Banks v Insurance Company of West Indies (Cayman) Ltd and YEE

• Jurisdiction: Cayman Islands
• Judge: (Martin, Morrison and Field, JJ.A.)
• Judgment Date: 04 November 2016
• Court: Court of Appeal (Cayman Islands)
• Date: 04 November 2016

Court of Appeal

(Martin, Morrison and Field, JJ.A.)

BANKS

and

INSURANCE COMPANY OF THE WEST INDIES (CAYMAN) LIMITED and YEE

P. Reed, Q.C. and F. Sbaiti for the appellant;

T. Lowe, Q.C. and W. Jones for the first respondent;

C. Bridges for the second respondent.

Attorneys: Stuarts Walker Hersant Humphries for the appellant; Ogier for the first respondent; Ritch & Conolly for the second respondent.

Cases cited:

(1) Abram S.S. Co. v. Westville Shipping Co., [1923] A.C. 773; (1923), 16 Ll. L. Rep. 245; 1923 S.L.T. 613, applied.

(2) British Caymanian Ins. Co. Ltd. v. Lindo, 2011 (2) CILR 282, referred to.referred to.

(3) Brotherton v. Aseguradora Colseguros S.A., [2003] EWCA Civ 705; [2003] 2 All E.R. (Comm) 298; [2003] 2 C.L.C. 629; [2003] Lloyd's Rep. I.R. 746, applied.

(4) CGU Ins. Ltd. v. AMP Financial Planning Pty. Ltd., [2007] HCA 36, considered.

(5) Carter v. Boehm (1766), 3 Burr. 1905; 97 E.R. 1162; [1558-1774] All E.R. Rep. 183, applied.

(6) Doheny v. New India Assur. Co. Ltd., [2004] EWCA Civ 1705; [2005] 1 All E.R. (Comm) 382; [2005] Lloyd's Rep. I.R. 251, considered.

(7) Drake Ins. plc v. Provident Ins. plc, [2003] EWCA Civ 1834; [2004] Q.B. 601; [2004] 2 W.L.R. 530; [2004] 2 All E.R. (Comm) 65; [2004] 1 Lloyd's Rep. 268, considered.

(8) Glicksman v. Lancashire & Gen. Assur. Co. Ltd., [1925] 2 K.B. 593; (1925), 22 Lloyd's Rep. 179, referred to.

(9) Hair v. Prudential Assur. Co. Ltd., [1983] 2 Lloyd's Rep. 667; (1982), 6 I.L.R. 104, referred to.

(10) Joel v. Law Union & Crown Ins. Co., [1908] 2 K.B. 863; (1908), 77 L.J.K.B. 1108; 99 L.T. 712; 24 T.L.R. 898, applied.

(11) Lambert v. Cooperative Ins. Socy. Ltd., [1975] 2 Lloyd's Rep. 485, applied.

(12) Law Acc. Ins. Socy. Ltd. v. Boyd, 1942 S.C. 384; 1942 S.L.T. 207, referred to.

(13) Manifest Shipping Co. Ltd. v. Uni-Polaris Ins. Co. Ltd., [2001] UKHL 1; [2003] 1 A.C. 469; [2001] 2 W.L.R. 170; [2001] 1 All E.R. 743; [2001] 1 Lloyd's Rep. 389, considered.

(14) Pan Atlantic Ins. Co. Ltd. v. Pine Top Ins. Co. Ltd., [1995] 1 A.C. 501; [1994] 3 W.L.R. 677; [1994] 3 All E.R. 581; [1994] 2 Lloyd's Rep. 427, applied.

(15) Revell v. London Gen. Ins. Co. Ltd. (1934), 50 Ll. L. Rep. 114; [1934] All E.R. Rep. 744; 152 L.T. 258, distinguished.

(16) Strive Shipping Corp. v. Hellenic Mutual War Risks Assn. (Bermuda) Ltd. (“The Grecia Express”), [2002] EWHC 203 (Comm); [2002] 2 All E.R. (Comm) 213; [2002] 2 Lloyd's Rep. 88; [2003] 1 C.L.C. 401, considered.

(17) Taylor v. Eagle Star Ins. Co. Ltd. (1940), 67 Lloyd's Rep. 136, considered.

(18) Versloot Dredging BV v. HDI Gerling Industrie Versicherung AG, [2016] UKSC 45; [2016] 3 W.L.R. 543; [2016] 4 All E.R. 907; [2016] 2 Lloyd's Rep. 198, distinguished.

(19) Wilson & Scottish Ins. Corp. Ltd., In re, [1920] 2 Ch. 28, referred to.

(20) Zeller v. British Caymanian Ins. Co. Ltd., 2008 CILR 11, distinguished.distinguished.

Legislation construed:

Monetary Authority Law (2016 Revision), s.34(6): The relevant terms of this sub-section are set out at paras. 44 and 77.

Vehicle Insurance (Third Party Risks) Law (2012 Revision), s.15(3): The relevant terms of this sub-section are set out at para. 1.

s.15(5): The relevant terms of this sub-section are set out at para. 2.

Marine Insurance Act 1906 (c.41), s.17: The relevant terms of this section are set out at para. 46.

