Pan Atlantic Insurance Co. et al. v. Pine Top Insurance Co., (1994) 171 N.R. 81 (HL)

• Case Date: July 25, 1994
• Jurisdiction: Canada (Federal)
• Citations: (1994), 171 N.R. 81 (HL)

Pan Atlantic Ins. Co. v. Pine Top Ins. Co. (1994), 171 N.R. 81 (HL)

MLB headnote and full text

Pan Atlantic Insurance Company Limited and others (appellants) v. Pine Top Insurance Company (respondents)

Indexed As: Pan Atlantic Insurance Co. et al. v. Pine Top Insurance Co.

House of Lords

London, England

Lord Templeman, Lord Goff of Chieveley,

Lord Mustill, Lord Slynn of Hadley and

Lord Lloyd of Berwick

July 25, 1994.

Summary:

Pan Atlantic Insurance was an insurance underwriter. It reinsured part of its risk with Pine Top Insurance. When Pan Atlantic claimed under the reinsurance contract, Pine Top refused to pay claiming that the contract was void because of misrepresentation or nondisclosure. Pan Atlantic sued to enforce the policy.

The trial court held Pine Top was not liable because of the nondisclosure. Pan Atlantic appealed.

The Court of Appeal of England dismissed the appeal. Pan Atlantic appealed.

The House of Lords dismissed the appeal.

Insurance - Topic 2402

Applicant's duty of disclosure - General principles - Disclosure, what constitutes - Pan Atlantic was an insurer - It applied to Pine Top for reinsurance for part of its risk - Subsequently, Pine Top refused to pay for Pan Atlantic's losses on the ground the policy was void because of misrepresenta­tion and nondisclosure - Pan Atlantic submitted that there had been no misrepre­sentation in the application, Pine Top's representative had failed to examine the material provided - As to the nondisc­losure, it was inadvertent (prior losses in 1981 of $235,768 instead of $468,168) and did not induce Pine Top to grant the rein­surance - The House of Lords held that Pine Top was not liable because Pan At­lantic's inadvertent nondisclosure of a material consideration had induced Pine Top to issue the policy.

Insurance - Topic 2441

Applicant's duty of disclosure - Materiality - Test for - The House of Lords con­sidered the test to be used to determine whether a misrepresentation or nondisc­losure on an insurance application was material - The issue was whether the nondisclosure or misrepresentation would have merely "influenced the judgment" of the insurer or must it have had a "decisive influence" in the decision to accept the risk - Their Lordships held that "[a] circum­stance may be material even though a full and accurate disclosure of it would not in itself have had a decisive effect on the prudent underwriter's decision whether to accept the risk and if so at what premium" - Instead, it was material provided that it was something "that a prudent underwriter would take into account" - See paragraphs 38 and 88.

Insurance - Topic 2483

Applicant's duty of disclosure - Default in duty to disclose - Requirement that mis­representation induced insurer to insure - The House of Lords considered the test to be used to determine if an insurance policy was void because of a material misrepre­sentation or nondisclosure - The central issue was whether the material nondisc­losure or misrepresentation had to actual­ly induce the insurer to accept the risk - Their Lordships held that actual induce­ment was required and stated that "[i]f the misrepresentation or nondisclosure of a material fact did not in fact induce the making of the contract ... the underwriter is not entitled to rely on it as a ground for avoiding the contract" - See paragraphs 8, 84, 95 and 159.

Cases Noticed:

Container Transport International Inc. v. Oceanus Mutual Underwriting As­soci­ation (Bermuda) Ltd., [1984] 1 Lloyd's Rep. 476 (C.A.), consd. [para. 2].

Container Transport International Inc. v. Oceanus Mutual Underwriting As­soci­ation (Bermuda) Ltd., [1982] 2 Lloyd's Rep. 178, refd to. [para. 23].

Berger and Light Diffusers Pty Ltd. v. Pollock, [1973] 2 Lloyd's Rep. 442, consd. [para. 27].

Zurich General Accident and Liability Insurance Co. v. Morrison, [1942] 2 K.B. 53; [1942] 1 All E.R. 529 (C.A.), consd. [para. 27].

Marene Knitting Mills Pty Ltd. v. Greater Pacific General Insurance Ltd., [1976] 2 Lloyd's Rep. 631 (P.C.), consd. [para. 28].

Seaman v. Fonereau (1743), 2 Stra. 1183; 93 E.R. 1115, refd to. [para. 32].

