MAK YUEN YUEN v. NATIONAL MUTUAL INSURANCE CO. (BERMUDA) LTD.

HEADNOTE

    Uberrimae fidei contracts - materials to be disclosed.

    Defendant sought to avoid a motor insurance policy on the grounds that one of the answers in the proposal form was false and that the Plaintiff had failed to disclose facts which were material to the Defendant in deciding whether it should accept the risk.

Held:

1) On the proper construction of the question, the word "loss" does not include loss in the sense that any vehicle owned or driven by the proposer or named driver had been stolen before.

2) Unless there is a specific statement in the proposal form to the effect that the proposer should disclose materials which were relevant but not covered by the questions set out therein, it is reasonable to infer that the insurer had restricted his right to receive all material informations from the question set out in the proposal form.

IN THE DISTRICT COURT OF HONG KONG
CIVIL JURISDICTION
ACTION NO. 7902 OF 1990

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JUDGMENT

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1. The Plaintiff was the registered owner of a private vehicle Registration No. DX 531. She took out a comprehensive insurance policy in respect of that car from the Defendant. On the 13th September 1989 the car was stolen but was later recovered. The car was badly damaged and a surveyor was instructed to prepare an estimate as to the repair costs. The surveyor reported that the estimated costs of repair exceeded $140,000 while the estimated market value of the said car was only $80,000 to 85,000. She clained from the Defendant a sum of $77,400,00 which is calculated as follows:-

Market value	$85,000
Survey fee	$400
less
Scrap value	$5,000
Compulsory excess	$3,000
	$77,400
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2. The Defendant disclaimer liability on the ground that the contract of insurance being an uberrimae fidei contract, the Plaintiff had failed to give truthful statements and answers in the proposal form and had failed to disclose material and relevant information to the Defendant when taking out the policy with the Defendant. Thus the Defendant is entitled to avoid the said policy. It also counter-claimed for a declaration to avoid the said policy.

3. The particulars of the non-disclosed relevant or material facts were that the named driver in the proposal form one Mr. IP Chi-wai, the spouse of the Plaintiff had 3 speeding offences between the 13th December 1985 and 30th May 1987 and that the said Mr. IP had reported loss of a motor vehicle reg. no. DH6647 on or about 12th February 1987.

4. Mr. WONG Chun-wai an underwriting manager of the Defendant gave evidence. He said when deciding as to whether to accept an application for insurance of motor vehicles he had to take into consideration the driving experience and age of the owner and driver, records of collision and traffic offences including whether there was any loss of vehicle by the proposer before. The traffic offences affect his assessment because if the owner or driver had frequently contravened traffic regulations it means he is not a careful driver and the insurance co. had to decide whether it would reject the application on increase the loading or premium. The previous loss of vehicle would affect its decision because if there had been record of cars being stolen the insurance co. could insert conditions such as installing of anti burglary alarm on increase the overloading and premium. He agreed that the proposal form contained questions which were important for his assessment and that he would not go to the proposer for information and that in deciding whether to accept a proposal for insurance policy the only materials he relied on are informations set out in the proposal form.

5. Mr. Hui for the Defendant submitted firstly that the answer from a question in the proposal form was incorrect: This affected the assessment and hence the Defendant is entitled to avoid the policy. Further and in the alternative the contract being uberrimae fidei the Plaintiff had not disclosed all material and relevant facts

Answers in the proposal form.

6. There are altogether 8 questions in the proposal form. The only answer which the Defendant says was incorrect was the question underneath the particulars of the drivers. The question was in both English and Chinese. The English version was as follows:-

"Have you or any of the named drivers above had any accident or loss during the past 5 years while driving a can irrespective of whether the can is owned by you or not, or the named driver?

If yes, please give details of accident."

7. The Plaintiff had ticked in the box indictating no.

8. The Defendant produced a letter from Tuen Mun Police Station confirming that the named driver IP Chi-wai made a report to Tuen Mun Police Station on the 12th February 1987 that his vehicle DH6647 was stolen from an open space near Feoso Petrol Station at Castle Peak Road between 1600 hours on 11th February 1987 at 1430 hours on 12th February 1987. Thus he said the answer to that question is wrong.

9. Mr. Hui cited Farra v Hetherington and others Lloyd's Rep. Vo1.40 132. Among the questions in the proposal form in that case was the following question.

"How many accidents or losses have arisen during the past three years in connection with this or any other motor vehicle owned or driven by you or your driver?"

10. He submitted that the question is similar and the facts of that case also involved stolen vehicles. The learned Lord Chief Justice held that

"That information was material and was information with which the underwriters should have been made acquainted.''

11. I do not think the answer was incorrect. The question was whether the driver had any accident or loss while driving a car. The word "loss" in the context of that question must mean damage suffered as a result of the accident. In my judgment the word "loss" in the question in the proposal form in the present case does not include loss in the sense that the car was stolen.

12. Further the question in the proposal form in this case is different from that of Farra's case. The underwriter in this case was concerned only with accident or loss while driving a car. If it is argued that it should be construed to include any loss including a vehicle being stolen I respectfully disagree because the contra proferentem rule should be applied in the construction of that question.

13. For these reasons I rule that the Plaintiff's answer to that question is correct.

Material and relevant information in uberrimae fidei contract.

14. Mr. Hui went on to submit that a contract of insurance is an uberrimae fidei contract, all relevant and material informations should be disclosed to the Defendant at the time of filling in the proposal form so that the underwriter can assess whether it should accept the risk. He said that the Plaintiff had not disclosed that the named driver had 3 speeding offences between 1985 and 1987.

