A Study on the application of duty of fair presentation under Insurance Act 2015: focused on the UK High Court Case (Berkshire Assets Ltd. v AXA Insurance UK [2021] EWHC 2689)

Abstract

As one of the important legal principles in the insurance act, the voluntary duty of disclosure under Marine Insurance Act 1906 has been replaced by the duty of fair presentation under Insurance Act 2015. In the recent case of Berkshire Assets Ltd. v AXA Insurance UK, the issues of materiality and inducement have been addressed as important points of the duty of fair presentation under Insurance Act 2015 for the first time. The insurer has denied the claim payment for the loss of flooding damage to the subject matter insured, alleging that there was a breach of duty of fair presentation by the insured. In the case, a director of the insured had been criminally charged by Malaysian attorney general. But the charge was not related to the insurance contract and later discharged by agreement. However, the court decided that the criminal charge on the director was a material circumstance that needed to be disclosed to the insurer before the conclusion of the contract. The court accepted the insurer’s argument that they would not have agreed to the contact if they had known about the criminal charge and treated the contract as if it had never been made. This case confirms that the laws regarding materiality before the Insurance Act 2015 are still applicable, despite the general expectation that the reformed act of 2015 would provide more favorable for the insured. The insured should be reminded that criminal charges are often considered material to a risk and that they are expected to know what should reasonably have been revealed by a reasonable search of information available to them. The decision also highlights the importance of having underwriting procedures in place to support any decision and will be persuasive in the court’s consideration of inducement. In the future, some points of reform in the UK statutory, such as duty to take reasonable care not to make misrepresentation, fall-back disclosure rule, and the proportionate payment reduction, may have meaningful implication to a Korean legislative principle on the duty of disclosure.