Barclay Holdings (Australia) Pty Ltd. v. British National Insurance Co., [1987] 8 N.S.W.L.R. 514, refd to. [para. 141].

Ionides v. Pender (1874), L.R. 9 Q.B. 531, consd. [paras. 33, 42].

Carter v. Boehm (1766), 3 Burr. 1905; 97 E.R. 1162, consd. [para. 45].

Rivaz v. Gerussi (1880), 6 Q.B.D. 222 (C.A.), consd. [para. 55].

Mutual Life Insurance Co. of New York v. Ontario Metal Products Co., [1925] A.C. 344 (P.C.), consd. [para. 57].

Mayne Nickless v. Pegler, [1974] 1 N.S.W.L.R. 228, consd. [para. 59].

Kennedy v. Panama, etc. Mail Co. (1867), L.R. 2 Q.B. 580, consd. [para. 65].

Anderson v. Fitzgerald (1853), 4 H.L. Cas. 484; 10 E.R. 551 (H.L.), consd. [para. 65].

Blackburn, Low & Co. v. Vigors (1886), 17 Q.B.D. 553 (C.A.), affd. (1887), 12 App. Cas. 531 (H.L.), refd to. [para. 67].

Pickersgill (William) & Sons Ltd. v. Lon­don & Provincial Marine & General Insurance Co., [1912] 3 K.B. 614, refd to. [para. 67].

Merchants' and Manufacturers' Insurance Co. v. Hunt, [1941] 1 K.B. 295; [1941] 1 All E.R. 123 (C.A.), refd to. [para. 67].

Mackender v. Feldia A.G., [1967] 2 Q.B. 590; [1966] 3 All E.R. 847 (C.A.), refd to. [para. 67].

March Cabaret Club & Casino v. London Assurance; March Cabaret Club & Casino v. Thompson & Bryan, [1975] 1 Lloyd's Rep. 169, refd to. [para. 67].

Banque Financière de la Cité S.A. v. Westgate Insurance Co., [1988] 2 Lloyd's Rep. 513; [1989] 2 All E.R. 952 (C.A.), refd to. [para. 67].

Traill v. Baring (1864), 4 De G.J. & S.M. 318; 46 E.R. 941 (L.J.J.), refd to. [para. 67].

Flinn v. Headlam (1829), 9 B. & C. 693, refd to. [para. 71].

Cantiere Meccanico Brindisino v. Janson, [1912] 2 K.B. 112; 106 L.T. 678, consd. [para. 75].

Visscherij Maatschappij Nieuw Onderneming v. Scottish Metropolitan Assurance Co. (1922), 27 Com. Cas. 198 (C.A.), consd. [para. 77].

Banque Financière de la Cité S.A. v. Westgate Insurance Co., [1991] 2 A.C. 249; [1990] 2 All E.R. 947 (H.L.), refd to. [para. 108].

Banque Keyser Ullmann S.A. v. Skandia (U.K.) Insurance Co. - see Banque Fi­nancière de la Cité S.A. v. Westgate Insurance Co.

Stribley v. Imperial Marine Insurance Co. (1876), 1 Q.B.D. 507, refd to. [para. 127].

Tate v. Hyslop (1885), 15 Q.B.D. 368 (C.A.), refd to. [para. 130].

Commonwealth Insurance v. Groupe Sprinks, [1983] 1 Lloyd's Rep. 67, refd to. [para. 133].

Southern Cross Assurance Co. v. Australian Provincial Assurance As­soci­ation Ltd. (1939), 39 S.R.(N.S.W.) 174, refd to. [para. 138].

Cantiere Meccanico Brindisino v. Janson, [1912] 3 K.B. 452; 107 L.T. 281 (C.A.), refd to. [para. 153].

Redgrave v. Hurd (1881), 20 Ch. D. 1 (C.A.), refd to. [para. 153].

Smith v. Chadwick (1884), 9 App. Cas. 187 (H.L.), refd to. [para. 153].

Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691; [1973] 1 All E.R. 90 (H.L.), refd to. [para. 156].

Statutes Noticed:

Evidence Act, 1851 (U.K.), 14 & 15 Vict., c. 99, generally [para. 56].

Insurance Act, S.O. 1914, sect. 156(3), sect. 156(4) [paras. 57, 136]; sect. 156(6) [para. 136].

Judicature Act (U.K.), generally [para. 65].