15. These offences most be material because accoding to Mr. Wong speeding is one of the factors which would effect his assessment as to whether he would increase the loading and premium. He cited the following passage in the judgment of the Lord Chief Justice in Farra's case:

"The matter seems to be clearly stated in the words of Lord Dunedin in the well-known case in the House of Lords of Glicksman v. Lancashire & General Assurance Company, [1927] A C. 139, at p. 143; 26 Li.L.Rep. 69, at p.71. Lord Dunedin used these words:-

The law was often been stated, but perhaps it is just as well to state it again. A coutract of insurance is denominated a contract uberrimae fidel. It is possible for persons to stipulate that answers to certain questions shall be the basis of the insurance, and if that is done then there is no question as to materiality left, because the persons have contracted that there should be materiality in those questions; but quite apart from that, and alongside of that, there is the duty of no concealment of any consideration which would affect the mind of the ordinary prudent man in accepting the risk. Now, I cannot help wondering what would have happened if the plaintiff had told the defendants the whole story of this Morris Oxford car as he told it in the witness-box yesterday. Would they, as ordinary prudent men, have accepted the risk about another car. I should think not. In other words, I think that that information was material and was information with which the underwriters should have been made acquainted.

I find the statement of Lord Dunedin that

"There is the duty of no concealment of any consideration which would affect the mind of the ordinary prudent man in accepting the risk"

16. difficult to follow. I cannot agree with that statement. People taking out insurance policies are mostly layman without knowledge as to what informations are relevant or material to an underwriter. Unless there are additional questions in the proposal from requesting for disclosure of informations which the underwriters feel are material, in my judgment the proposer had given all the information - required by the insurer if the proposer had answred truly all the questions contained in the proposal form. In fact Mr. Wong for the Defendant said that in deciding whether to accept the risk he relied only an informations contained in the proposal form. He would not go to proposer for information.

17. That being the case it would be harsh and unconscionable for the Defendant to argue that it is entitled to avoid the policy for non disclosure of material information which was never asked.

18. Para. 646 of HecCillioray one Parkington an Insurance Law stated reads:

"646. It is more likely however, that the questions asked will limit the duty of disclosure, in that, if questions are asked on particular subjects and the answers to them are warranted,if may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or on natters kindred to the subject matter of the question. Thus, if an insurer asks, "How many accidents have you had in the last three years?" it may well be implied that he does not want to know of accidents before that time, though these would still be material. If it were-asked whether any of the proposer's parents, brothers or sisters had died of consumption or been afflicted with insanity, it might well be inferred that the insurer had waived similar information concerning more remote relatives; so that he could not avoid the policy for non-disclosure of an aunt's death of consumption or an uncle's insanity. Whether or not such waiver is present depends on a true construction of the proposal form, the test being, would a reasonable man reading the proposal form be justified in thinking that the insurer had restricted his right to receive all material information, and consented to the omission of the particular information in issue?"

19. In Hair v the Prudential AssuranceCo. Ltd. 1983 Lloyd's Law Rep. Vol.2 667, the following was printed in the proposal from

"I wish to insure as above with the Prudential Assurance Co. Ltd. in the usual form for this class of insuranceand warrant that all the information entered above is true and complete and that nothing materially affecting the risk has been concealed,"

20. Concerning that statement Woolf J said:

"Reading that sentence as a whole, coming as it does at the end of the proposal form, it appears to me that it is reasonable to regard the question as requiring the proposer to make it clear that he or she has given a true and complete answer to the questions which appear above, and, what is more, that the proposer has not failed to disclose anything materially affecting the risk with regard to matters on which he is being questioned. I am bound to say, that, if it was intended thatan assured should answer matters even though he is not being questioned about them, I would expect a different form of statement from the one to which I have just made reference. I would have expected something to be said which clearly indicated to a proposer that, although they had not been asked any specific question about the matter, if there was something which was relevant to the risk which they knew of, but whichwas not covered by the questions, they should still deal with it, and leave a space for them to do so.''

21. In the proposal form in the present case underneath the word DECLARATION are printed the following words:

"I/We do hereby declare that the car described is and shall be kept in good condition and that the answers above given are in every respect true and correct and I/We hereby agree that this Declaration shall be the basis of the contract of insurance between National Mutual Insurance Co. (Bermuda) Ltd. and myself/ourselves and I/We agree to accept a policy of insurance according to the above proposal subject to the terms and conditions and exceptions to be expressed in and on the policy."

22. There is no statement in the proposal form, in the terns as suggested by Woolf J, that although the proposer had not been asked any specific questions, if there were something which were relevant but not covered by the questions the proposer should still deal with it.

23. For those reasons in my judgment the proposer had given full and relevant materials to the underwriter and the underwriter is not entitled to avoid the policy for materials which were not asked in the proposal form.

Quantum

24. The Plaintiff had filed a report from Roger Houghton Motor Surveys Ltd. saying that the estimated pre-accident current market value of the car was $80,000. The amount claimed by the Plaintiff is not challenged. It is most reasonable and fair claim.

25. In the premises there be judgment for the Plaintiff in the sum of $77,400.00 with interests at 10% p.a. from date of writ to judgment. Counter-claim dismissed. Coats in respect of both the claim and counter-claim to the Plaintiff. Certificate for Counsel.