Problems in Insurance Law

Author(s): A. H. Hudson
Source: The Modern Law Review , Mar., 1975, Vol. 38, No. 2 (Mar., 1975), pp. 212-217
Published by: Wiley on behalf of the Modern Law Review

Stable URL: https://www.jstor.org/stable/1094783

REFERENCES
Linked references are available on JSTOR for this article:
https://www.jstor.org/stable/1094783?seq=1&cid=pdf-
reference#references_tab_contents
You may need to log in to JSTOR to access the linked references.

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide
range of content in a trusted digital archive. We use information technology and tools to increase productivity and
facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at
https://about.jstor.org/terms

Modern Law Review and Wiley are collaborating with JSTOR to digitize, preserve and extend
access to The Modern Law Review

This content downloaded from

168.167.34.252 on Fri, 23 Feb 2024 16:50:51 +00:00
All use subject to https://about.jstor.org/terms
212 THE MODERN LAW REVIEW [Vol. 38

" They are not words of limitation but rather of

tion. . . . No occasion arises for seeking to fi
of or the antithesis of 'public.' The sectio
circumstances where there is a 'provision' to
the public and where there is provision to so
public." "
This has also been the consistent approach of the Court of Appeal,
where it has been suggested regard should be had to the nature of
the common quality distinguishing a group from others,'0 the numbers
involved," or the circumstances of the provision of facilities.'"
These factors individually may furnish only imperfect criteria for
deciding what constitutes a " section of the public." 13 But it is
submitted that an approach along these lines offers more promise of
a realistic result. Had their Lordships considered the numbers in-
volved, they would have found that 1. million associate cards have
been issued to the total membership of 3-1 million people in clubs
within the union. The quality held in common by this vast number is
nothing more than their payment of the extra fee for associate and
pass cards and their having been admitted to membership of one club,
which is not difficult to obtain in practice. Had the circumstances
of the provision been considered, it would have been found that on
many occasions, such as " music nights," the members are swamped
by associates and guests, and that in many parts of the country "the
club " represents a substantial part of community life.
COLIN MUNRO.

PROBLEMS IN INSURANCE LAW

Two problems that have attracted attention in fairly recent years are
the relationship between contracts of guarantee and contracts of
insurance and the scope of the obligation of disclosure in non-marine
as compared with marine insurance.'
The fact that there appears to be no recent English case law on the
first problem and very little on the second 2 lends a special interest to

9 [1973] 1 All E.R. 512, 522.

10 In Charter [19721 1 Q.B. 545, per Lord Denning M.R., Megaw and Stephenson
L.JJ.
11 In Applin 11973] Q.B. 815 and Dockers' Labour Club [19741 1 All E.R. 713, per
Lord Denning M.R.
12 In Charter [19721 1 Q.B. 545 and Applin [19731 Q.B. 815, per Stephenson L.J.,
and in Dockers' Labour Club [19741 1 All E.R. 713, per Scarman L.J.
13 The first was disapproved by the majority of their Lordships in Charter, who
professed not to understand it.
1 See " The Conversion of Guarantee Contracts," Michael C. Blair, (1966) 29
M.L.R. 522 and "' The Doctrine of Uberrima Fides in Insurance Law-A Critical
Evaluation," R. A. Hasson, (1969) 32 M.L.R. 615.
2 But see Arterial Caravans Ltd. v. Yorkshire Insurance Co. Ltd. [1973] 1 Lloyd's
Rep. 169 considered post note 22. The practice of making searching inquiries in
proposal forms and the use of " basis " clauses does not deprive uberrima fides of
all practical importance for the answering of specific questions does not relieve the
proposer of his duty to disclose material facts. See Fifth Report of the Law Reform

This content downloaded from

168.167.34.252 on Fri, 23 Feb 2024 16:50:51 +00:00
All use subject to https://about.jstor.org/terms
 Mar. 1975] NOTES OF CASES 213