Marine Insurance Act, 1906 (U.K.), 6 Edw. 7, c. 41, sect. 17 [para. 16]; sect. 18(1) [paras. 16, 105]; sect. 18(2) [paras. 3, 7, 16, 105]; sect. 18(3) [para. 45]; sect. 20(1), sect. 20(2), sect. 91(2) [para. 16].

Road Traffic Act, 1934 (U.K.), 24 & 25 Geo. 5, c. 50, generally [para. 79].

Authors and Works Noticed:

Arnould, J., A Treatise on the Law of Marine Insurance and Average (2nd Ed. 1857), pp. 541 [para. 44]; 548 [para. 66]; 565 to 568 [para. 52]; 584 [para. 149].

Arnould, J., A Treatise on the Law of Marine Insurance and Average, D. Mac­lachlan (ed.)(5th Ed.), generally [para. 48].

Arnould, J., A Treatise on the Law of Marine Insurance and Average, D. Mac­lachlan (ed.)(6th Ed. 1887), pp. 513 to 514 [para. 69]; 514 [para. 53]; 518 [paras. 52, 53]; 548 [paras. 149, 152].

Arnould, J., A Treatise on the Law of Marine Insurance and Average (7th Ed. 1901), p. 641 [para. 70].

Arnould, J., A Treatise on the Law of Marine Insurance and Average (8th Ed. 1909), pp. 463 [para. 151]; 475, 489 [para. 150]; 694 [para. 151].

Chalmers', Digest of the Law of Marine Insurance (1901), Foreword [para. 62]; p. 22 [paras. 67, 125, 156].

Clarke, M.A., The Law of Insurance Con­tracts (2nd Ed. 1994), para. 23-1A [para. 67].

Duer on Insurance, vol. 2, p. 388 [para. 126].

Duer, The Law and Practice of Marine Insurance (1846), pp. 382 [para. 52]; 388 et seq. [para. 44]; 388 to 391 [para. 47]; 682 [para. 63]; xxxxxx [para. 66].

Halsbury's Laws of England (1st Ed. 1911), pp. 404 [para. 73]; 414 [para. 74].

Halsbury's Laws of England (1st Ed. 1911), vol. 17, para. 809 [para. 152].

Kelly, D. St. L., Thesis on Ionides v. Pender (1988), 1 Ins. L.J. 30, p. 34 [para. 62].

Kent's Commentaries (No. 3), p. 282 [para. 66].

Leake on Contracts (3rd Ed.), pp. 230, 241 [para. 67].

MacGillivray and Parkington, Insurance Law (8th Ed. 1988), para. 577 [para. 65].

Marshall, A Treatise on the Law of In­surance (2nd Ed. 1808), p. 465 [para. 32].

Marshall, A Treatise on the Law of In­surance (3rd Ed. 1823), pp. 465 [para. 56]; 467 [para. 52].

Oxford English Dictionary [para. 118].

Parsons, The Law of Marine Insurance and General Average (1868), vol. 1, pp. 367 to 369 [para. 44]; 495 [para. 126].

Parsons, The Law of Marine Insurance and General Average, vol. 2, pp. 153 [para. 66]; 155 [para. 52]; 172, 174 [para. 53]; 449 [para. 52].

Phillips, W., A Treatise on the Law of Insurance (5th Ed. 1867), pp. 156 [para. 44]; 274 [para. 52]; 278 [para. 66].

Phillips on Insurance, s. 531 [para. 148].

Spencer-Bower on Actionable Misrepre­sentation (3rd Ed.), p. 154 [para. 153].

Spencer-Bower on Actionable Nondisc­losure (2nd Ed. 1990), pp. 32 [para. 138]; 36 [para. 85]; 37 [para. 153].

Counsel:

Michael Beloff, Q.C., and Stephen Berry, for the appellants;

Adrian Hamilton, Q.C., and Timothy Salo­man, Q.C., for the respondents.

Agents:

Ince & Co., for the appellants;

Alsop Wilkinson, for the respondents.

This appeal was heard on February 14, 15, 16, 17, 21 and 22, 1994, at London, England, before Lord Templeman, Lord Goff of Chieveley, Lord Mustill, Lord Slynn of Hadley and Lord Lloyd of Berwick of the House of Lords.

On July 25, 1994, the decision of the House of Lords was given and the following speeches were delivered:

Lord Templeman - see paragraphs 1 to 5;

Lord Goff of Chieveley - see paragraphs 6 to 15;

Lord Mustill - see paragraphs 16 to 94;

Lord Slynn of Hadley - see paragraphs 95 to 96;

Lord Lloyd of Berwick - see paragraphs 97 to 173.