Court refuses to uphold insurance claim over failure to disclose earlier losses

The case is only the second dispute to deal with policyholder disclosure in the context of the Consumer Insurance (Disclosure and Reporting) Act 2012 (CIDRA). 

The court found that if the policyholder, Christopher Jones, had revealed a previous claim when he was insuring his £190,000 watch, cover would in all likelihood have been declined, and therefore Zurich Insurance was entitled to avoid the policy covering the Rolex.

Jones brought the insurance claim after allegedly losing the Rolex Tropical watch while skiing in Aspen in 2019. Zurich sought to avoid paying out under the watch’s insurance policy because it said Jones had failed to disclose the earlier loss of a £15,000 diamond from an antique ring when he was applying to insure the watch.

Jones had made a claim in 2016 for the diamond, which had been set in a ring worn by his then-girlfriend, but had said in the documentation to insure the watch that he had not had any losses or claims in the previous five years.

In his testimony to the court, Zurich underwriter Michael Green said he had proposed an increased premium for the watch due to Jones’s age (27) and other risk factors, but also that he would have declined cover for the watch if he had known of the previous claim for the diamond.

The judge said the agreed position of underwriting experts giving evidence was that the claim for the diamond was material information for a prudent insurer to consider, and should have been disclosed. The claims history would inform an underwriter about how careful and honest the insured was.

“That is sufficient to establish that the misrepresentation was a qualifying misrepresentation because on the evidence I have considered that Mr Green would probably have declined the risk had the prior loss been disclosed,” his Honour Judge Pelling QC said.

Financial services disputes expert Charlotte Pope-Williams of Pinsent Masons, the law firm behind Out-Law, said the case served as a warning for consumers at the inception of an insurance policy to make full disclosure about previous claims and any other matters material to the assessment of risk under the policy. 

“It will be interesting to see how this interacts with the Financial Conduct Authority’s guidance on vulnerability, as arguably there will be individuals who due to their vulnerability do not fully understand duty under section 2.2 of CIDRA to take reasonable care not to make a misrepresentation, or as a result of their vulnerability genuinely believe that they have complied with the duty,” Pope-Williams said.

“The case appears to be triumph for common sense in that where seeking to ascertain the impact of misrepresentation on an underwriter’s decision in connection with an insurer’s ability to avoid a policy under CIDRA significant weight was placed on expert underwriter evidence,” Pope-Williams said.

The judge also provided commentary on the judicial approach to testing oral evidence. He noted that the first issue between Jones and Zurich was how the watch came to be lost, which depended on Jones’ oral evidence.

The judge said he could not accept Jones’s oral evidence “save where it is corroborated, against his interest or admitted”. He added that he had tested each witness’s oral evidence against contemporary documentation, admitted and inconvertible facts and inherent probabilities, and said this was an “entirely conventional approach”.

Pope-Williams said the judge’s commentary on this aspect would be generally relevant in the wider context of civil litigation.