UK: Court of Appeal Confirms the Validity of Basis of Contract Clauses in Business Insurance Contracts
In Genesis Housing Association Ltd v Liberty Syndicate Management Ltd (for and on behalf of Syndicate 4472 at Lloyd’s)  EWCA Civ 117, the Court of Appeal confirmed the validity of basis of contract clauses in business insurance contracts.
In this case, a housing association had declared the information given in a proposal form relating to a construction policy was correct to the best of its knowledge. However, the association had incorrectly identified the builder in the proposal form, and the insurers alleged therefore that there had been a breach of warranty.
It was held that where a proposal form contains a “basis of contract” clause, all statements in the proposal form constitute warranties on which the insurance contract is based and cannot be treated as immaterial. The Court also confirmed that the proposal form had contractual effect, even if the policy contains no reference to the proposal form. In the circumstances, the Court agreed with the insurers that there had been a breach of warranty.
Although the Consumer Insurance (Disclosure and Representations) Act 2012 excludes the use of basis of contract clauses in consumer insurance, this decision is a reminder of the validity of basis of contract clauses in business insurance contracts and that parties should take care when completing a proposal form.
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