Dawsons Ltd v Bonnin
A basis of the contract clause, which made the truth of answers in a proposal form a condition of the policy, entitled the insurer to avoid the policy for an inaccurate answer, even though it was immaterial.
Facts
Dawsons insured a lorry against fire and other risks. In the proposal form, which contained a basis clause making the answers the basis of the contract, it stated by mistake that the lorry would usually be garaged at its office address in Glasgow, when it was in fact kept at a farm on the outskirts of the city. The lorry was destroyed by fire. The insurers refused to pay, relying on the misstatement. The arbitrator found that the misstatement was not material to the risk.
Legal principle
The House of Lords held, by a majority, that the insurers were not liable. Viscount Haldane said that, by the basis clause, the parties had agreed that the accuracy of the statement was a condition of the policy, so that the insurers were entitled to avoid the policy if it was untrue, whether or not it was material. The court gave effect to the clear words of the contract. The use of basis clauses to convert all answers in a proposal form into warranties was abolished for consumer insurance by the Consumer Insurance (Disclosure and Representations) Act 2012 and for business insurance by the Insurance Act 2015.
Related cases on utmost good faith, disclosure, warranties and insurable interest
- Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd (The Good Luck) [1992] 1 AC 233
- Carter v Boehm (1766) 3 Burr 1905
- Feasey v Sun Life Assurance Co of Canada [2003] EWCA Civ 885
- Lambert v Co-operative Insurance Society Ltd [1975] 2 Lloyd's Rep 485
- Lucena v Craufurd (1806) 2 Bos & PNR 269
- Macaura v Northern Assurance Co Ltd [1925] AC 619
- Manifest Shipping Co Ltd v Uni-Polaris Shipping Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469
- Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501
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