Policies And Extensions For Misrepresentation By Broker

In the recent decision in Limit No 2 v AXA Versicherung AG, the court concluded that misrepresentations made by a broker as to his reinsured’s policy on inwards deductibles could entitle the reinsurer to avoid the policy even though the reinsured was not aware that the representation had been made. The court also confirmed that avoidance of a policy would automatically avoid any extended policy period agreed by endorsement to that policy, although avoidance of the endorsement would not necessarily automatically involve avoidance of the original policy.

This case concerned first loss fac/oblig reinsurance treaties under which Limit’s energy accounts were reinsured by AXA. The reinsurance placing information was sent to AXA by fax dated 4 July 1996. In the covering sheet, the broker stated that Limit "maintain a high standard" and "would not normally write construction risks unless the original deductible were at least £500,000 and preferably £1,000,000."