Banks had made loans against property which the borrower had said was valuable, and, also insurance policies against any shortfall on the realisation of the property. The borrower was a swindler and the property worthless. The insurers relied upon a fraud exception in the policies to repudiate liability. The banks discovered that the agent of their broker who had placed the insurance had, by an altogether separate fraud, issued cover notes in respect of non-existent policies for part of the risk. This had come to the knowledge of one of the insurers before a substantial part of the advances had been made. The banks claimed that the insurers were under a duty of good faith to disclose this information and that, if they had done so, the banks would have so distrusted the brokers that they would have made no advance and therefore suffered no loss.
Held: Assuming that a duty to disclose the information existed, the breach of duty did not cause the loss. The failure to inform the lenders of the broker’s fraud had induced them to think that valid policies were in place. But even if this had been true, the loss would still have happened. The insurers would still have been entitled to repudiate the policies under the fraud exception.
Judges:
Lord Templeman, Lord Jauncey of Tullichettle
Citations:
[1991] 2 AC 249, [1990] 1 QB 665, [1990] 2 All ER 947, (1990) 6 ANZ Insurance Cases 60-987, [1990] 3 WLR 364
Jurisdiction:
England and Wales
Citing:
Appeal from – Banque Keyser Ullmann SA v Skandia (UK) Insurance Co Ltd CA 1990
A loan was to be made. An agent of the borrower came to know of the fraudulent nature of the loan, but said nothing.
Held: A failure to disclose a known fraud may itself amount to a misrepresentation, but nondisclosure (whether dishonest or . .
Cited by:
Cited – HIH Casualty and General Insurance Limited and others v Chase Manhattan Bank and others HL 20-Feb-2003
The insurance company had paid claims on policies used to underwrite the production of TV films. The re-insurers resisted the claims against them by the insurers on the grounds of non-disclosure by the insured, or in the alternative damages for . .
Cited – BPE Solicitors and Another v Hughes-Holland (In Substitution for Gabriel) SC 22-Mar-2017
The court was asked what damages are recoverable in a case where (i) but for the negligence of a professional adviser his client would not have embarked on some course of action, but (ii) part or all of the loss which he suffered by doing so arose . .
Lists of cited by and citing cases may be incomplete.
Contract, Torts – Other
Updated: 21 July 2022; Ref: scu.219301