In Niramax Group Ltd v Zurich Insurance Plc [2020] EWHC 535 (Comm), Niramax Group Ltd ("Niramax") brought a claim against Zurich Insurance plc ("Zurich") challenging Zurich's failure to pay out on a claim for fire damage to a recycling facility.
Niramax, a waste management operator, held insurance policies with Zurich covering plant and machinery (the "P&M policy"). It also had separate buildings insurance coverage with a different insurer. This buildings policy required Niramax to satisfy certain risk mitigation conditions, such as CCTV installation, by a stipulated date; Niramax failed to do so, triggering further special terms.
When Niramax's P&M policy with Zurich came up for renewal in 2014, it did not disclose its failure to satisfy the conditions imposed on it in its buildings insurance policy. Unaware of this non-compliance, Zurich renewed the policy and subsequently, in 2015, expanded coverage under it to include a new multi-million pound sorting machine known as the 'Eggersman' plant.
Three months later, the Eggersman plant was destroyed by fire, and Niramax claimed for losses totalling £4.5 million under the P&M policy. However, Zurich rejected the claim and sought to avoid the P&M policy on the basis of Niramax's non-disclosure of its failure to satisfy the conditions included in the buildings policy (it should be noted that the contracts in question were entered into before 12 August 2016, such that the Insurance Act 2015 did not apply). Zurich argued that these facts were material and, had they been disclosed, decisions relating to both the 2014 renewal and the addition of the Eggersman plant to the policy in 2015 would have been referred to a particular senior Zurich underwriter, Mr Penny, who would have proposed a different set of terms or refused coverage altogether.
Mrs Justice Cockerill, sitting in the Commercial Court (QBD), found that the case on avoidance was not made out in respect of the original policy; but that there had been an actionable non-disclosure in relation to the Eggersman plant extension. The net effect of this was that Niramax succeeded in relation to about 10% of the claim relating to the loss of older (non-Eggersman) equipment, with the increased premium charged for inclusion of the Eggersman plant to be repaid by Zurich.
Mrs Justice Cockerill found that Niramax's non-compliance with the conditions attached to the buildings policy and the imposition of special terms were material. Niramax's lax attitude to compliance with another insurer's stipulations was relevant to Zurich's calculation of risk. In Mrs Justice Cockerill's words, it "manifested an attitude to compliance which was relevant to the risk". Convincing evidence presented to the court included that insurers' proposal forms invariably include a question about special terms imposed by previous insurers, demonstrating materiality.
On inducement, Mrs Justice Cockerill found for Zurich, but noted that the matter was complicated by Zurich's apparent willingness to diverge from the findings of a risk matrix in order to maintain a relationship with a long-term client. She found that, had disclosure been made, the policy would have been referred to Mr Penny, who was particularly experienced in insurance of recycling material. He would have renewed the policy but he would not have extended the policy to include the Eggersman plant, instead suggesting that a property policy would have been more appropriate. This was supported by evidence submitted; most importantly, that Mr Penny had previously issued guidance advising "no fixed plant on waste risks".
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