Court dismisses claim where insured misrepresented profession as hazardous, voiding policy under insurance law.

[*36] 1981 May

(ARTEMIDES, S.D.J.)

IN THE DISTRICT COURT OF NICOSIA

Klitos Mavrides,

Plaintiff,

v.

Cannon Assurance Ltd.,

Defendants.

(Action So. 5440/79).

Insurance - Personal accident insurance - Warranty -Representation - Distinction - Proposal form - False representations by insured regarding his profession -Insurers entitled to avoid the policy.

A. Danos, for the Plaintiff.

M. Iacovou, for the Defendants.

JUDGMENT

The following judgment was delivered “by:-

ARTEMIDES, S.D.J.:- The plaintiff [*37] claims compensation pursuant to a personal accident policy issued to him by the. defendant company who are insurers.

On 14.8.1977 the plaintiff signed a Proposal for a personal accident insurance which the defendants accepted and issued to him the insurance policy which was valid as from 24.8.1977 to 23.8.1978. The policy was renewed for another year until 23.8.1979. On 23.10.1978, i.e. whilst the policy was in force the plaintiff met with an accident whilst engaged in his workshop. He was hit on both forearms by an iron band which was wound like a coil snapped together with clips. These clips suddenly broke and the metal was forcibly decoiled thus hitting the plaintiff whose forearms were severely wounded. He was immediately taken to the private clinic of Dr. HadjiCostas where under general anaesthesia he was operated upon. He stayed in the clinic for 5 days and was then discharged to continue his convalescence at home. There is no dispute between the parties that for a period of 10 weeks the plaintiff could not do any manual work. He therefore claims by the present action the benefits arising from his policy,

i.e. the sum of £250.- for medical expenses he has paid to Dr. HadjiCostas and £100.- per week he was out of work,

i.e. £1,000.-

The insurers counterclaim for a declaration that the insurance policy is void as having been taken out after the plaintiff had made to them false representations. They allege that on the Proposal form the plaintiff describes his profession as being that of an owner of a cutting factory[*38](ιδιοκτήτης εργοστασίου κοπτικών). In giving details of his duties he states “management, administration and supervision” of his factory (διεύθυνσις, διαχείρισις, επίβλεψις εργοστασίου). These answers to the questionnaire contained in the Proposal: are in column 1, 2(a) and 2(e).

The only witness in the cause was the plaintiff himself and an employee of his. He

described his occupation as being that of a plumber (υδραυλικός) being the owner of a workshop for hydraulic and other ancillary jobs.

The work of a cutter (κόπτης) is included in that of a plumber, and has to do with the shaping and moulding of metals by oxygen welding. The plaintiff says that he was engaged himself in his factory doing manual work.

Counsel for the plaintiff submits that there is no inconsistency between the work he is actually doing and the description he has given in the Proposal. The insurers on the other hand say that the plaintiff's actual job is a more hazardous one than the one he has described in the Proposal and if they knew about it they would have not undertaken the risk, or of course would have asked for a higher premium.

The case turns to be decided on the construction of the Proposal for the issue of the insurance policy. In my judgment there can be no other interpretation of the words used in the Proposal than the one placed upon them by the insurers. The “management, administration and supervision” of a factory cannot include the actual [*39] engagement in the work of the workshop of a person who manages, administers and supervises.

In the present case the plaintiff was in fact engaged in the ordinary manual work carried out in his workshop and that is certainly a different occupation and positively a more hazardous one.

It has been submitted by counsel for the plaintiff that the words used i.e. “management, administration and supervision” are wide enough to include the actual work carried out in the workshop. That this is not so and was not contemplated to be so by the contracting parties is explicitly shown by another answer to a

question in the Proposal in column 26 . In letter 2(ϐ) the question is; “Πόσον χρόνον εργάζεσθε εις. . . . . .” and there follow three parallel columns each with the words: “γραφείον, εργαστήριο, εξωτερικήν εργασίαν”.

The answer put in by the plaintiff is “100%” in the “γραφείον “ space.

The Proposal is in Greek. The plaintiff has agreed that he signed it after reading it and there can, therefore, be no dispute regarding its contents.

The Proposal, by an expressed agreement on it, is made part of the insurance agreement and forms the basis of that contract. That means that the truth of the statements contained in the Proposal are made a condition precedent to the liability of the insurers. From Mac Gillvray on Insurance Law, 5th edition we read:-

“Where the policy contains a recital that the [*40] proposal therein referred to shall be the basis of the contract, the truth of the statements contained in the proposal is thereby made a condition of the liability of the insurers, and any inaccurate answer will entitled the insurers to repudiate liability apart from any question of materiality.”

The answers contained in the Proposal constitute a warranty, in that it is expressly agreed to be so, and a breach of warranty avoids the contract. The difference between a warranty and a representation is again explicitly explained in the aforesaid book at p. 386 paragraph 795.

“A warranty must first be distinguished from a representation. A representation is not part of the contract, but is something stated by the one party as an inducement to the other party to make the contract. It may be made before or at the time the contract is concluded, and may be oral or in writing, and if the latter may be separate from or written upon the same paper as the contract itself. The essential characteristics of a representation are that it makes the contract voidable if it is –

Substantially false,

material to the risk, and

an operative inducement to the contract.

The case commonly cited on the elementary distinction between a warranty and a representation is that of Pawson v. Watson (1778) Cowp. 785, before Lord Mansfield. On a marine policy the [*41] insured vessel was warranted to carry twelve carriage guns and twenty men, and it was held that the warranty must be literally fulfilled, and that it was not complied with by ten carriage guns and nine swivel guns and sixteen men and eleven boys, even although the latter might be the stronger force. 'If there 'is a warranty', said Lord Mansfield, 'nothing 'tantamount will do or answer the purpose; it must be strictly performed as being part of the agreement'. And in another case D. Hahn v. Hartley (1786) I T. R. 343, 345 the same judge said: 'There is a material distinction between a warranty and a representation. A representation may be equitably and substantially answered, but a warranty must be strictly complied with… A warranty in a contract of insurance is a condition or contingency, and unless that be performed there is no contract. It is perfectly immaterial for what purpose a warranty is introduced, but, being inserted, the contract does not exist unless it be literally complied with.”

Counsel for the plaintiff has made another point which, however, is so weak that can be dispenced with quickly. He said that when the plaintiff was answering the questionnaire contained: in the Proposal to the agent of the insurers the latter saw him working in his workshop and therefore had knowledge of what he was actually doing. This also happened when the agent came to collect the renewal' premium of the policy. The evidence on this is quite unsatisfactory [*42] and I do not think that its contents can impart knowledge on the insurers on the actual work the plaintiff was doing so as to waive their right to avoid the policy.

The insurers had the explicit description by the plaintiff himself of the work he was doing, which it was agreed between them to be part of their contract, in fact forming the basis of it and only quite explicit evidence of waiver could militate against the contents of the contract.

In the light of the above I find that the defendants are entitled to avoid the policy. In the result the action is dismissed with costs to be assessed by the Registrar.

Declaratory Order is hereby made as per the counterclaim of the defendants to the effect that the policy signed between the parties was void and they are, therefore, entitled to avoid it. There will be no order as to costs regarding the counterclaim.

Action dismissed.

Declaratory order as per the counterclaim.

Order for costs as above.