Avondale Exhibitions v. Arthur J Gallagher Insurance Brokers, High Court of England and Wales, 31 May 2018, the intermediary faces the delicate issue of determining what information must be provided by the insured when submitting a risk for insurance
A company took out insurance to cover its premises against various risks, including fire. Some time later, the premises and the stock of goods stored there were severely damaged by fire. The company submitted a claim for an indemnity to the insurer, which declined and cancelled the policy on the grounds that prior criminal convictions of its managers had not been disclosed when the policy was taken out. The insured company contended that it had provided this information to the broker and, therefore, sued the broker, first, for not having forwarded the information to the insurer and, second, on the grounds that the broker had not advised it of the importance of disclosing certain specific risks such as this one.
The court held in favour of the broker, finding that the managers who had signed the insurance policy had sufficient knowledge of the information likely to be required when taking out the policy as they had been in business for many years. It was therefore probable that they would have completed many similar insurance questionnaires in the past that would have requested the same type of information. The court thus held that this information had been voluntarily not disclosed to the broker. Moreover, according to the court, there is no rule requiring intermediaries to ask specific questions about particular facts such as this in connection with disclosing the risk.
Since the Insurance Act of 2015, the duty to make a fair presentation of the risk is much stricter than before: the broker must advise the insured of the importance of answering all questions and of the consequences of inaccurate or incomplete responses. However, the courts hold that the broker is not required to provide the insured with advice relating to specific information that the insured should spontaneously provide when taking out insurance, in particular in the case of a professional deemed to be an experienced buyer of insurance.