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Material misrepresentation: easy to allege – harder to prove

July 2025

Executive Summary

The Insurance Act 2015 has raised the bar for insurers seeking to rely on misrepresentation or material non-disclosure as a basis for avoiding cover. Recent case law shows that courts require clear pleadings and well-documented underwriting as well as documentary evidence of how the underwriter would have acted differently had the material information been disclosed. In broker-led placements, identifying specific misstatements can be challenging, and vague or poorly evidenced allegations are unlikely to succeed. Robust underwriting records and a clear audit trail are essential for insurers seeking to rely on this as a defence.

Introduction

Since the introduction of the Insurance Act 2015 (“the Act”), the law governing disclosure and misrepresentation in non-consumer insurance has shifted in favour of policyholders. The Act introduced a new “duty of fair presentation” and replaced the traditional all-or-nothing avoidance remedy with a graduated set of outcomes based on the insurer’s likely underwriting response. While the Act modernised the law and aimed to improve clarity, in practice it has proved challenging for insurers seeking to rely on material misrepresentation as a basis for avoiding or limiting claims.

The result is a legal environment that is, in many respects, policyholder-friendly, placing significant evidential and procedural burdens on insurers. For financial & specialty risks, where proposal processes are often complex and layered, and where claims values can be substantial, these difficulties are particularly acute.

What is the “duty of fair presentation”?

Under the Act, policyholders must make a “fair presentation of the risk” before the contract is entered into. This includes disclosing every material circumstance which the insured knows or ought to know, or providing sufficient information to put a prudent insurer on notice that it needs to make further enquiries.

Insurers are no longer entitled to remain passive recipients of disclosure and are expected to take steps to investigate and assess the risk. Even though the Act has shifted the burden of identifying what is material on to the insured, the case of Young v Royal Sun Alliance Plc [2019] (following Doheny v New India Assurance Co Ltd [2005]) shows that the responsibility is on insurers to make further enquiries on issues that it considers material to the risk. If insurers don’t make those further enquiries, they risk a finding of waiver under section s.3(5)(e) of the Act if there is a ‘clear case’ that a reasonably careful insurer ought to have made further enquiries but failed to do so. Insurers should also be alive to waiver where they have asked ‘limiting’ questions which might enable an insured to reasonably infer that the insurer therefore has no interest in information outside the scope of that question. The issue of waiver was helpfully discussed by Mr Justice Snowden in Ristorante Limited t/a Bar Massimo v Zurich Insurance plc [2021].

Where the duty is breached, the available remedies depend on whether the misrepresentation was:

• Deliberate or reckless, or
• Neither deliberate nor reckless (innocent), but still material.

In the latter case, insurers must show what they would have done differently had the misrepresentation not occurred. They need to establish that, not only was there a misrepresentation, but that it was relied upon when agreeing to underwrite the risk. This creates a fact-heavy, counterfactual exercise in which insurers must be able to establish what they would have done had the material circumstance been disclosed.

What makes a misrepresentation “material”?

What is “material” is a question of fact and will be tested at the time of the placement and not guided by subsequent events.

A misrepresentation is material if it would have influenced the insurer in deciding whether to take the risk, and on what terms. This is not a purely subjective test: the standard is that of the “prudent insurer”.

The relevance of inducement

In addition to establishing that there was a material misrepresentation, an insurer will also need to show that it would not have entered into the contract or would have done so on different terms if they had been provided with all the relevant information i.e. the material non-disclosure induced them to enter into the contract on less favourable terms

Inducement is not a new concept. Prior to the Act, in the House of Lords case of Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1994] Lord Mustill noted that the non-disclosure of a material fact cannot be relied upon as a ground for avoiding the contract unless its full and accurate disclosure would have had a decisive effect on the prudent underwriter’s decision whether to accept the risk and at what premium. This has since been codified in the Act where the proportionate remedies available for non-disclosure vary depending on whether the insurer would not have entered into the contract at all or would have done so on different terms.

When determining what remedies are available, the actual insurer’s internal underwriting guidelines, appetite statements, and decision-making records become crucial. Insurers must show that a prudent underwriter would have acted differently in practice.

In Berkshire Assets (West London) Ltd v AXA Insurance [2021], insurers successfully argued that a failure to disclose charges relating to alleged fraudulent conduct, even where the charges were for a strict liability offence and were later dropped, was a material non-disclosure of a moral hazard. Insurers were able to show from their internal policies that, had that information been disclosed, they would not have written the risk.

Challenges for insurers

The Courts have taken a strict line on insurers’ ability to rely on material misrepresentation:

1. Procedural failures: Courts expect insurers to plead their misrepresentation case clearly, specifically setting out the representation, its falsity, its materiality and when it was communicated to insurers. Vague or generalised allegations have been criticised by the Court and will need to be amended or else struck-out (Bellhouse v Zurich [2025]).
2. Proof of actual underwriting response: It is not enough to assert that a different decision would have been made. Insurers must produce contemporaneous underwriting evidence showing how the proposal would have been handled differently — not just in theory, but by that particular insurer. In many cases, insurers struggle to locate (or never properly document) such evidence.
3. Broker-led placement: In financial and specialty lines, placements are often driven by brokers and unfold over multiple interactions. Representations may be made in emails, presentations, or calls, making it difficult to identify a specific statement or moment of misrepresentation. Unless the insurer asked clear questions and recorded responses, it may struggle to prove that the information presented was misleading or incomplete.
4. Evolving risks and expectations: For emerging areas like ESG, cyber, or sanctions exposure, what constitutes a material fact is not always obvious. Policyholders may argue that the insurer failed to ask the right questions or did not make its underwriting expectations clear.

The burden of the counterfactual

Perhaps the most challenging aspect for insurers is the counterfactual exercise – proving what would have happened if a fair presentation had been made.

This often requires evidence such as:

• Internal underwriting guidelines and rating tools in place at the time of placement,
• Historical underwriting files,
• Testimony from the actual underwriter or decision-maker,
• Evidence of how similar risks were handled.

Any inconsistency between what the insurer says it would have done and what it actually did in comparable cases is likely to be used against it. Courts are sceptical of retrospective reconstructions, particularly where underwriting notes are sparse or generic.

A policyholder-friendly landscape

The Act was intended to rebalance the relationship between insurers and commercial policyholders — and it has largely succeeded in doing so. Courts have been consistent in holding insurers to high standards when seeking to avoid policies or reduce claims based on misrepresentation or non-disclosure.

In effect, the Act makes it harder for insurers to rely on technical failures by the insured. Instead, the focus is on real prejudice: would the insurer, acting prudently and in accordance with its own rules, have declined the risk or imposed different terms.

Conclusion

Material misrepresentation remains an important defence for insurers — but it is one that must be deployed with care, precision, and evidence. To rely on misrepresentation effectively, insurers must strengthen their underwriting practices and documentation. This means asking clear questions, recording decision making contemporaneously, and maintaining evidence of underwriting appetite and comparable risks.

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