the judgment of Davitt P. in the Irish c

v. Irish National Insurance Co.3 The case
appears to have passed unnoticed in this co
The facts were that the defendant insu
bonds by which they agreed to indemnify
any failure to perform contracts under
London merchants, were to purchase b
When the sellers failed, the defendants
on the bonds on the ground that they
material matters of fact had been misre
Counsel for the insurers argued that,
were contracts of guarantee or of insu
necessary. Whilst utmost good faith is a
is not generally true of guarantee," sinc
fuller knowledge of the risks he is un
There may, however, be so-called cont
more nearly akin to insurance than or
contracts will be uberrimae fidei.
The criteria for making these distinc
L.J. in Seaton v. Heath.5 Guarantee
friendship between the debtor and the
commercial considerations; it follows th
contract of guarantee will often be the de
guarantor whilst in a similar contract o
make the first approach to the insur
however, that these tests would not
answer and that there could be contrac
propriety be called contracts of guarant
Whether such a contract would require
on " its substantial character and how it came to be effected." "
Davitt P. said these tests had long been accepted as satisfacory'
and, applying them to the bonds, he found them to bear a closer
resemblance to the contracts in Dane v. Mortgage Insurance
Corporation 8 and Finlay v. Mexican Investment Corporation,9
which were held to be insurance, rather than to the guarantee in
Trade Indemnity v. Workington Harbour and Dock Board.'o
Davitt P. pointed out" that, though the performance bonds
related to persons who assumed relations comparable to those of
Committee (1957) Cmnd. 62 citing Joel v. Law Union and Crown Insurance Co.
[1908] 2 K.B. 863.
3 [1956] I.R. 116. This case has escaped citation in Macgillivray on Insurance Law,
5th ed.; Colinvaux on the Law of Insurance, 3rd ed.; Ivamy, General Principles
of Insurance Law, 2nd ed. and in the articles cited in note 1.
4 Lee v. Jones (1864) 17 C.B.(N.s.) 482; Seaton v. Heath [1899] 1 Q.B. 782 (revd.
on other grounds sub nom. Seaton v. Burnand [1900] A.C. 135).
5 Ibid. at pp. 792-793.
6 Ibid. at p. 793.
r [1956] I.R. at pp. 148-149.
8 [1894] 1 Q.B. 54. 9 [1897] 1 Q.B. 517.
10 [1937] A.C. 1. " [1956] I.R. at p. 148.

This content downloaded from

168.167.34.252 on Fri, 23 Feb 2024 16:50:51 +00:00
All use subject to https://about.jstor.org/terms
 214 THE MODERN LAW REVIEW [Vol. 38

creditor, debtor and surety, the defendants did

discharge the sellers' liability to the purchasers
the second plaintiffs, who were the purchasers' b
loss resulting from the failure of the sellers to perform their
contracts.'2 Moreover the matter was placed by the plaintiffs (the
creditors) in the hands of insurance brokers "who placed the risk
before the defendants as a business transaction and they, in
consideration of a premium, agreed to undertake it."
Since he had decided that utmost good faith was required Davitt
P. had also to consider whether it had been observed.
There had been inaccuracies in the description of the sale
contracts to the insurers. It had been stated that the meat was
to be processed by one company rather than by its wholly-ow
subsidiary and also that the processing plant belonged to the hol
rather than the subsidiary company. This failure to chart accura
the corporate structure was, he held, if a misrepresentation, n
material."3 Again he held that the fact that the price had been
six months in advance and could from one point of view be
regarded as a loan at a substantial rate of interest did not mean
that the contract of sale was a "camouflaged loan" and should
have been described as such.'4 He did, however, say that if the
bargain was a bad one from the point of view of the sellers this
might have been material as affecting their willingness to perform
their contracts, but on the evidence there was nothing to show
that it was in fact bad.'"
In any event, however, he held that there had been sufficient
disclosure.'6 The broker who negotiated the bonds had shown the
insurers the contracts of sale and the insurers could see their terms.
Davitt P. was of the view that insurance companies " must surely
be presumed to have some knowledge of the trade and business
of the persons whose contracts they cover" and it should have
occurred to them that the English buyers would be re-selling the
beef to Smithfield merchants. If the profit on this resale was
material to assessing the risk on the bonds, the insurers should
have made inquiries. This they failed to do even though their
attention was called " in a very clear and specific way" to arrange-
ments for resale.
Davitt P.'s statement of the law and his choice of authorities 1
12 For the terms of the bonds see ibid. at p. 121. For the significance of this
distinction see Colinvaux, Law of Insurance, 3rd ed., p. 343. Payment by a surety
discharges the principal debt, whereas payment by an insurer does not affect it. In
attaching weight to the language used Davitt P. is in accord with the majority of the
English cases. See Blair op. cit., p. 532 and compare Re Law Guarantee [1914] 2
Ch. 617, 631 and 636, cited by Blair at p. 531.
1a [1956] I.R. at pp. 146-147.
14 Ibid. at pp. 144-145.
15 Ibid. at pp. 149-150. 16 Ibid. at pp. 150-152.
17 !bid. at p, 152. Foley v. Tabor (1861) 2 F. & F. 663; Aslar v. Blundell [1896]
1 Q.B. 123; Mann Macneal v. Capital and Counties Insurance [1921] 2 K.B. 300;
The Bedouin [18941 P. 1. The only non-marine case he cited is Joel v. Law Union
[1908] 2 K.B. 863, 882 and 897.

