Clarendon Dental Spa vs Aviva and Zurich insurance dispute

Introduction

The High Court recently handed down a significant judgment in the case involving Clarendon Dental Spa LLP and Clarendon Dental Spa (Leeds) Limited against Aviva Insurance Limited and Zurich Insurance PLC. The case centred on insurance claims following a fire that caused substantial damage to the dental practice premises in Leeds in June 2021.

Background

The proceedings involved two distinct insurance claims. The first claimant, Clarendon Dental Spa LLP, had settled its claim against Aviva Insurance Limited, leading to a stay in those proceedings. The second claimant, Clarendon Dental Spa (Leeds) Limited, pursued its claim against Zurich Insurance PLC for losses incurred due to the fire.

The central issue in the case was the alleged failure to make a fair presentation of the risk, as required under section 3 of the Insurance Act 2015, during the renewal of the insurance policies covering the period of the fire.

Legal Arguments

Two applications were brought before the court. The Company sought to strike out parts of Zurich's Defence or obtain partial summary judgment, while Zurich applied for permission to amend its Defence. The contentious points focused on whether the case pleaded or sought to be pleaded had a real prospect of success, following the principles established in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339.

Facts of the Case

The dental practice, operating from 9 Woodhouse Square, Leeds, was founded in 2007 and underwent a structural reorganisation in 2014 for tax efficiency. This reorganisation involved transitioning operations from the LLP to the Company, although Zurich contended that the LLP retained ownership of some equipment.

Insurance policies were renewed with Zurich and Aviva for the relevant period, with statements of fact issued to the policyholders outlining the importance of fair presentation of risk. These statements included questions regarding insolvency and other material facts.

Issues of Fair Presentation

Zurich alleged several breaches of the duty of fair presentation, focusing on the insolvency of former partners and directors of entities previously involved in the business. Zurich argued that the Company misrepresented the insolvency history of these entities, which was material to the risk assessment.

Court's Analysis

The court examined the interpretation of the insurance questions and declarations, determining that the questions were targeted at current directors or partners of the policyholder. It found that the Company correctly answered the questions based on the reasonable interpretation of the wording.

The court further held that Zurich had waived its right to disclosure of insolvencies of other entities not directly involved with the policyholder, as the questions were specific to the policyholder's current directors or partners.

Judgment

Deputy Judge David Quest KC refused Zurich's application to amend its Defence and struck out the relevant paragraphs alleging misrepresentation and non-disclosure. The court concluded that the Company's interpretation of the insurance questions was correct and that there was no real prospect of Zurich's case succeeding.

Conclusion

This case underscores the importance of precise wording in insurance documents and the implications of the duty of fair presentation under the Insurance Act 2015. It highlights the need for insurers to clearly articulate the information they require from policyholders.

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