In this judgement, the English high court decided that the insurer was entitled to avoid an employer’s liability insurance policy on grounds of material non-disclosure and misrepresentation.  The insurers had shown that the facts misrepresented or not disclosed would have influenced the mind of a reasonably prudent underwriter in exercising their underwriting judgment as to whether to write the risk and that the underwriter who agreed the risks was induced to do so by the facts misrepresented or not disclosed.  (Bear in mind in South African law the test is not of the reasonable insurer but of the reasonable person in determining materiality for the purposes of avoidance of the policy).

A number of claimants brought a claim against the insured, in liquidation, for damages alleging that they had been employed in conditions amounting to modern slavery and had suffered psychiatric injuries and, one the claimants, a very serious physical injury resulting in a below-knee amputation.

The insurer argued material non-disclosure in relation to the use of trafficked labour, material misrepresentation in regard to wage costs which gave a misleading picture of the number of workers engaged and the disguised fact that the national minimum wage was not being paid to all workers.

The expert evidence was that the matters withheld or misstated were highly material and any one of them would have justified avoidance at common law.

There is no authority for the proposition that an insurer cannot avoid a policy where the insured has been guilty of criminal conduct which was material to the risk insured in circumstances where the claimants were not in any way associated with the illegality.

The outcome is unsurprising and would have been no different in South African law under an objective test for materiality.

Judgment: Komives and Another v Hick Lane Bedding Limited and Another [2020] EWHC 3288 (QB)