DRN-6272877

The complaint A limited company, which I will call C, has complained about the refusal of a claim and cancellation of its commercial insurance policy with The New India Assurance Company Limited. Mr S, as a director of C, has brought the complaint on its behalf. What happened C held insurance with New India from 2019 to February 2025. In early January 2025, C made a claim under the policy following a fire at its premises. New India considered the claim. Shortly before the policy was due to renew, in early February 2025, New India said it would not offer renewal terms. New India subsequently decided to void the insurance from when it first started in 2019, as it said that C had not provided a fair presentation of the risk at that time. New India said C had failed to disclose, when it took out the insurance, that its directors had been involved in a company that had entered liquidation in 2009, with the process apparently completing in 2011. New India said that if it had known this information, it would not have offered insurance at all, so said it was entitled to void the policy from when it first started. New India also said it would be entitled to recovery of the difference between the value of the claims paid under the policy and the premiums paid, but offered to waive the amounts it considers to be outstanding if the voidance of the policy was accepted. C does not consider this is fair and, as New India did not change its mind, it referred the complaint to this Service. Mr S is director of four other linked companies all also insured with New India. It has voided all the policies for the same reasons. Separate complaints have been brought for each of the linked companies. This decision only deals with C. Mr S has made a number of submissions in support of its complaint. I have considered everything he has said and have summarised its main points below: - C was asked when it applied for the policy whether any directors had been involved in a business that had gone into “liquidation administration”. The question was unclear and didn’t make sense because "liquidation administration" is not a recognised distinct legal term or process. - Because the company in question did not go into "liquidation administration", it had answered ‘no’, which was correct. - It did not make any deliberate misrepresentation, because it had answered the questions asked by New India correctly. - In subsequent correspondence and elsewhere, New India has inserted a comma between liquidation and administration, distinguishing them as two distinct processes. - The part of the question that asks about liquidation administration is between two

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other questions about current circumstances. - New India said the company had entered compulsory liquidation involving creditors winding up and significant debts, but this isn’t accurate. It was voluntarily liquidated. - Voluntary liquidation was not an option in the proposal form. And voluntary insolvency is only mentioned in the context of current procedures. - The question was under a heading “general information” which did not give any indication of the importance of the information being asked. - The court judgement in Ristorante Ltd t/a Bar Massimo v Zurich Insurance plc EWHC 2538 (CH) is relevant. The court determined that the insurer in this case had waived its right to information about insolvency due to its proposal questions being ambiguous. - A significant part of that company’s debt was voluntarily transferred to C and paid off. - Its broker has informed it that New India has accepted the risk in similar circumstances for other customers. - New India’s response is disproportionate given the time since the insolvency and circumstances of what happened with the previous company. - In any case, he finds it difficult to accept that New lndia would under no circumstances insure where any of the directors have been involved in a company that has been through any form of liquidation/winding up procedure. - New India did not revisit the question at any subsequent renewal and it was not provided with a copy of the statement of fact, which might have alerted C to the issue. Mr S wants the claim met and compensation for the stress and time involved. One of our Investigators looked into the matter He did not recommend the complaint be upheld, as he was satisfied that New India was entitled to take the action it had. C does not accept the Investigator’s assessment, so the matter has been passed to me. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I am mindful of the significance of this matter for Mr S and his colleagues at C. I have therefore considered the matter very carefully. Having done so, however, I am not minded to uphold the complaint. I will explain why. Relevant considerations As this is a commercial contract of insurance, The Insurance Act 2015 is the relevant law here. The Insurance Act 2015 places a duty of fair presentation of risk on the policyholder: “Before a contract of insurance is entered into, the insured must make to the insurer fair presentation of the risk.” And: “the disclosure required is …disclosure of every material circumstance which the insured knows or ought to know.” If the insured fails to do this the insurer has certain remedies, provided the breach of the

