Summary

An insurer's duty of disclosure did not go beyond facts which were material to the insurance contract. * Leave to appeal to the House of Lords refused.

Facts

Appeals by the defendants ('the Names') against the decisions of Rix J and Rimer J to the effect that the Names had no case against the plaintiff ('NU') in respect of alleged dishonest concealment of material facts in relation to endowment policies entered into by the Names with NU. The actions arose out of Plans marketed by NU, under which NU gave guarantees on behalf of the Names to Lloyds to meet losses incurred by the Names. Under the Plans the Names charged real property or investments to NU to secure the liabilities of NU under the guarantees. The Names also took out endowment policies with NU and assigned them to NU by way of further security. Any sums paid by NU under the guarantees were to be treated as sums advanced under the charge. Provided that the Names paid interest on those sums and premiums under the policy they were not required to repay to NU the principal sum unless and until the policy matured. NU had honoured calls under the guarantees, but the Names claimed to be entitled to be relieved of their obligations to make repayment on the ground of dishonest concealment of material facts by NU. In particular, they alleged that at the time that they were considering entering into the policies NU owed them a duty of utmost good faith to disclose that subsidiary or associated companies of NU were already affected by the kind of adverse losses which were later to escalate with catastrophic effects for the syndicates of which the Names were members.

Held

(1) The issue was whether the risk of losses by the Names at Lloyds, and the facts which were known to NU in relation to the potential for such losses, were facts or matters material to the risk covered by the endowment policies. (2) The only matter material to the risk covered by each policy was the life of the Name to which it related, and the duty of disclosure was therefore limited to matters material to that risk. (3) The duty of disclosure did not therefore operate to require disclosure of any fact which would or might induce a person to enter into the policy or into a composite transaction of which the policy formed part. (4) Section 47 Financial Services Act 1986 did not create a duty wider than that existing at common law. (5) There was no evidence of fraud on the part of NU. (6) (per Evans LJ) The position might well have been different if the premiums under the policy had not been assessed by reference to the risk of death alone, but by reference also to the risk of the guarantees being called in.

Appeals dismissed.