Victoria Jane Banks v The Insurance Company of the West Indies (Cayman) Ltd

• Jurisdiction: Cayman Islands
• Judge: Morrison JA
• Judgment Date: 04 November 2016
• Court: Court of Appeal (Cayman Islands)
• Docket Number: CICA NO: 18 OF 2015 G464 of 2012
• Date: 04 November 2016

Between

Victoria Jane Banks

Appellant

and

The Insurance Company of the West Indies (Cayman) Limited

First Respondent

and

Susan C Yee

Second Respondent

Before:

The Hon John Martin QC, JA

The Hon Dennis Morrison, JA

The Hon Sir Richard Field, JA

CICA NO: 18 OF 2015 G464 of 2012

IN THE CAYMAN ISLANDS COURT OF APPEAL

Appearances:

Paul Reed QC and Farrah Sbaiti of Stuarts Walker Hersant Humphries for the appellant. Thomas Lowe QC and William Jones instructed by Ogier for the first respondent and Cherry Bridges of Ritch and Conolly for the second respondent.

JUDGMENT

Morrison JA

Introduction

1. The Vehicle Insurance (Third Party Risks) Law (2012 Revision) (‘the Law’) provides for compulsory motor vehicle insurance, requiring users of motor vehicles on the road to insure against third party risks in accordance with the Law.1 Subject to the conditions set out in the Law, an injured third party is given a right of recovery against the motorist's insurer2, unless the insurer, in an action brought pursuant to section 15(3) of the Law, obtains a declaration that –

“… apart from any provision in the policy, he is entitled to avoid it on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular, or if he has avoided the policy on that ground, that he was entitled so to do apart from any provision contained in it.”

2. Section 15(5) of the Law adds that “‘material’ means of such a nature as to influence the judgment of a prudent insurer in determining whether he would take the risk, and if so, at what premium and on what conditions”.

3. This is an appeal from a judgment given in the Grand Court by McMillan J (Ag, as he then was) on 17 August 2015, in proceedings brought by the first respondent (‘ICWI’), which is an insurer within the meaning of the Law, against the appellant, its former policyholder, pursuant to section 15(3). By its judgment, the court ordered that ICWI was entitled to avoid a policy of motor vehicle insurance, first taken out by the appellant on 22 May 2009 (‘the policy’), on the ground that renewal of the policy had been obtained by non-disclosure of a material fact.

4. The non-disclosure alleged against the appellant arose out of her negative response to the following question in the proposal form for the insurance:

“To the best of your knowledge, in the past five years, has any person who will drive the motor vehicle (1) been fined, (2) had their licence endorsed/revoked, (3) been prosecuted for a motoring offence?”

5 As would later emerge, in or around the middle of 2010, possibly prior to the renewal of the policy in June of the year, but certainly before its renewal in June 2011, the appellant was charged with a number of motoring offences, including careless driving, driving under the influence of alcohol and using a vehicle with an expired licence. The discovery of this fact would prompt ICWI to avoid the policy and to launch proceedings in the Grand Court for a declaration that it was entitled to do so.

6. The issues on this appeal are (i) whether the judge erred in fact or law in deciding that ICWI was entitled to avoid the policy on the ground that its renewal had been obtained by nondisclosure of a material fact; and (ii) assuming that the judge was correct on the first issue, whether he erred in fact or law in concluding that ICWI did not breach their duty of good faith to the appellant and were therefore not prevented from avoiding the policy.3

7. Lastly by way of introduction, I should mention that the second respondent is the widow and executrix of the late Mr Richard Douglas Martin (‘the deceased’). The deceased suffered fatal injuries and died on 30 November 2011, as a result of a collision between his vehicle and a vehicle owned by the appellant and driven by her husband, Mr Patrick Brooks-Dixon. By writ of summons filed on 14 November 20124, the second respondent commenced proceedings against the appellant and Mr Brooks-Dixon, on behalf of the estate of the deceased, and on behalf of herself and the other dependants of the deceased. By the consent of the parties, the second respondent was added as a defendant in these proceedings.5 Save appearing by counsel (Miss Bridges) to support the appeal, the second respondent took no part in the appeal.