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duty of fair presentation is a qualifying breach, as set out in the Act. If the insurer shows it would not have offered the policy at all, or would only have offered it on different terms, then it’s a qualifying breach. Schedule 1 of the Insurance Act 2015 sets out the remedies available for insurers for qualifying breaches. “If a qualifying breach was deliberate or reckless, the insurer— (a) may avoid the contract and refuse all claims, and (b) need not return any of the premiums paid. Other breaches Paragraphs 4 to 6 apply if a qualifying breach was neither deliberate nor reckless. 4 If, in the absence of the qualifying breach, the insurer would not have entered into the contract on any terms, the insurer may avoid the contract and refuse all claims, but must in that event return the premiums paid. 5 If the insurer would have entered into the contract, but on different terms (other than terms relating to the premium), the contract is to be treated as if it had been entered into on those different terms if the insurer so requires. 6 (1) In addition, if the insurer would have entered into the contract (whether the terms relating to matters other than the premium would have been the same or different), but would have charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim.” In order to fulfil a fair presentation of risk, The Insurance Act 2015 says a commercial policyholder must disclose everything they know, or ought to know, that would influence the judgment of an insurer in deciding whether to insure the risk and on what terms. The Insurance Act 2015 doesn’t give consideration to how clear any questions asked of the applicant were when deciding if a policyholder made a fair presentation. However, we usually think it’s fair and reasonable for an insurer to ask a clear question, so the policyholder can find out what it wants to know. And the Insurance Conduct of Business Sourcebook says that a way of ensuring a commercial customer knows what they need to disclose is to have “asked clear questions about any matter material to the insurance undertaking”. Did C make a fair presentation of risk when applying for the policy? I have therefore considered whether clear questions were asked of C. And C could only answer any questions, or provide information, to the best of its knowledge or belief. During the application process, C was asked: “2. Have you or any of your partners or directors personally or in connection with any Business which you/they have been involved… d) ever been declared bankrupt or are the subject of any current bankruptcy proceedings or been the director or any company which went into liquidation administration or receivership or is currently undergoing any voluntary or mandatory insolvency or winding up procedures?”

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C answered “No” to this question. New India says this was not a correct answer, because C’s directors had previously been involved in a company that entered liquidation. C says the question was not sufficiently clear to have required it to disclose the liquidation of the previous company several years earlier. The directors had been involved in a company that had gone into liquidation but not “liquidation administration”. C says the absence of a comma between these two words indicates it is referring to a standalone process, different from liquidation. It says New India has since amended the form, inserting a comma here, so it must accept it was not clear. I note what Mr C has said about the absence of a comma. However, the question needs to be read as a whole. In my opinion, even in the version of the proposal without a comma, it is sufficiently clear that New India wanted to know about any circumstances where a previous business that the directors or partners had been involved in had become insolvent. I also note that C has said it was aware that “liquidation administration” is not a process in itself. I do not think the way the question was phrased creates such ambiguity that would mean C was not required, or reasonably did not know it was required, to disclose a previous insolvency involving its directors. C also says voluntary liquidation was not an option, but the question does ask about any liquidation, which would mean compulsory and voluntary, of any previous company, as well as current voluntary liquidation. I do not agree therefore that this can reasonably be interpreted as meaning that previous voluntary processes were not required to be disclosed. I’ve also considered the judgment in the Ristorante Ltd t/a Bar Massimo v Zurich lnsurance plc EWHC 2538 (CH) 2021 case. However, the questions asked of the policyholder in that case were different from those asked of C. I note the insurer was deemed to have not asked sufficiently clear questions in that case to have elicited the information it said should have been disclosed but as it involves different wording, I do not think it directly impacts this case. I have also considered the case referred to by New India: Tynefield Care Ltd (and others) v the New India Assurance Company Ltd (2024). This case also involves a differently worded insolvency question, but the court determine that the policyholder had a duty to disclose an insolvency that was many years prior and with no adverse comment about the individual concerned in the administration (“an unremarkable insolvency”) as a material fact the insurer would want to know about, even though the question asked in the proposal in that case did not expressly ask about that person (as a shadow partner). C has also said that the statement of fact was not provided to it at the renewals of the policy, and it was not asked to complete a proposal form other than in 2019. If it had done, it says there would have been an opportunity for it to review its answers and perhaps correct the situation. C says this was a failing on New India’s part. I do not agree. As the Investigator has explained, New India was not required to do either of these things and was entitled to rely on the information given in 2019. It did ask C to notify it of any relevant changes at each renewal. In any case, even if it would have been reasonable for New India to have provided a copy of C’s answers given in 2019 at the renewals, I do not consider it likely this would have changed the position, given C asserts that it answered the question correctly in 2019. I have also considered what C has said about the position of the questions in the proposal form and its submission that the significance of this information was not therefore apparent to it. The form starts with the following warning: “You must disclose every material circumstance which you know or ought to know. If

