Breach of duty of fair presentation of risk leads to avoidance of insurance contract

Cometsambre SA v Lloyd's Insurance Company SA HIG 5321 [2026] EWHC 1837 (Comm) (21 July 2026)

The Court has held that a marine insurer was entitled to avoid the Charterers’ Liability (C/L) and Freight Demurrage and Defence (FDD) cover it had provided to its insured on the basis that the insured should have disclosed, but had failed to disclose, certain material facts in breach of its duty of fair presentation of risk under s.3 of the Insurance Act 2015 (IA).

The case is useful for adding to the limited authorities dealing with key issues arising under the IA, including the scope of the duty of fair presentation, materiality of the relevant facts or circumstances and knowledge of insured/insurer.

In addressing these issues, the Court made reference to Delos Shipholding SA -v- Allianz Global, which also dealt with the duty of fair presentation (see our article: The WIN WIN: Constructive Total Loss Claim | Hill Dickinson).

The background facts

The assured, Cometsambre SA (Cometsambre), is a Belgian scrap metal dealer. In early 2008, it decided to start voyage chartering vessels to ship cargoes of scrap metal from Ghent and sought C/L and cargo insurance via its broker, Concordia NV (Concordia). Concordia provided Cometsambre with a C/L questionnaire which it completed. Under ’types of cargoes’, Cometsambre provided the following information:

"Scrap (schredded steel scrap HMS 1 + HMS 1-2 or ISRI specs. 210/211, min. density 65 LBS/F3) in bulk
Delivery CFR/FO
Abt. 35 000 MT per vessel"

Cover was confirmed in March 2008 with Antwerp Insurance Claims Associates NV (AMICA).

Cometsambre did not renew cover with AMICA in 2009, but it did so in 2010, with the new C/L and FDD cover note being on AMICA’s new standard terms. The policy was governed by English law. The security on the cover was a Lloyd’s syndicate that assumed the risk under the insurance contract.

The C/L and FDD cover was renewed on almost identical terms between 2010 and 2022. In June 2022, there were two fires on board the LOWLANDS MIMOSA, chartered by Cometsambre, whilst loading scrap at Ghent. The owners commenced arbitration against Cometsambre for breach of charterparty in shipping dangerous cargo.

Cometsambre sought a declaration that the insurer was obliged to indemnify it in respect of the charterparty claim and its legal costs associated with the fire and the arbitration claim. The insurer had declined the claim for an indemnity on the basis that the assured should have disclosed details of 10 fires between 2014 and 2022 that had involved scrap metal shipments belonging to Cometsambre either on the quayside or when loaded onto vessels.

The legal framework

S.3(4) IA requires an assured, prior to entering into the insurance contract, to disclose every material circumstance that it knows or ought to know or to give the insurer sufficient information to put the insurer on notice that it needs to make further inquiries for the purpose of revealing those material circumstances.

Pursuant to s.3(5) IA, the assured does not need to disclose information if the insurer knows it, ought to know it, is presumed to know it or it is something in respect of which it has waived information.

Under s.7(3) IA, a circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms.

In Delos Shipholding SA & Ors v Allianz Global Corporate and Specialty SE & Ors [2024] EWHC 719 (Comm) (25 March 2024), the Commercial Court stated that insurers did not need to show that the undisclosed circumstances would have had a decisive effect on the judgment of a prudent underwriter, they only needed to show that the underwriter would have wanted to take them into account when deciding whether to place the cover or whether to place a condition on the cover.

Under s.8 IA, the insurer has a remedy against the assured if, but for the breach of the duty of fair presentation of risk, it would not have entered into the insurance contract at all or would have done so on different terms.

Where the breach was neither deliberate nor reckless, as in this case, where the insurer would not have entered into the contract at all, then it is entitled to avoid the insurance contract but must return the premiums paid. Where it would have entered into the insurance contract on different terms, then the contract will be treated as if it had been entered into on those terms.

The Commercial Court decision

As each renewal of an insurance contract is a new insurance contract, the relevant contract of insurance in this case was the 2022 renewal.

The duty of fair presentation required the disclosure of material circumstances, even if they ought to have been disclosed, but were not disclosed, at inception or at an earlier renewal, provided that such circumstances were still relevant to the new contract of insurance and remained unknown to the insurer. Inducement was assessed at the time that the relevant contract of insurance became binding.

