2017, clerical errors
A commercial policy was taken out by an insured whose business was in the construction sector. Due to a fire on the company’s premises, damage was caused to the premises themselves and to the stock. This caused significant business interruption losses due to the insured’s inability to supply its customers with equipment they had ordered.
However, the insured’s turnover was incorrectly reported at the time the policy was taken out because of an error on the part of the broker, who did not provide accurate information to the insurer. The insurer denied cover on the grounds that the insured was under-insured and that the broker had misreported the risk. The broker was therefore sued as a third-party defendant in the case between the insurer and the insured. The broker contended that the error was made “innocently”, as provided in the Insurance Act, which mitigated his liability.
This case was settled, and the insurer agreed to cover the claim to a large extent. In fact, in such situations in the United Kingdom, the majority of claims will be covered by the insurer.
This decision is interesting when contrasted with the law in force before the Insurance Act. For policies taken out before 12 August 2016 and therefore subject to the former law, the insurer could have decided to cancel the policy on the grounds of the inaccurate declaration of the sums insured. This is therefore good news for brokers, as this law will certainly lead to a significant decrease in the number of professional civil liability claims in this situation.