Article by Gareth Thomas and Tommy Tong
‘Moral Hazard’
Brotherton v Aseguradora Colseguros
(Transcript 22nd May 2003, Court of Appeal (Eng))
Arising from the judgment of Colman J. in Strive Shipping Corp. v Hellenic Mutual War Risks Association (The ‘Grecia Express’) [2002] EWHC 203, there has been much debate about the extent to which an insured can mitigate his failure prior to the inception of an insurance policy to disclose allegations of misconduct by demonstrating later that the allegations were false. That debate may have been laid to rest by the Judgment of the Court of Appeal in Brotherton.
Facts
In Brotherton, the claimant reinsurers are seeking to avoid their policy of reinsurance with the defendants, who insured a Columbian state-owned bank under a bankers blanket bond policy, which covered, amongst other things, losses caused by the dishonest or fraudulent acts of bank employees. The basis of their avoidance was the failure by the defendants to disclose news
