Guidance on the duty of "fair presentation" under the Insurance Act 2015

Although the Insurance Act 2015 has been in force for some time, there has been scant judicial guidance as to how courts will approach the question of whether a policyholder is in breach of the duty of fair presentation. The High Court gave welcome guidance in Berkshire Assets (West London) Limited v AXA Insurance UK plc [2021] EWHC 2689 (Comm).

The case involved a claim under a Contractors All Risks and Business Interruption policy following an escape of water. AXA denied liability on the basis that, on renewal in November 2019, Berkshire failed to disclose that one of its directors was subject to criminal proceedings in Malaysia — which, AXA argued, it would not have insured had it known.

Under s.3(1) of the Act an insured must make a fair presentation of the risk, disclosing every "material circumstance" it knows or ought to know; s.7(3) defines a circumstance as material if it would influence the judgment of a prudent insurer. The Court held that the pre-Act approach to materiality continues to apply: materiality is a question of fact assessed at placement, from the insurer's perspective, and a material circumstance need only be something the insurer would take into account, not something decisive.

The Court held that a criminal charge will very often amount to a "moral hazard" and so a material circumstance. Although unconnected with the actual loss, the criminal proceedings should have been disclosed; and, supported by clear underwriting guidelines, AXA established it would not have written the risk had they been. The case reasserts the importance of clear evidence from underwriters, backed by documents, in establishing that a risk would have been declined.