Insurance policy avoided for misrepresentation dismissed; burden of proof on insurer not met.

[*276] 1981 Febr. 28

(STYLIANIDES, P.D.C. AND FR. NICOLAIDES, D.J.)

IN THE DISTRICT COURT OF NICOSIA

Commercial Union Assurance

(Cyprus) Ltd.,

Plaintiffs,

v.

Costas Stavrides,

Defendant.

AND AS AMENDED BY ORDER OF THE COURT

DATED 18.11.76:-

Commercial Union Assurance

(Cyprus) Ltd.,

Plaintiffs,

v.

Costas Stavrides and

Another,

Defendants.

(Action No. 4880/76).

Insurance - Motor insurance - Policy

- Avoidance for misrepresentation - Principles applicable - Burden of proof of misrepresentation lies on the insurers - Policy sought to be avoided because of mis-statement regarding ownership of vehicle - Plaintiff failing to substantiate allegation of mis-statement - Action dismissed - Section 10(3) and

(5) of the Motor Vehicles (Third Party Insurance) Law, Cap. 333.

R. Stavrakis, for the Plaintiffs.

Z. Katsouris, for Defendant No. 1.

St. Nathanael, for M.I.F.

JUDGMENT

The judgment of the Court was delivered by: -

STYLIANIDES, P.P.C.: The plaintiff, [*277] approved insurers, by this action seek a declaration that they are entitled to avoid a policy of insurance dated 6th September, 1972, under s.10(3). of the Motor Vehicles (Third Party Insurance) Law, Cap. 333, and on the ground that the said policy of insurance was obtained by the nondisclosure of material facts and/or misrepresentation of facts which were false in some material particular.

The factual basis of this action, as set out in the statement of claims, is that defendant No. 1 stated in the proposal form that he was the sole owner of motor-car Registration No. C. F. 395, in respect of which the policy of insurance was issued, whereas in truth and in fact the owner was a certain Houssein Mehmet of Potamia.

Defendant No. 1 on 6.9.72 applied by a proposal form (exhibit No.1) for the issue of a policy of insurance under the Motor Vehicles (Third Party Insurance) Law for motor-car Registrartion No. C.F.395. Pursuant to that proposal on 6.9.72 a covering note was issued to him for one month and later on policy of insurance No. C.U.323096 was issued by the plaintiffs.

On 8.12.72 the said car, whilst being driven by Houssein Mehmet was involved in an accident in which Ioannis Panayi (defendant No. 2) received personal injuries and filed Action No. 4352/76 claiming damages for personal injuries he sustained in that accident. The advocate of the said plaintiff on 4.10.76 sent to the plaintiffs-insurers by double registered post the prescribed notice. [*278]

In the proposal form defendant No. 1- assured declared that the particulars of the proposal were true and that he had not omitted to disclose any material fact and further he agreed that the proposal and declaration should be the basis of the contract between himself and the plaintiff-insurers.

Condition 9 of the said insurance policy provides that the truth of the statements and answers in the proposal shall be conditions precedent to any liability of the company to make any payment under this policy.

The action was raised by the insurers against their assured. The injured person with the leave of the Court was added as defendant No. 2 and he contended that in accordance with the Memorandum of Internal Agreement, amongst the insurers on the one part and the M.I.F. on the other, dated 22.4.69, the plaintiffs being parties to the said Internal Agreement, are precluded from denying liability to pay him because by virtue of Clause 1(ii) the plaintiffs are “insurers concerned” irrespective that defendant No. 1 obtained the policy in question by fraud or misrepresentation and that he had served as per s.6(a)(ii) the appropriate notice to M.I.F. and the plaintiffs before instituting his action, and that the plaintiffs were estopped from denying liability to pay him, they being signatories to that Collective Agreement. Thereafter the action against this defendant was withdrawn and dismissed as his claim was satisfied. [*279]

This action is based on the statutory provisions of ss.10(3) and (5) of the Motor Vehicles (Third Party Insurance) Law, Cap. 333. These subsections are a replica of the relevant provision contained in s.10. of the English Road Traffic Act, 1934.

For an insurer to succeed under ss.10(3) and (5) he must prove that there is a misrepresentation of a

material fact. “Material” is defined by subsection (5) as meaning “of such a nature as to influence the judgment of a

prudent insurer in determining whether he will accept the risk, and if so, at what premium and on what conditions”.

