Non-disclosure to insurers (pre-Insurance Act 2015)

Zurich argued that if the failure to comply had been disclosed at renewal in December 2014, then the underwriting would have been referred to a more senior individual at Zurich who would have declined to provide cover. Zurich argued that this would also have happened if the information had been disclosed when the policy was extended in September 2015. 

Zurich contended that it was entitled to avoid the Policy from renewal on 14 December 2014, or alternatively that it was entitled to avoid the extension of the Policy; and if the non-disclosed facts had been disclosed in September 2015, it would have cancelled the Policy.

At first instance it was held that: (i) there was a material non-disclosure of Millennium's risk requirements and special terms, and that if proper disclosure had been made it would have been referred to a more senior underwriter at Zurich; (ii) that the non-disclosure did not induce Zurich to write the Policy on the terms on which it had been written in December 2014; and (iii) had the material facts been disclosed at the time of the extension of the Policy to add the fixed shredding machine, Zurich would have declined to insure the fixed shredding machine (but would not have cancelled the Policy). 

As a result, Niramax's claim was successful in part - it could recover the value of the mobile plant but not the fixed shredding machine. Cockerill J noted that if the decision had been referred to a more senior underwriter at Zurich, they would have corrected the errors in calculating the premium - but this change would have related to the Zurich employee's earlier errors, not the non-disclosure on the part of Niramax.

Zurich appealed.

On appeal, Zurich argued that, on the basis that the judge at first instance had held that the premium would have been higher if the relevant disclosure had been made, inducement had been established (regardless of the amount of the increase, or the thought process behind it). In doing so, Zurich maintained that "but for" causation was sufficient for inducement to be found.

Niramax contended that the non-disclosure had to be an "effective, real and substantial cause of the different terms on which the risk would have been written if full disclosure had been made". Further, it suggested that there was no evidential basis for the judge's conclusion that the senior employee would have charged an increased premium than the premium that was charged. It could therefore not be said that "but for" the non-disclosure the Policy would have been written on different terms.

The Court of Appeal rejected Zurich's appeal.

In relation to the test for inducement, in his leading judgment Popplewell LJ held that

"in order for non-disclosure to induce an underwriter to write the insurance on less onerous terms than would have been imposed if disclosure had been made, the non-disclosure must have been an efficient cause of the difference in terms".

The "but for" test is therefore not, on its own, sufficient to establish causation. 

Applying the "efficient cause" test to these facts, the Court of Appeal agreed with the finding at first instance that in this case, there was no inducement. The process by which the premium was calculated was a "formulaic, streamlined process based only on the amount insured, nature of the trade and claims history". Therefore, Niramax's attitude to risk, and therefore the non-disclosed facts, was "irrelevant to the rating of the risk". The non-disclosure did not have any causative effect on the renewal being written on cheaper terms than would have occurred if disclosure had been made.

Regarding the argument that the judge erred in deciding that the change would have been limited to an increased premium, Popplewell LJ held that this point was a question of fact rather than law. As per Lewison LJ in Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 at [114], the appellate court "will not readily interfere with findings of fact of a trial judge. The appellate court should only interfere if the high bar is met that it can be proven that the "Judge's conclusions were not reasonably open to her on the evidence"". Zurich fell short of meeting this high threshold in their appeal.