Misrepresentation, Non-Disclosure and Breach ... - Law Commission

8.104 Often both forms of waiver involve similar types of inconsistent acts. For
example, after learning of a breach an insurer may accept premiums, 48 or issue a
policy document, 49 or handle a claim. For affirmation, the issue would be whether
the insurer had the requisite knowledge and whether the act shows that it
intended to continue with the policy. For “waiver by estoppel” the focus shifts to
the policyholder’s perceptions and conduct. Did the act appear to show that the
insurer did not intend to rely on its legal rights? If so, did the policyholder in fact
rely on this representation by, for example, failing to take out another insurance
policy? It is usually more difficult for the policyholder to show waiver by estoppel
because it has to prove that it relied on the representation, usually to its
detriment. The policyholder would not need to prove that the insurer knew that it
had the right to deny liability, but the policyholder would need to show that a
reasonable policyholder in their position would think that the insurer was aware of
the right. 50
8.105 It is now thought, following The Good Luck, that affirmation, or waiver by election,
is not applicable to a breach of an insurance warranty of assurance. In HIH
Casualty & General Insurance Ltd v AXA Corporate Solutions, Lord Justice
Tuckey explained with apparent approval the reasoning of the trial judge: 51
where there is a breach of warranty there is no scope for traditional
waiver by election because the insurer is automatically discharged
from liability upon breach and therefore has no choice to make. This
is why only waiver by estoppel availed HIH, if it did… 52
8.106 This puts a heavier burden on the policyholder as they not only have to show that
the insurer made an unequivocal representation, but also that they relied on it.
48 As MacGillivray says "the acceptance of premium after receipt of knowledge of a breach of
warranty or condition is an act so inconsistent with an intention to repudiate liability that it is
frequently a ground of waiver": J Birds and N Legh-Jones, MacGillivray on Insurance Law
(10 th ed 2003) para 10-109. See for example, Yorkshire Insurance Co v Craine [1922] 2 AC
541 and Cia Tirrena Assiccurazioni v Grand Union Insurance Co [1991] 2 Lloyd's Rep 143.
49 See, for example, Sulphate Pulp Co v Faber (1895) 1 Comm Cas 146.
50
As the judge of first instance said in HIH Casualty & General Insurance Ltd v AXA
Corporate Solutions [2002] Lloyd’s Rep IR 325:
the point is not so much the awareness of [reinsurer] as to its rights to treat the cover
as discharged but whether it appeared to a reasonable person in the position of [the
reinsured] that the reinsurer was so aware and was prepared to forego its rights. That is
a gloss that is important and can easily be overlooked in this analysis.
51
[2003] 1 Lloyd’s Rep IR 1.
52 Para 7. Note also Longmore J’s view in Kirkaldy & Sons Ltd v Walker [1999] Lloyd’s Rep
IR 410, 422 that “since the breach of warranty does not give rise to any election by the
insurer, eg, to choose to keep the contract on foot, the doctrine of waiver by election has
no application”. We have some doubts whether these decisions are consistent with the
wording of the Act, which refers simply to waiver without mentioning reliance, but the cases
are clear. See B Soyer, Warranties in Marine Insurance (2 nd ed 2006) ch 6.
208