Whether Insurer Was Stopped From Relying On Right To Avoid

An insured under an After The Event insurance policy brought unsuccessful proceedings against a third party (its insurance broker) and was ordered to pay the third party's costs. The insured became insolvent and so the third party claimed (pursuant to the Third Parties (Rights against Insurers) Act 1930) against the ATE insurers. It was accepted that the insurers had been entitled to avoid the policy because of a serious fraudulent misrepresentation. However, the third party alleged that insurers were estopped from relying on that right.

It has been established by prior caselaw that, in order to establish a waiver by estoppel, there must be a clear and unequivocal message from the insurer to the insured that it will not exercise its relevant rights and the insured must rely on that message in a manner making it inequitable for the insurer to go back on it.