Higherdelta Ltd was the owner of commercial properties including a restaurant in Scotland. Its company secretary, director and shareholder was also the owner of a portfolio of residential properties. The non-disclosure of prior events relating to the personal portfolio was held not to be relevant to underwriting the business policy.
The restaurant was added to its commercial policy in 2009 with Covea Insurance. The restaurant was damaged by fire in July 2013. The insurer purported to avoid the policy for: (a) nondisclosure of the fact that as a result of fires at the director’s residential properties another insurer refused to renew cover placed by the director for a period of nine months; and (b) the director incorrectly stated that he had never had insurance declined or a refusal to renew insurance due to poor claims experience.
It was common cause that the director of Higherdelta Ltd was the proprietor of a portfolio of residential properties. These were insured with a different insurer and two separate fires had resulted in claims. As a result the insurer advised the proprietor that they were not willing to renew the director’s insurance cover. The properties remained uninsured for a period of nine months
The insurer of the restaurant contended that a director of a company who is the beneficial owner and controlling mind of a company proposing for insurance was required to disclose material facts in relation to his other business entities.
The court found that although the director was the sole director and controlling mind, his personal affairs could only be material in relation to the policy in issue in relation to moral hazard. His personal portfolio involved a different category of property and no reasonable insurer would have regarded the insurance position in relation to the personal residential properties as relevant to an application for insurance by the company of its restaurant.
[The case is Higherdelta Ltd vs Covea Insurance plc]