Clarity in proposal form questions and implied waivers of disclosure under the Insurance Act 2015

Clarendon Dental Spa LLP and Clarendon Dental Spa (Leeds) Limited v Aviva Insurance Limited and Zurich Insurance PLC [2025] EWHC 267 (Comm)

The High Court recently handed down judgment in which the Court upheld an application to strike out parts of Zurich’s Defence on the basis that Zurich had impliedly waived a requirement to disclose certain matters before the policy was incepted.

Background

On 13 February 2025, David Quest KC, sitting as a Deputy Judge, handed down judgment in Clarendon Dental Spa LLP and Clarendon Dental Spa (Leeds) Limited v Aviva Insurance Limited and Zurich Insurance PLC [2025] EWHC 267 (Comm).

Clarendon Dental Spa LLP (“the LLP”) was insured by Aviva for property risks and Clarendon Dental Spa (Leeds) Limited (“the Company”) was insured by Zurich for loss of contents, business interruption and other risks. On 27 June 2021, there was a fire which caused substantial damage and both the LLP and the Company claimed on their respective insurance policies. Both Aviva and Zurich attempted to avoid on the basis that there had been a failure to make a fair presentation of the risk prior to the policies being renewed.

The relevant facts and history of the dental practice (“the Practice”) are as follows:

1. The Practice was founded in 2007 by Dr Al-Ani, and Dr Patel, and operated from premises at 9 Woodhouse Square, Leeds (“the Premises”). Since 2012, the Premises was owned by the LLP but had historically been held by Back-to-back Investments Limited (“BTB”) of which Dr Al-Ani was a director. BTB entered into a creditors’ voluntary liquidation in December 2009.
2. The LLP’s members at commencement were Drs Al-Ani & Patel, and two companies of which Drs Al-Ani & Patel were directors: PDS (Leeds Limited) (“PDS”) and JHP (Leeds) Limited (“JHP”).
3. On 19 June 2014, as part of a reorganisation, Drs Al-Ani & Patel incorporated the Company which took over the operations and goodwill of the Practice from the LLP. Thereafter, PDS and JHP resigned as members of the LLP and entered creditors’ voluntary liquidation.
4. On 18 November 2016, Dr Patel exited the business and resigned as a member of the LLP and as a director of the Company.

The LLP settled its claim against Aviva. The present judgment deals with two applications by the Company to strike out parts of Zurich’s Defence or for partial summary judgment, together with an application by Zurich to amend its Defence.

Fair Presentation of Risk

Section 3 of the Insurance Act 2015 (“the IA”) imposes a duty on policyholders to make a fair presentation of the risk being insured, ensuring that every material representation as to a matter of fact is substantially correct. Generally, this requires disclosure of every material circumstance which the insured knows or ought to know.

On 4 October 2020, the Company renewed its insurance policy with Zurich. As part of this process, a Statement of Fact was issued which recorded the information provided by the Company’s broker, on its behalf. Notably, the Statement of Fact set out an “Insolvency Question”:

“Have you or any partners, directors or family members involved in the business: Been declared bankrupt or insolvent, or been disqualified from being a company director?.”

The Company answered “No”.

The Company argued that the Insolvency Question was directed at the Company (as policyholder) and the current directors of the Company only, none of whom had been declared bankrupt, insolvent, or disqualified from being a company director. Zurich sought a broader interpretation covering any partner or director of any partnership or company that is or was involved with the business.

By Zurich’s interpretation, this would extend to PDS and JHP, rendering the response to the Insolvency Question incorrect.

The Court held that a reasonable policyholder would not think that its insurer would be interested in the insolvency history of PDS, JHP, or BTB, which are not and never were a partner or director of the policyholder and will not be involved in the business in any capacity during the period of cover. Accordingly, the Company’s interpretation of the Insolvency Question was held to be correct, given that the at the time it was asked, PDS and JHP were not “partners… involved in the business”.

DJ Quest KC further set out that there were two ambiguities in the Insolvency Question:

1. whether it asks only about partners or directors of the policyholder as opposed to other entities (such as the LLP); and
2. whether it only asks about current partners or directors or whether it extends also to former partners or directors.

The Deputy Judge applied Snowden J’s (as he then was) decision in Ristorante Ltd v Zurich Insurance plc [2021] EWHC 2538 that:

“When the court is interpreting questions posed by insurers rather than a negotiated contract term, a different approach applies under which any genuine ambiguity is resolved in favour of the applicant. Thus, if faced with two rival constructions, both of which are objectively reasonable, the insurer will not be entitled to impugn as a misrepresentation of fact an answer given by the policy holder if that answer was true having regard to a construction which it was objectively reasonable to give to the question”.

Accordingly, the ambiguity in the Insolvency Question should be and was resolved in favour of the Company.

Waiver of the Duty of Disclosure

Zurich further claimed that even if it did not specifically query it, the Company should nonetheless have disclosed the liquidations of PDS, JHP and BTB. The Company contended that by asking the Insolvency Question in the terms that it did, Zurich waived any right to disclosure.

The questions asked by insurers can act to limit (or enlarge) the scope of the insured’s duty of disclosure. MacGillivray on Insurance Law (15^th ed.) states:

“…if questions are asked on particular subjects and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or on matters kindred to the subject matter of the questions”.

Accordingly, and applying the judgment in Ristorante, the Court held that Zurich had waived disclosure of the fact of the insolvency of any persons other than the subjects of the question, who as it already found, were the Company and its current directors. Accordingly, that element of Zurich’s Defence, based upon non-disclosure was struck out.

Practical Implications

Clarendon provides useful guidance when construing policy wording and highlights the need for policyholders to review the specific wording of any questions, alongside their brokers, to determine the level of disclosure applicable and to seek clarification on any ambiguity in the wording at the outset. It is important to note that the duty of disclosure is not unlimited; it can be narrowed by insurers’ questions and may be waived by the insurer in some cases.

If a question of waiver arises in an insurance claim it’s worthwhile policyholders exploring whether early resolution of the issue can be achieved by way of strike out or summary judgment claim.

Should you have any inquiries regarding this judgment or need guidance and support with insurance policies and/or claims, please reach out to Nicola Maher or a member of the Insurance Litigation team at Edwin Coe.

Read the full judgment here.

Our Insurance Litigation team has considerable experience in this specialist area of law. For further information on this topic, please contact Nicola Maher or any other member of the Insurance Litigation team.

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