This content downloaded from

168.167.34.252 on Fri, 23 Feb 2024 16:50:51 +00:00
All use subject to https://about.jstor.org/terms
 Mar. 1975] NOTES OF CASES 215

is of significance as an adoption of the

insurance in the field of non-marine in
of his judgment runs:
" While the duty to make full disclos
to this risk rests upon the insured, a
insurer to relieve him of that duty
converse is to this extent true, that
to conduct the insurer's business for
the performance of which the insurer i
a clear intimation that a matter whic
to but not fully set out, is of import
is to be had for the asking, it would
and unjust to allow the insurer to re
grounds that he did not know and
of something he was in fact told abo
The most recent of the authorities rel
was the well known marine case of Mann Macneal v. Capital
and Counties Bank.'9 A wooden schooner with auxiliary engine
had been insured for a voyage but the insurers were not told that
the cargo was 100,000 gallons of petrol in drums. This was not an
unusual cargo and the evidence was that its carriage was not unduly
hazardous. When the vessel was destroyed the insurers sought to
repudiate liability on the ground that the cargo had not been dis-
closed. This was rejected by the Court of Appeal on the general
principle, formulated by Bankes L.J.20 that " it is not necessary to dis-
close minutely every material fact; assuming there is a material fact
which [the insured] is bound to disclose, the rule is satisfied if he
discloses sufficient to call the attention of the underwriters in such
manner that they can see thai if they require further information
they ought to ask for it."
The chief significance of Davitt P.'s use of Mann Macneal seems
to be that he attached no special importance to such factors as
those mentioned in the judgment of Atkin L.J.2 which might have
confined the case to marine insurance. Atkin L.J. had pointed out
that the insurers had failed to cite an authority in which insurers
had been allowed to repudiate liability because of non-disclosure
of the cargo. This was because insurance on the hull was often
arranged well before a cargo was obtained and hence disclosure of
the cargo would be impossible.
The readiness of Davitt P. to allow a wide ambit to this authority,
and earlier cases to the same effect such as Foley v. Tabor and
Asfar v. Blundell, can now be matched in this country in the
18 A development which would be favoured by Hasson (1969) 32 M.L.R. at
pp. 633 and 635 who would, however, go further and provide that any failure by an
insurer to ask for information customarily required should be deemed to be a
waiver of that information.
19 [1921] 2 K.B. 300.
20 Ibid. at p. 309 citing Lord Esher in Asfar v. Blundell [1896] 1 Q.B. 123, 129.
21 [1921] 2 K.B. at p. 311. But see Bankes L.J. at pp. 306-307.

