been placed into liquidation [90 – 92]. Zurich’s avoidance defence failed accordingly.
Clarendon Dental Spa v Zurich
In Clarendon Dental Spa v Zurich, the Claimant company (“Clarendon”) operated a dental business from the “Premises”.
The Premises were owned by the “LLP”, which had previously also operated the dental business as a mixed membership partnership comprised of members being two persons, Dr Al-Ani and Dr Patel (who were dentists and business partners), and two corporate persons, JHP and PDS.
In 2014, the dental business had been restructured such that its goodwill was sold to Clarendon (a limited company), the Premises were retained by the LLP and rented to Clarendon, and JHP and PDS were put into liquidation.
Thereafter the LLP insured the Premises whilst Clarendon insured the contents and its business interruption losses.
In 2021, a substantial fire broke out at the Premises, and the LLP and Clarendon put forward insurance claims to their respective insurers, Aviva and Zurich.
Both Aviva and Zurich had defended the claims for indemnity inter alia on the basis that the fact of PDS and JHP’s liquidation in 2014 had not been disclosed to them when respective insurance policies had been renewed in 2020/2021.
As part of the insurance renewal process, the LLP and Clarendon had been invited to confirm standard Statements of Fact containing questions which had been written by the insurers.
The Zurich Statement of Fact identified Clarendon as the “Policyholder” and described the “Policyholder’s Business” as “Dental Practice”. It then set out a series of questions and answers, including these:
The first question in that list was referred to as the “Zurich insolvency question”.
The Aviva statement of fact identified the LLP as the Policyholder and described its business as “Dentistry” and then set out a series of declarations:
Neither You or Your directors or partners involved with The Business or any other company or business have:
- ever had a business insurance proposal declined, renewal refused, insurance cancelled or special terms applied
- ever been convicted of or charged (but not yet tried) or been given an Official Police Caution in respect of any criminal offence other than a motoring offence which are not spent under the Rehabilitation of Offenders Act
- in the last ten years been declared bankrupt or insolvent or been the subject of bankruptcy proceedings or insolvency proceedings or been disqualified from being a company director
- in the last ten years been the subject of a County Court Judgement, an Individual Voluntary Arrangement, a Company Voluntary Arrangement or a Sheriff Court Decree
The third declaration was referred to as the “Aviva insolvency declaration”.
The Application
The LLP and Clarendon issued strike out and/or summary judgment applications on the basis that, properly construed, they had answered or confirmed correctly to each insurers’ Statements of Fact because neither of the LLP or its partners or Clarendon or its directors had ever been declared bankrupt or insolvent or been subject to insolvency proceedings. Further, that insurers had no real prospect of defending the claim on the basis of the liquidations of PDS and JHP, because by asking the questions they had on the respective Statements of Facts, insurers had impliedly waived any requirement to disclose the liquidations of any entities other than those of the LLP or its partners, or Clarendon or its directors (or, in the case of the Zurich Statement of Fact, the insolvency events of family members involved with the business).
Shortly after issuing the application, the LLP settled its claim with Aviva by way of a confidential settlement agreement. Clarendon’s application proceeded against Zurich.
Zurich defended the application by proposing amendments to its defence. Its updated defence was that: (i) first, that Clarendon had made a material misrepresentation by incorrectly answering the Zurich insolvency question; (ii) second, that Clarendon had in any event failed to disclose the fact of the liquidations in breach of its duty of fair presentation, and there had been no waiver of that requirement by Zurich; (iii) third, Clarendon had also failed to disclose that the LLP had previously misrepresented (in the Aviva statement of fact) or failed to disclose the fact of the liquidations to Aviva.
The rival interpretations of the Zurich Statement of Fact
The application centred upon the proper construction of the Zurich statement of Fact.
Clarendon argued that the subjects of the Zurich insolvency question were the identified policyholder (“you”) together with (a) the current partners in the policyholder, if the policyholder was a partnership (i.e. current when the question was answered), (b) the current directors of the policyholder, if the policyholder was a company, and (c) family members of the policyholder currently involved in the business, if the policyholder as a sole trader or the business was operated as an informal family arrangement. In the present case, therefore, the subjects of the question would be Clarendon and its current directors only. None of those persons has been declared insolvent or bankrupt; Clarendon therefore answered the question correctly.
Zurich argued for a broader interpretation. It said that the question covered any partner in any partnership and any director of any company, provided that the partnership or company, or the partner or director, was currently or was previously involved in the business of the policyholder. In the present case, that would include PDS and JHP because they were formerly members of the LLP, and the LLP had operated the dental practice until 2014 (and, on Zurich’s case, remained involved to some extent thereafter).
