Chariot Inns Ltd v Assicurazioni Generali S.p.a.

• Jurisdiction: Ireland
• Judge: KENNY J.:
• Judgment Date: 23 January 1981
• Neutral Citation: 1981 WJSC-SC 103
• Court: Supreme Court
• Docket Number: [1978 No. 4329 P.]
• Date: 23 January 1981

CHARIOT INNS v. ASSICURAGIONI GENERALI S.P.A.

BETWEEN:

CHARIOT INNS LIMITED

Plaintiffs

v.

ASSICURAZIONI GENERALI S.P.A. AND COYLE HAMILTON HAMILTON PHILLIPS LIMITED

Reversing High - 23.1.80

Defendants

1981 WJSC-SC 103

No. 4329/1978

No. 59/1980

SUPREME COURT

1 Judgment delivered 23rd day of January 1981 by KENNY J.:[Nem Diss]

2 A contract of insurance requires the highest standard of accuracy, good faith, candour and disclosure by the insured when making a proposal for Insurance to an insurance company. It has become usual for an insurance company to whom a proposal for insurance is made, to ask the proposed insured to answer a number of questions. Any misstatement in the answers given when they relate to a material matter affecting the Insurance entitles the insurance company to avoid the policy and to repudiate liability if the event insured against happens. But the correct answering of any questions asked is not the entire obligation of the person seeking insurance: he is bound, in addition, to disclose to the insurance company every matter which is material to the risk against which he is seeking indemnity.

3 What then is to be regarded as material to the risk against which the insurance is sought? It is not what the person seeking insurance regards as material nor is it what the insurance company regards as material. It is a matter or circumstance which would reasonably influence the judgment of a prudent insurer in deciding whether he would take the risk and, if so, in determining the premium which he would demand. The standard by which materiality is to be determined is objective, not subjective. The matter has, in the last resort, to be determined by the court: the parties to the litigation may call experts in insurance matters as witnesses to give evidence of what - they would have regarded as material but the question of materiality is not to be determined by such vitnesses.

4 The generally accepted test of materiality in all forms of insurance against risks when property of any kind is involved is stated in s. 18(2) of the Marine Insurance Act, 1906:

"Every circumstance is material which would influence the judgment of a prudent Insurer in fixing the premium or determining whether he will take the risk".

5 Although this test is stated in an Act dealing with marine insurance, it has been accepted as a correct guide to the law in insurance against damage to property or goods of all types.

6 The rule to determine the materiality of a fact not disclosed to the insurers was expressed by Lord Justice MacKinnon with his customary pungency in Zurich General Accident and Liability Insurance Co. Ltd. v. Morrison (1942) 1 All E.R. 529 at p. 539:

"Under the general law of insurance an insurer can avoid a policy if he proves that there has been misrepresentation or concealment of a material fact by the insured. What is material is that which would influence the mind of a prudent insurer in deciding whether to accept the risk of fix the premium. If this be proved, it is not necessary further to prove that the mind of the actual insurer was so affected. In other words the insured could not rebut the claim to avoid the policy because of a material misrepresentation by a plea that the particular insurer concerned was so stupid, ignorant or reckless that he could not exercise the judgment of a prudent insurer and was in fact unaffected by anything the insured had represented or concealed".

7 The statement of Mr. Justice Samuels of the rules relating to the law about materiality of facts not disclosed in insurance law in Mayne Nickless Ltd. v. Pegler (1974) I.N.S.W.L.R. 228 has the authority of having been approved and followed by the Judicial Committee of the Privy Council in Marene Knitting Mills Property. Ltd. v. Greater Pacific General Insurances Ltd. (1976) 2 LI. L.R. 631:

"Accordingly I do not think that it is generally open to examine what the insurer would in fact have done had he had the information not disclosed. The question is whether that information would have been relevant to the exercise of the insurers" option to accept or reject the insurance-proposed. It seems to me that the test of materiality is this: a fact is material if it would have reasonably affected the mind of a prudent insurer in determining whether he will accept the insurance, and if so, at what premium and on what conditions".

8 In January 1976, the plaintiffs ("Chariot") - whose directors and shareholders were Mr. and Mrs. Wootton - bought licensed premises at Ranelagh, Dublin. The directors decided to run the premises as a public house and also to have a cabaret entertainment. This made it necessary to build a larger room at the back. There were furnishings in the existing room at the back and as the extension could not be built without removing them, the directors decided to store them in 82 Lower Leeson Street. This latter premises was owned by Consolidated Investment Holdings Limited ("Consolidated") whose shares had been-purchased by Mr. Wootton and his business partner, Mr. Mockler, but had been registered in the maiden names of their wives. Mr. Wootton and Kr. Mockler intended to use the promises as a hotel and discotheque and as Mr. Wootton had been associated with a number of night clubs which had been prosecuted for breaches of the licensing laws, the directors expected considerable local opposition when their application for permission for a change of user was made if it became known that his wife or he were associated with Consolidated.

9 The insurance brokers acting for Mr. Wootton were Coyle Hamilton Hamilton Phillips Limited, ("the brokers"), the second-named defendants. Mr. Wootton had almost all his dealings with the brokers through Mr. John Hart, an employee of theirs. The brokers placed, the insurance on 82 Lower Leeson Street with the Sun Alliance and London Insurance Group and, in the policy, the premises were described and it was stated that the property was "at present unoccupied." When the directors of Chariot decided to store their furnishings in 82 Lower Leeson - Street, Mr. Hart advised them that further insurance cover on the furnishings was necessary. An endorsement on the policy in connection with the furnishings valuing them at £15,000, was made. As the premises at Lower Leeson Street were unoccupied, they were broken into by squatters...