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you are in any doubt as to whether the circumstance is material, you should for your own protection, disclose it as a failure to do so could invalidate the insurance.” The general information section comes after the questions about the levels of cover being applied for and just above the claim history questions. I do not think the position of the questions in the form, or the subheading the insolvency question was under, means that the question, or the importance of answering it accurately, was any less clear. Having considered everything very carefully, I am of the opinion that the question set out above was sufficiently clear to have elicited the correct information from C and it was not provided. I therefore do consider that C failed to make a fair presentation of the risk at the point of sale. Was New India induced by the failure to provide a fair presentation of risk? Insurers are generally entitled to decide what cover they want to provide and New India has provided reliable evidence that it would not have been willing to offer cover, if it had known that C’s directors had been involved in a previously liquidated company. I appreciate Mr S has asked to see the evidence that New India would not have provided cover at all, if it had known of the insolvency of the previous company, however, an insurer’s underwriting criteria is commercially sensitive information. So, whilst I appreciate – and I understand – Mr S’s desire to see this information, I do not think it is appropriate to share it. Having considered the evidence provided, I am satisfied that New India has established it would not have provided this policy in 2019 or any of the following years, if it had known of the insolvency history of the directors. Mr S has also said C has been treated unfairly, as its broker has informed it that New India has provided cover for another business in similar circumstances. I do not have any other evidence about this., However, I can only determine whether New India has acted fairly and reasonably, in line with the relevant law and industry regulations, in relation to C. I cannot comment on how it has treated other policyholders. I also acknowledge that Mr S thinks that as the insolvency was several years prior and he and the other director acted reasonably in managing the debts, New India’s response is disproportionate. I do appreciate the impact of its response on C but the previous insolvency is a material fact that New India was entitled to be aware of. Remedy available to New India As this was a qualifying breach, New India is entitled to a remedy under The Insurance Act 2015. The remedy available depends on whether the breach was deliberate or reckless or not deliberate or reckless. There is no reason to think this was a deliberate misrepresentation. Instead, it seems to me likely that this was a result of carelessness. As set out above, if a qualifying breach is deliberate or reckless, The Insurance Act 2015 provides that the insurer can void the policy, reject any claim and keep the premium. If it is not reckless or deliberate it is still entitled to void the policy but should refund the premium. If it was careless oversight then it would fall within the category of breaches that the Act describes as “neither deliberate nor reckless”. New India seems to also accept it was not deliberate or reckless, as it confirmed that it

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would refund the premium. However, as claims have been paid it would also be entitled to recover the amount paid in claims. New India has provided evidence that the amount paid out across all the policies is just over £263,000 and the premiums £84,000 (nett of insurance premium tax). So, it says it would be entitled to recover the difference of approximately £153,000. I agree that it would be entitled to recover this, as the voidance of the policy means it should be treated as never having been in existence and therefore both parties put back in the position they would have been had it not been in place. This means C would not have paid the premiums and New India would not have paid the claims. The premiums paid by C for its policy was just under £15,000 and claims have been paid to a value of almost £90,000. As stated, New India is entitled to seek recovery of the claims values paid, so there is no refund to be made in this case. It is entitled to seek recovery of the difference from C. However, New India has also offered to waive the outstanding amounts, across all the policies, if the voidance of all the policies is accepted. I think this is a reasonable offer. When New India first made the offer, it was time limited, but it has confirmed it is still willing to settle the matter on those terms. C should contact The New India Assurance Company Limited directly if it now wishes to accept this. My final decision Despite my sympathy for C’s position, I do not uphold this complaint. The New India Assurance Company Limited has already made an offer to settle the complaint. If C wants to now accept that offer, it should contact The New India Assurance Company Limited direct. For the avoidance of doubt, if C does not accept my decision then its legal rights, if any, remain intact. Under the rules of the Financial Ombudsman Service, I’m required to ask C to accept or reject my decision before 26 May 2026. Harriet McCarthy Ombudsman

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