Lloyd’s Underwriters might be successful in avoiding the hull and machinery insurance contract based on non-disclosure of Mr. James past imprisonment by Benning. This is if Benning did not know of the situation of Mr. James before. To understand why this is the case, consider the following.
The material facts of the case indicate that Benning Pty Ltd has sought insurance for Fishball Revolution with a Lloyd’s broker, Lloyd’s Underwriters. Lloyd’s Underwriters have provided insurance by getting into an agreement with specific clauses that state the insurance comes under Australian law and practice. Now when Fishball Revolution sunk on its voyage from Tasmania, it was identified that a hold in the engine room has been the reason for the sinking and there was no material evidence on how the hole is created. Some prior information about a director of Benning leads to some suspicion on the issue especially since the partner a Mr. James was involved in a prior incident of a ship sinking. Mr. James had been sentenced to around five years’ imprisonment 20 years back. His sentence was completed 20 years back. The imprisonment was because he had scuttled a ship while he was chief engineer on the ship.
Under insured’s duty of disclosure, the person or the entity that is applying for insurance has the duty to disclose necessary information when entering the contract. In doing so, they will also have to disclose all other material facts that are closely allied with the case. In this context, they must answer all questions asked as well as provide details of their situations or some details from past that could have a material impact on insurance claims later. Here additional care must be taken to answer questions on convictions, offenses, fines etc. These are usually subject to special assessments. It could so happen that the insurance could be rejected base on some issues. Therefore, at the time of agreement itself all these details have to be stated explicitly. Now the conviction of Mr. James was not explicitly stated by Benning. Mr. James was a director of Benning and the information has a material effect. It could be said that Lloyd’s Underwriters have a case to reject the insurance claim, but at this point it is also important to check if an exception can be made in non-disclosure.