EXPERT EVIDENCE IN INSURANCE CASES 2: BRIT UW LIMITED: FAILURE TO DISCLOSE UNDERMINED DEFENDANT’S CASE

There are, coincidentally, two recent cases on the use of expert witnesses in insurance disputes.  In Brit UW Limited -v- F & B Trenchless Solutions Limited [2015] EWHC 2237 (Comm) Mrs Justice Carr DBE considered the utility of expert evidence as to underwriting.  It is an example of experts being used but being far from determinative of the outcome.  It is also interesting to look at the judge’s consideration of the evidence of the lay witnesses.

THE CASE

The claimant sought a declaration that it had validly avoided a liability policy on the grounds of failure to disclose material information in relation to a void near a tunnel. The parties called experts on the issue of whether the failure was material.
I. The expert witnesses
  1. Mr Rudden gave evidence for Brit. He is a highly experienced underwriter. He was confused (or at least at cross-purposes) in the early sections of his cross-examination when asked to deal with hypothetical situations not based on the present facts. But he was convincing when addressing the actual circumstances surrounding this claim. So for example, he was clear that if there was a possibility of the void being caused by FBTS’ tunnelling he would expect the appearance of the void to be disclosed. To the extent that there were inconsistencies between his discussion of the relevant principles in a vacuum and his opinions on materiality on the facts of this case, I prefer his evidence given by reference to the facts.
  2. Mr Blackburn, who is a broker by trade and not an underwriter, gave evidence for FBTS. It was clear from his evidence that his approach to the issues was essentially (and perhaps understandably given his background) from the perspective of a broker rather than that of an underwriter. Thus, he often answered that he would expect the insured to raise a certain issue with his broker for discussion, but was not clear as to what the outcome of any such discussion from the underwriter’s perspective should have been. His answers were often inconclusive. I find that the thrust of his written opinion that FBTS would only have been under a duty to make disclosure to Brit if the track settlement reached (or was likely to reach) NR’s intervention level of 25mm to be wholly unrealistic. It may have been one that Mr Blackburn felt forced to adopt, given that there was at that stage the possibility that the Policy would be held not to have been concluded until 21st August 2013 (when FBTS was told that settlement was at 22mm).
  3. Where there is a material difference between the two experts, and in so far as necessary, I prefer the evidence of Mr Rudden. However, as appears below, where ultimately the conclusions on materiality turn on my findings of fact, the outcome on materiality does not depend on this expert evidence, although such evidence informs the outcome.

THE JUDGE’S ASSESSMENT OF THE WITNESSES

This is also one of those cases where it is interesting to see the judge’s conclusions about the lay witnesses.

” The witnesses of fact
Mr Tompson, the relevant underwriter at Brit, presented as intelligent and experienced in the insurance industry, albeit relatively new to underwriting. He was a fair and honest witness. Where he had made a mistake, he accepted it. He came across as someone who understood his job at the time, and as someone who took that job and the ultimate decision to avoid the Policy very seriously. He emphasised how exceptional it was for Brit to avoid a policy. It was something done only once every 3 to 4 years.
Mr Wise, Brit’s loss adjuster, was also an impressive witness, with 22 years of industry experience. Again, he made fair concessions and did not overstate his case. He gave his evidence in a compelling way when he had a direct recollection. A good example was his clear memory of advising FBTS to get its own legal advice at the very first meeting he attended with FBTS.
Ms Brostek, Brit’s solicitor who attended the meeting of 3rd October 2013 with Mr Wise, was a more nervous witness but nevertheless a careful one.
Mr Gibson, FBTS’ commercial director, came across as a hardworking and experienced commercial director. However, despite being charged with responsibility for FBTS’ insurance matters, his understanding of insurance matters appeared limited. His understanding of FBTS’ duty of disclosure to insurers in particular was limited, if not flawed : it was to the effect that generally notification was required only when damage had actually occurred. He was reluctant to answer on some questions, but in general answered questions in a straightforward manner. The overriding impression throughout was, however, that his focus was at all material times on “the money”. This was most striking in his behaviour after the tunnelling had finished. His primary concern then was to achieve payment for FBTS. Despite the following settlement results and MS’ worries, he did not proactively follow up any monitoring results, nor respond to queries from MS, for example, about the void.
Mr Burke was in general an unreliable witness. By way of example, he made a volte face in his evidence in relation to his tender estimate of 2-4mm settlement, stating in oral evidence that it was in fact accurate at the time. At the time of his witness statement, he (or perhaps others within the FBTS team) recognising the potential difficulties in FBTS’ path arising out of its tender estimate, sought to suggest that the estimate was not a true one. Thus, in his witness statement he said :
“5. In the section headed “Proposal” I provided my estimate of the settlement that would occur – that is 2-4mm…The reason I put this level of settlement down was because this was a competitive tender in that MS wished to do the job using an Auger-Boring technique which, if it could have been done at all would have been much cheaper, and I wished to secure the job for the Defendant. I was conscious that settlement is, for very good reason, a very serious matter for [NR] and accordingly to how any kind of settlement above the minimum is likely to be unacceptable…I expected, based on experience from Colwick that the actual settlement was very likely to be greater and in the region of 10-12mm or so based on the depth of the tunnel shown on the tender drawing.”
In FBTS’ written opening, it was stated that the estimate of 2-4mm was “unduly optimistic”. Mr Burke had “frankly” stated that he gave it in order to secure the job for FBTS.
However, in his oral evidence, Mr Burke said quite the reverse. He stated that the estimate was a genuine one given in good faith and accurate, based on actual calculations. In due course I shall have to choose which version I prefer. He was inconsistent and evasive in other areas of his evidence, including as to his alleged expectations of settlement on the Site beyond the tender proposal.”

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