An insurance policy is known in law as a ‘contract of good faith’. The insurer relies on the honesty of the person proposing to take out the insurance cover. If it later appears that the person who obtained the policy gave false information when making the proposal, then the insurer is entitled to decide not to provide indemnity under the policy.
Last week, I settled a case with a well-known insurer of a Defendant who had apparently been less than honest when obtaining his cover from them.
My client was working for his employer on a roof when he fell and suffered a significant injury to his elbow. His boss, the Defendant, hadn’t taken any of the usual health and safety procedures to keep him safe on the roof and, predictably, he fell off.
The insurer told me that the Defendant had stated on his proposal form that he and his employees did not undertake any roofing work. Clearly that was not correct.
Fortunately, the Defendant insurer made a commercial decision to pay damages to my client, even though they were entitled to declare the policy void and make no payment at all. The compensation was significantly below what he might have been awarded at Court, but there was a huge risk to the client that the Court would find that the insurer was not liable to pay damages, due to the misrepresentation made by the Defendant.
In that situation, the Court would award damages against the Defendant personally. If the Defendant did not have sufficient money or assets to meet any Court Judgement, the client would have had to enforce the judgement (and order for legal costs) running to tens of thousands of pounds against his employer personally, which may have resulted in his recovering a small percentage of the total, or even nothing.
Wisely, our client chose to accept the insurers’ offer and not risk losing everything by proceeding against an uninsured Defendant.
Credit should be given to Ageas Insurance, who very behaved decently throughout this claim.
It should be noted that the situation would be different if our client had been injured by a motorist. Even if the insurers would be entitled to revoke the contract of insurance, they would have had to pay the damages and costs to our client by virtue of the Road Traffic Act 1988.
The potential for the insurers to refuse to provide cover due to policyholder misrepresentation is not unusual and represents a real risk to injured Claimants of not being able to recover their compensation in non-road traffic cases.
If you would like advice about any type of personal injury claim, please call me on 0114 218 4000 or email me at john.green@tayloremmet.co.uk
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