Level of fire risk to be expected

In its initial presentation of the risk in the C/L questionnaire, Cometsambre had referred to ISRI (Insitute of Scrap Recycling Industries) specifications indicating that the cargoes would be clean in the sense indicated by the relevant specification i.e. non-oily, non-radioactive and non-dangerous.

The Court accepted evidence that, based on that information, an underwriter would understand the cargo to be a Group C cargo under the IMSBC Code, i.e. non-combustible or carrying a low fire risk. Cometsambre had also declared the cargo as Group C.

Materiality

The underwriter would, therefore, be expecting a low risk of fire. Nonetheless, there remained a risk, the extent of which was difficult to quantify precisely and which would depend in part on the exact nature of the cargoes being shipped by Cometsambre.

Consequently, an underwriter would want to know of the incidence of fires (five cargo fires in quick succession after about 12 years of no fires) because it would help the underwriter assess what was the extent of the fire risk, and whether it had changed, and because the record of fires might indicate something about Cometsambre's cargoes and/or procedures.

The fact that the undisclosed fires did not lead to claims was not relevant for these purposes. Industry practice required all incidents that could have given rise to claims or losses to be disclosed to the underwriter, even if claims did not materialise.

Insurers put on notice?

The Court dismissed the argument that the insurers should have known of the general risks of a steel scrap business, but they had not asked Cometsambre to fill in an updated questionnaire, nor asked for any further information about risk management, losses, incidents, claims or fires.

In the Court’s view, this argument amounted to an attempt improperly to reverse the burden of ensuring a fair presentation of the risk in circumstances such as this. That obligation was primarily on the insured.

More specifically, what AMICA was told could not be said to have put insurers on notice of the need to make further enquiries as to whether there had been a change in the incidence of fires as compared to previous years. Yet, that was what in fact had happened. After many years in which there were no fires, there were five fires on vessels or in quayside scrap piles in the 20 months before the 2022 renewal. The underwriters had not been put on notice of the need to enquire as to such a change in incidence. Nor could they be presumed to have had knowledge of those fires.

Was disclosure requirement of the relevant information waived?

On the evidence, it was not unusual that the insured was not asked to fill in an updated questionnaire in subsequent years. The absence of a renewal questionnaire could not reasonably be understood to be a waiver of disclosure of material circumstance.

Furthermore, the limited scope of the C/L questionnaire did not indicate anything on the part of the insurers because the questionnaire was prepared by Cometsambre’s broker, Concordia. It contained information offered by the insured, not information specifically requested by the insurers.

More generally, looking at the dealings between the parties in the round, the conduct or communications of insurers could not reasonably have been understood as showing that they were not interested in the incidence of the fires which occurred in 2020/2021, after a significant period in which there had been no quayside or vessel fires.

Inducement

The Court accepted the evidence of the underwriter responsible for the renewal of the cover in 2022 that if the earlier fires on board vessels and on the quayside had been disclosed, he would not have renewed the policy.

Specifically, the premium earned on C/L insurance was low and it was not commercially viable to write the business if there was a real risk of a fire on board that could result in a large claim. Furthermore, the recurring pattern and increasing frequency of fires were likely attributable to the poor quality of scrap being loaded and transported. The Court accepted that this was probably due to a failure to sort out the scrap properly before shipment.

Therefore, the underwriter’s evidence was that he would not have written the business on different terms e.g. higher premium; he would not have been interested in the business at all.

The Court also accepted the underwriter’s evidence as to why, in the case of a different scrap metal exporter, insurers had renewed cover notwithstanding two fires. In that case, the evidence indicated that the cargo had a minimum cargo of debris and the fires had been started by hot work being performed. Further, the premium paid was six times more than that paid by Cometsambre.

In conclusion, the Court agreed that a prudent underwriter would believe the potential for a very significant claim was very high compared to the premium; and would be concerned that the incidence of fires indicated that the scrap recently being shipped by Cometsambre was other than that which had been initially described or at least that there was sufficient uncertainty about the quality of the cargo that they did not wish to take the risk.

Comment

The case is an important one for insurers and insured alike. It makes clear what are the insured’s obligations in respect of its duty of fair presentation and highlights that, given the burden of ensuring a fair presentation of the risk rests squarely with the insured, where there is uncertainty as to whether a fact or circumstance is material, it should be disclosed.

For insurers who provide a proposal form or questionnaire pre-contract, they should ensure that they consider carefully the type and scope of questions posed to avoid any suggestion that they have waived requirement of a particular piece of information.

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