The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Tonio Mallia and Mr Justice Joseph Azzopardi, on July 28, 2014, in the case ‘Paul Grech and Rosaria Grech v Middlesea Insurance plc and England Insurance Agency Ltd’ held, among other things, that in the circumstances, the assured could easilyconclude that the insurance company was not concerned with robberies of more than five years before. The specific question of the insurer on the proposal form was construed as a ‘waiver of disclosure of information on the same subject’.
The facts in this case were as follows:
Paul and Rosaria Grech had purchased a home policy from Middlesea Insurance to insure the contents of their home flat at 26, Binja Ħamrija, Triq il-Ħamrija, Naxxar. On July 28, 2008, they were robbed. Jewellery worth €13,396 was stolen and Grech requested his insurance company to indemnify him under the policy but Middlesea refused to pay.
Faced with this situation, he proceeded to take legal action against Middlesea and England Insurance Agency, requesting the court to declare that the insurance companies were obliged to pay him damages under the insurance policy, to liquidate the amount due (€13,396) and to order them to pay the sum so liquidated.
In reply, Middlesea disputed liability. It argued that when Grech completed the proposal form he failed to disclose relevant and material information. As a consequence, this released them from having to pay the alleged damages on grounds of non-disclosure of material facts.
Middlesea maintained that Grech had to prove that the objects were actually stolen, their value and that the value claimed was just, real and correct. No interests accrued, they said.
The company England Insurance Agency Ltd asked to be freed from the proceedings as it was not a legitimate defendant.
On March 25, 2010, Grech ceded the suit against England Insurance Agency Ltd.
The first court considered that Grech had not told Middlesea that in 1991 he was robbed and had made a claim with Gasan Insurance, which had paid him €11,647.
The policy with Middlesea was taken for the period October 13, 1998 to October 12, 1999, and subsequently renewed. Grech maintained that he had replied to all questions on the proposal form.
Middlesea, however, held that his failure to disclose details pertaining to the robbery of 1991 was a failure to disclose essential information.
The First Hall of the Civil Court held that the contract of insurance required the highest degree of good faith and the disclosure of all relevant information. As Lord Scrutton said in ‘Greenhill v Federal Insurance Co.’ (1927 “Now insurance is a contract of the utmost good faith and it is of the gravest importance to commerce that this position be observed. The underwriter knows nothing of the particular circumstances of the voyage to be insured. The assured knows a great deal and it is the duty of the assured to inform the underwriter of everything that he is not taken as knowing, so that the contract may be entered into on an equal footing.”
Middlesea maintained that Grech should have informed them that he was robbed in 1991. This was a material fact which should have been disclosed as it would have influenced its decision whether to accept the risk.
If they accepted the risk, they could have imposed different conditions. The principle of uberrimne fidei required that the assured would reply to all questions on the proposal form and was obliged to give the insurance company all information for it to make an assessment of the risk. If there was non-disclosure, the insurance company had grounds to revoke the policy.
On the proposal form the assured also declared that he had not withheld any material fact. The first court maintained that it was not in dispute that Grech did not disclose a material fact to enable Middlesea assess the risk and for it to decide whether to insure such risk.
The first court was of the opinion that Grech was obliged to disclose other previous claims preceding the last five years as such was a material fact.
In this case, the insurance company had to rely on the proposal form. The fact that his daughter worked for the insurance company was totally irrelevant and did not impose any obligation on the insurance company.
Aggrieved by the decision of the first court, Grech entered an appeal, calling for its revocation.
The court noted that the assured was duty-bound to be honest and to give all material information relevant to this case, re: ‘Rozannes v Bower’ (1928).
This principle was emphasised in the EEC Council Directive of 1977, though it was also stated that the obligation of the assured was exhausted if he replied honestly to the questions on the policy.
In ‘Camilleri noe v Bartolo (PA)’ dated March 22, 1982, a policy of insurance was annulled when the assured did not inform the insurance company that he had made other claims in the past before approaching the insurance company. Every material fact should be disclosed.
A material fact was such that would influence the decision of the prudent insurance company to decide to take the risk. The contract of insurance was one of utmost good faith and the assured was obliged to give a clear reply to questions on the proposal form.
The assured had a duty to mention every fact even if not asked: ‘Degiorgio v Agius (PA)’ dated June 25, 1962; (VOL XLVI-11-656); ‘Muscat v Gasan Insurance Agency Ltd’ dated March 2, 1998. The duty of the assured was to disclose all relevant facts and to reply to all questions correctly.
For the purpose of this decision, it was stated that an insured’s accident history would often be of greatest importance to an insurer and if an assured did not say that he was robbed, he would be concealing a material fact.
The fact that in 1991 he was robbed from his residence and reimbursed by another insurance company was both relevant and material. In the court’s opinion, an incorrect reply from the assured was a misrepresentation of a material fact which rendered the policy to be invalid; re ‘Parnis v Fava (PA)’ dated October 26, 2001.
As stated by English courts, in ‘Arterial Carowners Ltd v Yorkshire Insurance Co.’ (1973), the primary obligation was one of disclosure on the part of the assured, not of enquiry on the insurer.
The court did not feel that it was proven that Grech was in bad faith. It was presumed he was in good faith and Middlesea had to prove the contrary
Non-disclosure was equivalent to deceit, as the insurer was not in a position to take a proper decision, rendering the policy null and void. However, in this case, Grech was specifically asked whether he was robbed in the last five years and he answered in the negative.
The Court of Appeal said, however, that Grech could easily conclude that the insurance company was not concerned with previous robberies, of more than five years ago. The specific question of the insurer on the proposal form could be a ‘waiver of disclosure of information on the same subject’. In Birds’ Modern Insurance law of Birds & Hird (6th edition, 2004
‘’Waiver as a result of the form of questions asked will usually arise where an express question asks for some details of certain facts or types of facts. Disclosure of other details will be waived if it is felt that a reasonable man reading the proposal form would consider that the insurer did not seek the other details.
“For example, a question asking the proposer for details of previous losses he has suffered within a five-year period would waive disclosure of losses outside that period even though such losses might well be material facts according to the usual test.
“Similarly, a question asking about the claims history of the proposer in relation to the type of insurance for which he is applying might well be regarded as waiving any duty of disclosure of losses or claims in respect of other types of insurance that in some circumstances might be regarded as material facts.’’
This was what happened in this case, pointed out the court. Once Grech was asked a specific question in relation to thefts in the last five years, it was deemed that this issue was already dealt with.
The court did not feel that it was proven that Grech was in bad faith. It was presumed that he was in good faith and Middlesea had to prove the contrary. It was not unusual for the same person to be a victim of two robberies; in particular in this case, Grech’s residence was broke into twice, to his prejudice.
For these reasons, on July 28, the Court of Appeal gave judgment by accepting the appeal and by revoking the decision of the first court dated November 30, 2010.
The court accepted Grech’s claims and ordered Middlesea to pay him €13,396 under the policy, with legal interests from the date of this decision.
Dr Karl Grech Orr is a partner at Ganado Advocates.