In Zurich Insurance Co. v. Morrison (1942) 1 All E.R. 529, at p. 533, we read:-

“For an insurer to succeed under and get the benefit of this subsection, he must prove that the policy in question was obtained by that non-disclosure or misstatement, in other words, he must prove that, but for that non-disclosure or misstatement, the contract which was obtained would not have been obtained. It is a material averment in an action for rescission based on misrepresentation to aver and to prove that the misrepresentation has been relied upon.

Usually, however, there is a warranty in the proposal form incorporated in the policy that there has been no material non-disclosure. In such cases the insurer has merely to prove material non-disclosure and the policy falls to the ground by virtue [*280] of that term of the contract. He has not to prove inducement or anything of the kind. Again, even if there is no clause making full disclose a condition of the contract, as the duty to disclose proceeds from an implied term in the contract wherever full disclosure is a condition precedent to the liability of the underwriter, again inducement has no relevance.”

Where a person states in a proposal form that he is the owner of the vehicle to be insured, and he is not so in fact, that amounts to a material misrepresentation and the insurance company is entitled to avoid liability on that ground. (Guardian Assurance Co. Ltd. v. Sutherland, (1939) 2 All E.R. 246).

The misrepresentation must be of a fact known or which ought reasonably to have been known by the assured at the

time he answers the question in the proposal form. (Whitwell v. Autocar Fire and Accident Insurance Co. Ltd. (1927) 27 Ll.L. Rep. 318, Ch, D.; Joel v. Law Union and Crown Insurance Co., (1908) 2 K.B. 863).

The action is also based on a contract of insurance with the “basis” clause or “by the condition procedent clause”.

Where there ‘is a “basis” clause or a condition precedent clause, as is the present case, having regard to the contents of the proposal form and condition 9 of the policy, exhibits Nos. 5 and 6, the insurer can avoid the [*281] the policy and repudiate the liability under it and all questions and answers in the proposal form are thereby made material and the falsity of the answers produces the same result as the failure to disclose or the false statement of a material fact and the whole contract is thus vitiated. (Dawsons Ltd. v. Bonnin, (1922) 2 A.C. 413; Mackay. v. London General Insurance Company, (1935) 51 Ll.L. Rep. 201).

The burden of proving that the proposer has made a misstatement in the proposal form lies on the insurance company. (Adams v. London Insurance Co.Ltd., (1932) 42 Ll.L. Rep. 56).

In the present case the misrepresentation on which the plaintiffs seek to avoid the policy is that the defendant declared that he was the sole owner of the car whereas, as contended in the statement of claim, the owner was a certain Houssein Mehmet of Potamia who also had the exclusive use of the said motor-car.

Georghios Yorgallides, Managing Director of the insurers, was the sole witness for the plaintiffs. He produced the proposal form, the covering note and protocopy of the policy of insurance in question. His evidence falls far short from discharging the burden of proof which rests on the plaintiffs.

The plaintiffs intended to call another witness but as he is abroad at an unknown address, the Court did not have the benefit of his evidence. [*282]

The defendant testified that he purchased the said car on 6.9.72 from C.D. Hay and that at the time he answered the questions and the proposal form was filled in, he was the owner thereof. He produced an invoice dated 6.9.72 from C.D. Hay & Sons Ltd. which supports his version. Photocopy of the record of the Criminal Case No. 1375/73, in which this defendant was charged that being the registered owner of the motor-car C.F. 395 on the change of ownership of such motor-vehicle from his name to one Houssein Mehmet of Potamia, did fail to inform the Registrar of Motor- Vehicles in-writing within seven days of the name and address of the new owner of such motor-vehicle to which he has pleaded guilty, also lends support to his story.

We may remark, however, at this point that registration of a motor-vehicle is not proof of ownership; it may be registered and stand registered in the name of someone for more than one reason. (James v. British General Insurance Co. Ltd., (1927) 27 Ll.L. Rep. 328 K.B.).

As the plaintiff failed to substantiate the allegation of misstatement, this action fails.

In the result action is hereby dismissed, but, in all the circumstances of the case, we make no order as to costs.

Action dismissed with no order as to costs.