Insurer held entitled to avoid public liability policy by reason of material non-disclosure and misrepresentation

31/07/15

In a rare decision entitling insurers to avoid a public liability policy of insurance, Mrs Justice Carr today handed down judgment in Brit UW Ltd v F&B Trenchless Solutions Ltd  [2015] EWHC 2237 (Comm), in which Neil Calver QC and Michael Bolding acted for the claimant insurer (”Brit"). The defendant tunnelling contractor ("F&B") entered into a contractor’s combined liability policy issued by Brit providing cover for public liability, employers' liability and product liability, each up to a limit of ￡10 million.  F&B sought an indemnity under the policy after a train derailed as a result of subsidence above a tunnel which it had constructed under a railway crossing near Nottingham. Brit issued a claim in the Commercial Court seeking a declaration that it had validly avoided the policy on the basis that F&B had failed to disclose material facts to Brit, namely the increasing amount of track settlement at the site and the appearance of a void in the road prior to the conclusion of the policy. 

In its tender for the tunnelling project, F&B had informed the main contractor at the site (Morgan Sindall) that track settlement would be 2-4 mm, which was below Network Rail’s maximum allowable track settlement of 5 mm. Prior to the conclusion of the policy, and after the construction of the tunnel, F&B had been informed that track settlement had increased to 15-18 mm and that Morgan Sindall was worried about the situation. Stating that she did not accept the evidence given by F&B’s witnesses at trial, Mrs Justice Carr held that these were material facts which should have been disclosed to Brit prior to the conclusion of the policy. She rejected the argument advanced by F&B that the track settlement was not material because there had been no suggestion that Network Rail would be taking any remedial action. Mrs Justice Carr emphasised that the track settlement was material because it was beyond anyone’s expectations and no-one knew when it would stop increasing. She also emphasised that, although the cause of the void in the road at the site was uncertain, there was a risk that it had been caused by F&B¹s tunnelling works.  Mrs Justice Carr noted that the central flaw in F&B’s defence in relation to this part of the case was to overlook the objective nature of the test for materiality; an absence of subjective concern on the part of F&B because it, and others, had formed the preliminary view that the void had not been caused by F&B’s tunnelling works did not relieve the appearance of the void of materiality for underwriting purposes.  

It was also held that F&B's brokers had made a misrepresentation to Brit prior to the conclusion of the policy by suggesting that F&B had not (and would not during the forthcoming policy period) conduct tunnelling works under or in close proximity to active railway lines. That representation was false because trains had continued to pass over the railway line at the site in question throughout the period during which F&B constructed its tunnel. Mrs Justice Carr held that Brit had been induced to provide cover to F&B on the terms of the policy as a result of the non-disclosure and the misrepresentation, and that the policy had not been affirmed by Brit.

The jugdment is here.