This content downloaded from

168.167.34.252 on Fri, 23 Feb 2024 16:50:51 +00:00
All use subject to https://about.jstor.org/terms
 216 THE MODERN LAW REVIEW [Vol. 38
Arterial Caravans Ltd. v. Yorkshire Insurance Co.22 Here one
Sutherland had started as a manufacturer of caravans and then
incorporated the business under the name of the plaintiff compa
of which he was the sole director. This company became dorma
and Sutherland brought into being a new company, of which h
was also sole director, to carry on the business. The new compa
suffered a serious fire and shortly afterwards went into liquidat
Sutherland then re-activated the plaintiff company to continue
making of caravans. Negotiations were entered into with the def
dants for fire insurance and the plaintiff company was covered
pending the issue of a policy. Fire damaged the plaintiff compan
premises but the defendant insurers repudiated liability on the groun
that Sutherland had failed to disclose the fire involving his oth
company. Against this it was argued for the plaintiff company t
the insurers had waived any non-disclosure since their manager
failed to ask questions on the proposal form as to previous loss
and get answers to them. Moreover, after the insurers had recei
the forms with the questions unanswered they had accepted th
forms and made no further attempt to obtain answers.
These contentions were rejected by Chapman J. Whilst he seem
to accept without comment that Asfar v. Blundell and Mann
Macneal v. Capital and Counties Insurance could apply in the non-
marine field,23 he pointed out that nonetheless the primary obliga-
tion was one of disclosure on the part of the insured, not of
inquiry on the insurer. It was only when the insured disclosed,
albeit in general terms, some material fact and the insurers then
failed to explore the matter that they were debarred from relying
on the fact that there had not been full disclosure. Here the
insurers were kept in complete ignorance that there had ever
a fire in the history of the business and, that being so, the
that they did not pursue inquiries did not operate as a waive
estoppel to debar them from relying on non-disclosure. This s
consistent both with Kreglinger and Fernau v. Irish National
Insurance, for there the existence of arrangements for re-sale were
known to the insurers, and with Mann Macneal since the carrying
of cargo is an ordinary incident of a voyage, whereas a serious fire
is not an ordinary incident of a manufacturing business.
The judgment in Arterial Caravans Ltd. touches but does not
explore a thorny field of controversy. There are authorities to the
effect that if a proposer leaves a question unanswered and the
insurer accepts this without further query, the insurer will then
be taken to waive information on matters covered by the
unanswered question.24
22 [1973] 1 Lloyd's Rep. 169. In Anglo-African Merchants v. Bayley the insurance
was marine. [1969] 1 Lloyd's Rep. at p. 275.
23 Ibid. at p. 181. Chapman J.'s mention of Lord Esher refers to Asfar v.
Blundell. See ante note 20.
24 See Macgillivray on Insurance Law, 5th ed. Vol. I, pp. 401-402 and 441-442;
Colinvaux, Law of Insurance, 3rd ed., pp. 88 and 98; Marcovitch v. Liverpool
Victoria (1912) 28 T.L.R. 188 (C.A.).

This content downloaded from

168.167.34.252 on Fri, 23 Feb 2024 16:50:51 +00:00
All use subject to https://about.jstor.org/terms
 Mar. 1975] NOTES OF CASES 217

This will not be the case, however, if the failure to answer

implies a negative answer.25 This distinction has been criticised as
unduly favourable to insurers 28 but Chapman J. did not discuss these
authorities, perhaps because he found that the inference was not
that the (now dead) underwriter acting for the insurers had simply
accepted blank answers without more, but that he had been
informed, perhaps by telephone, of verbal answers by Sutherland
to inquiries on behalf of the insurers, which carried the implication
that no fire losses had been sustained in his business.27 On this view
the case was not one of simple failure to answer but one where
partial and misleading answers had been given. Chapman J. was
also clear that if the insurers were to be estopped or bound by their
waiver they must have done or said something to lead the insured
to suppose that they were not interested in a history of fires and
nothing that they had done or said could bear this construction.28
It will also be seen that in both Kreglinger and Fernau v. Irish
National Insurance Co. and Arterial Caravans Ltd. v. Yorkshire
Insurance Co. the courts showed themselves ready to disregard
niceties of corporate structure and look to the actual business
reality when assessing the materiality of misrepresentation and
non-disclosure. Davitt P. attached no importance to the fact that
the property and activities of a wholly owned subsidiary were
attributed to its holding company 29 and, of an answer by Suther-
land to the effect that if he had been asked certain questions as to
losses he would only have replied with regard to the history of his
present company, Chapman J. said " Frankly, that seems to me to
be a typical example of answering by the card." " This attitude
on the part of the courts sharply contrasts with their opposite view
of the significance of corporate personality in relation to problems
of insurable interest.31
A. H. HUDSON.

INDUSTRIAL TORTS: INDUCING BREACH AND INTERFERENCE

WITH CONTRACTUAL RELATIONS--JUSTIFICATION

THE recent decision of the New Zealand Court of Appeal in The

Northern (Except Gisborne) Road Transport Motor and Horse
Drivers and their Assistants Industrial Union of Workers v. Kawau
Island Ferries Ltd.' represents the first occasion on which that court
has been called upon to consider the question of an interim labour
injunction. Accordingly, the case assumes great importance in the
25 Roberts v. Avon Insurance Co. [1956] 2 Lloyd's Rep. 240.
26 Hasson (1969) 32 M.L.R. at p. 625.
27 [1973] 1 Lloyd's Rep. at p. 179.
28 Ibid. at p. 180.
29 11956] I.R. at pp. 146-147.
so (1973] 1 Lloyd's Rep. at p. 176.
31 Macaura v. Northern Assurance (1925j A.C. 619.
1 Judgment of the New Zealand Court of Appeal (as yet unreported) handed down
June 18, 1974.

This content downloaded from

168.167.34.252 on Fri, 23 Feb 2024 16:50:51 +00:00
All use subject to https://about.jstor.org/terms