The factual background

8. The relevant facts are not in dispute and can be shortly stated. The appellant signed the proposal form on 22 May 2009. After the question set out at paragraph 4 above, the proposal

form contained boxes marked ‘Y’ and ‘N’, in which the proposer was required to indicate ‘yes’ or ‘no’ in the appropriate box. There was a further box for details to be provided in the event that the proposer answered ‘yes’ answer to the question. The appellant answered ‘no’, by marking an ‘x’ in the box marked ‘N’ next to the question. It is accepted that at the time she completed the form, the appellant did so honestly and that the answers she gave were accurate.

9. ICWI duly issued the policy to the appellant, initially for a period of 12 months, from 22 May 2009 to 21 May 2010. The policy provided the appellant with cover against all sums which she should become liable to pay in respect of (a) death of or bodily injury to any person, subject to a maximum sum payable of CI$1,000,000.00; and (b) damage to property, subject to a maximum sum payable of CI$250,000.00 arising out of any one event. These were liabilities which were required to be covered under the Law6. The appellant did not renew the policy immediately upon its expiry in 2010, but it was in due course reinstated, on her application, for a further period of 12 months from 21 June 2010 to 20 June 2011. And, in June 2011, the policy was again renewed for the period 21 June 2011 to 20 June 2012.

10. It is common ground that the renewal notices issued by ICWI to the appellant in respect of the 2010 and 2011 renewals were silent on the question of disclosure7. The appellant was not asked to complete a new proposal form upon the reinstatement and the renewal of the policy in 2010 and 2011, respectively. Nor would she have been shown the original proposal form and asked to review it. The appellant's evidence was that, on each occasion, the entire process took “no longer than 10 minutes” and that she was not asked whether she had been arrested, charged or convicted of any criminal offences, or whether she had been prosecuted for any driving offences.8 It is also common ground that, on each occasion, the appellant made no disclosure relating to the question posed in the proposal form.

11. As I have already indicated, the accident which resulted in the death of the deceased occurred on 30 November 2011. As at that date, the policy, which had been renewed in June of that year, was in full force and effect and the accident was reported to ICWI. While the accident

was being investigated, ICWI got sight of a copy of the Cayman Islands Judiciary Summary Court hearing list for 14 May 2012. The list revealed that the appellant was due to appear before the court that day in connection with charges, under indictment number 05818/2010, for careless driving, driving under the influence of alcohol and using a vehicle with an expired license. As a result of this information, ICWI wrote to the appellant on 30 July 2012, to advise her that:

“… it has come to our attention that in 2010 you were charged with careless driving and driving under the influence of alcohol. As you would no doubt be aware the contract of insurance is one of utmost good faith which requires you to disclose all facts material to the risk to be undertaken by the Company. The duty bites both at the inception stage and at renewal.

Accordingly it was incumbent upon you to disclose these prosecutions. The failure to do so constitutes a misrepresentation and or non disclosure of a material fact which renders the policy void.

In the circumstances we advise that no indemnity will be offered in the event that suit is filed by yourself or any third party involved in the loss. We intend to seek the appropriate relief under the Motor Vehicle Insurance (Third Party Risks) Law.”

12. Subsequently, on 18 February 2013, the appellant was convicted, based on her pleas of guilty previously entered on or about 23 July 2012, of the offences of driving under the influence of alcohol and using a vehicle with an expired license. For driving under the influence, the appellant was sentenced to a fine of $555. 00 or 2 months' imprisonment, and disqualified from driving for two years; and, for using a vehicle with an expired license, she received a fine of $45. 00 or 5 days' imprisonment. The charge for careless driving was left on the file.

The proceedings below

The pleadings

13. ICWI filed action on 22 November 2012, serving notice of it on the second respondent that same day. Among other things, ICWI said this in its statement of claim9:

“13. The Defendant failed to comply with her continuing duty of utmost good faith by failing to disclose the fact that she was facing the Motoring Prosecutions when she renewed the Policy in June 2010 or in June 2011.

14. Although the Plaintiff does not know the specific date on which the Motoring Prosecutions were brought against the Defendant, it is clear that they were brought prior to the June 2011 renewal, as the indictment number is 05818 of 2010, which means that the Motoring Prosecutions were brought during the year 2010.

15. The fact that the Defendant was facing the Motoring Prosecutions was material in that it would have influenced the Plaintiff, and would have influenced the judgment of any prudent insurer, in deciding whether to take the risk of insuring the Defendant or fixing the premium of insurance.”

14. On this basis, ICWI asked the court to declare that it was entitled to avoid the policy on the ground that its renewal was obtained by...