Insurance — misrepresentation and non-disclosure — insurer avoiding policy — insurer entitled to avoid policy of motor insurance for non-disclosure of criminal charges of careless driving, driving under influence of alcohol and driving without licence — charges material to prudent insurer's calculation of risk of insuring driver — ongoing duty to disclose charges to insurer (e.g. before renewal of policy) based on relationship of uberrima fides — failure to disclose may induce insurer to enter agreement it would not otherwise enter

The first respondent had applied to the Grand Court for a declaration that it was entitled to set aside a contract of insurance between it and the appellant.

The first respondent issued a policy of motor insurance to the appellant in 2009. The appellant was required to complete a proposal form in which she confirmed that no one would drive her vehicle if he or she had been fined or prosecuted for a motoring offence or had had their licence endorsed or revoked. In mid-2010, the appellant was charged with careless driving, driving under the influence of alcohol and using a vehicle with an expired licence.

The first respondent subsequently renewed the insurance policy on two occasions. No enquiries were made of the appellant, she was not required to complete any additional proposal forms, and she did not disclose the motoring offences or the charges brought against her. Her vehicle wassubsequently involved in a collision which resulted in the death of the second respondent's husband. The second respondent, as executrix of his estate, commenced an action against the appellant seeking damages, and the appellant sought to rely on her insurance policy with the first respondent.

The first respondent sought a declaration in the Grand Court that its contract of insurance with the appellant be set aside for non-disclosure. It submitted that it would not have issued the renewed insurance policy to the appellant in June 2011 had it known that one of the proposed drivers had been charged with motoring offences and therefore (a) the fact that the appellant had been charged was “material,” as it was capable of influencing a prudent insurer; (b) the failure to disclose the charges induced it to agree to insure the vehicle; (c) the appellant had an absolute duty to disclose that she had been charged on the basis that it was a material fact; (d) the duty to disclose was not circumscribed by any failure on its part to act in accordance with recognized industry standards requiring an insurer to make explicit enquiries on renewal of an insurance policy; and (e) it had not breached the relationship of utmost good faith between it and the appellant and, in any event, good faith applied only to the formation of a contract and not to its attempted avoidance.

The Grand Court (McMillan, Ag. J.) held that the appellant had breached her duty of disclosure by failing to inform the first respondent of the motoring offences and that the first respondent was entitled to set aside the contract of insurance (that decision is reported at 2015 (1) CILR 505). The natural meaning of “prosecution” within the proposal form encompassed charges and acquittals as well as convictions; the charges brought against the appellant were therefore material facts which the first respondent had asked to be disclosed. The appellant had an ongoing duty to disclose all material facts of which she was aware. The first respondent's failure to comply with industry standards by not making explicit enquiries regarding any change in the appellant's circumstances at the time of each policy renewal was unsatisfactory but did not affect the legal position between the parties and was not a breach of the relationship of utmost good faith between the parties to such an extent that the appellant's duty to disclose was waived. In any event, as a matter of Cayman law, a lack of utmost good faith did not curtail an insurer's right to avoid a contract.

The appellant appealed, submitting that (a) the court was not correct in holding that she was obliged to have disclosed the fact she had been charged with motoring offences; (b) the phrase “been prosecuted for a motoring offence” in the proposal form was expressed in the past tense and would be properly construed by a reasonable person in the context of the surrounding policy as referring to completed actions only, i.e. convictions; (c) the proposal form only required disclosure to the best of the appellant's knowledge, and she genuinely did not know and honestly did not believe that her pending motoring charges amounted to a “prosecution”; (d) if the proposal form were capable of more than one meaning, it should be construed contra proferentum in favour of the appellant; (e) thefirst respondent had adduced no independent evidence to demonstrate that the alleged material fact would have influenced the judgment of a reasonably prudent insurer when deciding whether to insure the appellant and on what conditions; (f) the court was wrong to find that a lack of good faith required only unconscionable conduct and that neither professional inadvertence nor even a lack of competence would suffice; (g) commercial standards of decency, fairness and fair dealing required the first respondent to have notified her of her obligation to inform it of all material changes in circumstances; and (h) the court had erred in considering accepted standards of good practice to be only regulatory and irrelevant for the purposes of ascertaining the requirement of fair dealing.

The first respondent supported the Grand Court's judgment and submitted inter alia that (a) a reasonable person would have understood the phrase “been prosecuted” to refer simply to evidence of criminal proceedings; (b) the appellant's duty of utmost good faith required her to disclose all material facts known to her so as to ensure a fair presentation of the risk to be undertaken; (c) there was an equal obligation of good faith on the part of the insured upon renewal of a policy which required disclosure of all material facts and any material change in circumstances adverse to the insured; (d) materiality was a question of fact in respect of which expert evidence was not needed and a finding by a tribunal of fact should not be lightly disturbed on appeal; (e) the court had no power to prevent an insurer from exercising the right of rescission conferred by non-disclosure; (f) there had not been a case in which an insurer's failure to explain the duty of disclosure to the insured had been held to constitute bad faith; (g) bad faith required something approaching a knowing disregard of the rights of the...