Insurance contract incorrectly identified the wrong party which invalidated the insurance cover
A recent Court of Appeal decision has highlighted the care that needs to be taken when completing insurance proposal forms. Genesis Housing Association Limited, an English housing association providing homes across London and the South East of England, unsuccessfully appealed against a decision that it could not recover under an insurance policy in circumstances where the builder had gone into administration, because the proposal form had been incorrectly completed.
The facts of the case are quite simply that the insurance proposal form completed on behalf of the housing association named the wrong builder. It named a company in the builder’s group of companies but not the company that was actually carrying out the building work. The policy was to provide cover in respect of latent defects emerging during the first ten years of the construction of the houses and, as an optional extra, offered cover against the risk of the builder becoming insolvent during the construction period.
The building company carrying out the building work subsequently went into administration and, when Genesis claimed on the policy, the insurance company refused to pay out because the wrong building company was stated in the proposal form. The proposal form included a ‘basis of contract’ declaration to the effect that “this proposal and the statements made therein shall form the basis of the contract between me/us and the Insurer”. The Court held that this declaration had contractual effect and, as such, all statements in the form were “warranties” on which the insurance contract was based. Genesis argued that the error in the form was inadvertent, there had been no intent to defraud and that there was a comprehensive list of documents referred to in the policy that had made no reference to the proposal form. These arguments did not persuade the Judges either in the High Court or the Court of Appeal. The Appeal Judges held that where there is a ‘basis of contract’ declaration such as in this case in a form completed by the insured in connection with the policy, to deprive same from having contractual effect, the contract must specifically stipulate this. The mere omission of the form from the list of documents stated in the policy was insufficient to deprive the proposal form from having contractual effect. The Courts held that the insurance policy was void.
This case obviously had profound effects for Genesis and is an important reminder to those involved in the construction industry that they must ensure that insurance related forms are correctly completed and accurately identify the contracting parties.
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