The Statement of Fact
Throughout this series of “when insurance doesn’t pay out”, we will look at some hints and tips to help make sure your insurance works when you need it most.
What is the Statement of Fact?
The Statement of Fact refers to the details upon which the whole insurance contract is based. If these are wrong, there could be no cover in the event of a claim.
What Are the Key Statements?
There are 3 key statements that you need to answer about ANY director or partner of the business whether in a personal or business capacity. These include:
- Bankruptcies, insolvencies, or proceedings including County Court Judgements (CCJs)
- Any unspent* convictions or criminal charges
- Any insurance cancelled, renewal refused, or special terms imposed
*Unspent convictions are defined by the Rehabilitation of Offenders Act. Depending on the length of the sentence given, a conviction may be spent and non-declarable after a given period.
For more information on unspent convictions, take a look at the guidance published on the GOV.UK website.
How Do I Comply
Insurers won’t look for this information when you take out a policy. The onus is on you to tell them. You need to seek it out from all your fellow directors/partners.
If you fail to tell the insurers, you may not get a claim paid. Insurers often review this information when you make a claim.
- It doesn’t matter if you think the detail is irrelevant.
- It doesn’t matter if not telling the insurers was an honest mistake.
- It doesn’t matter if you think it doesn’t affect your risk, they may disagree.
It’s a harsh world, but those are the rules, and they can be rigid.
Real-World Examples
Two recent legal cases show how important the above is. Two business owners took the insurers to court over the above and lost.
The first is Mr Young. According to a Capital Law article, in 2019 a fire occurred at Mr Young’s property and £7.2 million was claimed from his insurers, RSA.
However, the insured had failed to mention that one of the directors had been the director of four previous companies which had been declared insolvent.
The court ruled this was a breach of the requirement to make a fair presentation under the Insurance Act, and Mr Young got no pay-out.
The second case of interest involves a business by the name of Berkshire Assets (West London) Limited.
In 2018, Berkshire Assets (West London) Limited, purchased a Construction All Risks and Busi-ness Interruption Policy underwritten by AXA for a property development project in Brentford.
According to a Fenchurch Law article, “the policy renewed in 2019. Unbeknown to the director who was tasked with handling its insurances, one of its other directors, Mr Sherwood (and vari-ous other companies and individuals), had criminal charges filed against him by the Malaysian public prosecutor in August 2019 in connection with a $4.3bn fraud.
In January 2020, an escape of water resulted in substantial damage to the development. Berk-shire thereafter made a claim under the policy.
After investigating the claim, AXA avoided the policy on the basis that Berkshire failed to dis-close the charges against Mr Sherwood at renewal, and, had it done so, said that cover would not have been provided.”
It didn’t matter that these were only charges and later dropped. It didn’t matter that they had nothing to do with the escape of water claim. AXA could prove they were material and Berk-shire got no claim pay out.
Help and Advice from Sense Risk Solutions
Please do not think that being ignorant to these details will help you in the event of a claim. It will not.
If you want your insurance to pay out, you need to be mindful of what you need to do before you take out the cover and then what terms and conditions apply.
Don't be caught out by the Statement of Fact. For easy to navigate insurance solutions, why not arrange a call with one of our knowledgable team members who can advise you on the best cover for your business. Call us on 0117 452 8773 or fill out our contact form.