The Judge’s interpretation
Mr Quest KC first considered the principles to be applied when considering the proper construction of insurance policy documents. There was no dispute that the interpretation of insurance policy documents broadly followed the principles generally applicable to interpretation of contracts as set out by the Supreme Court in Wood v Capita Insurance Services Ltd [2017] AC 1173.
There was, however, an additional, special rule that applied where there was an ambiguity in a question asked by an insurer. When the court is interpreting questions posed by insurers rather than a negotiated contract term, a different approach applies pursuant to which any genuine ambiguity is resolved in favour of the policyholder. Therefore, if there is genuine ambiguity in a question put to an applicant by insurers in a proposal form or elsewhere, the latter cannot rely upon the answer as a misrepresentation of fact if that answer is true having regard to the construction which a reasonable man might put upon the question (see Snowden J in Ristorante at [35]).
The Judge first considered the Zurich insolvency question from a linguistic perspective. He found that whilst the question did not expressly ask about partners or directors of the policyholder (compare the Aviva insolvency declaration, which did), the juxtaposition (“you and any partners, directors…”) together with the fact that there was no reference in the question to any partnerships, companies, or trading entities other than the policyholder, strongly indicated that that was what was intended. Moreover, “you and any partners, directors…” was naturally read as referring to current partners or directors (i.e. current at the date of the question), not to former partners or directors. That reading was reinforced by the use of the phrase “involved in the business”, which was naturally read as a reduced form of “[who are] involved in the business”, not “[who are or were]”.
The Judge considered that his linguistic analysis was consistent with commercial and common sense. A significant factor was the practical difficulty that might be expected to be faced by the policyholder in answering the question if it meant what Zurich said it did. The Judge found there would have needed to be an inquiry into the circumstances not only of the policyholder’s own former partners or directors but also of the partners or directors of predecessor owners and operators of the business. As part of that inquiry, the policyholder might have to make a judgment about whether any potentially relevant person was sufficiently involved in the business to require investigation. The Judge found that an exercise of that kind was in principle both unrealistic and unnecessary.
The Judge added that if his view of the interpretation was wrong, then he would nevertheless have found the Statement of Fact as at best ambiguous in two respects: first, as to whether it was asking only about partners or directors of the policyholder as opposed to other entities such as LLP; and, second, as to whether it was asking only about current partners or directors or whether it extended also to former partners or directors. In deciding whether there had been a misrepresentation, that ambiguity would then have to be resolved in favour of Clarendon.
The Judge applied much the same analysis to the Aviva Statement of Fact, which he also found to have been targeted at directors or partners of the policyholder itself.
Waiver
Having decided upon the proper interpretation of the Zurich insolvency question, the Judge was satisfied that by asking the question in the terms it did, Zurich had impliedly waived disclosure of the fact of the insolvency of any persons other than the subjects of the question, who, as he had found, were Clarendon and its current directors. Accordingly, Zurich’s defence based upon that non-disclosure was bound to fail and was struck out.
In doing so the Judge noted that whilst Doheny, R&R, and Ristorante concerned different documents, and the decision on waiver in Doheny was obiter, the cases clearly illustrated the point that if an insurer asks about the insolvency of specific persons, whether identified by name or by description or category, then a reasonable insured would be justified in thinking that the insurer was interested in those persons only.
Conclusions
The case is consistent with and joins the line of cases through Doheny, R&R, and Ristorante. It provides helpful guidance to the principles to be applied when construing insurance policy documents and deciding whether there has been a waiver of disclosure pursuant to the IA 2015.
It is of particular note to insurance practitioners in that it was fought on a strike out/summary judgment application. Given the question of waiver under the IA 2015 is broadly speaking a question of the proper construction of insurance policy documents (notably proposal forms or statements of facts), the Judge understandably felt comfortable in grasping the nettle and deciding the issues (following Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch)). Therefore, if a question of waiver arises in an insurance claim, it may well be advisable for the policyholder to seek early resolution of the issue by way of a strike out/summary judgment claim, given success will dispose of insurers’ defence on the particular alleged non-disclosure without needing to expend substantial cost fighting the entire case to trial.
Ben Quiney KC and Hamish Fraser acted for the Claimant, instructed by Fenchurch Law.
David Myhill acted for the Defendant, instructed by Clyde & Co LLP.
