Non-disclosure and fraudulent claims

The assured in Sharon’s Bakery (Europe) Ltd v AXA Insurance UK plc and Anr [2011] EWHC 210 (Comm) may be thought to have been a little unfortunate. The assured created false documents for the purpose of obtaining finance from a bank and then, when the subject matter was destroyed by fire, used those same documents to press a claim against the insurers. The outcome was that the assured suffered a genuine loss but the insurers were able to deny liability both by reason of non-disclosure and by reason of the assured having made a fraudulent claim. This seems to be a case in which the fraud was not an attempt to obtain any dishonest advantage but rather to substantiate the assured’s version.

Sharon’s Bakery: the facts

The claimant, SB, carried on a bakery business in North London. SB was formed early in 2008 when two earlier businesses, Wholesale and Hollyland, joined forces, and the controllers of those businesses each became directors of SB in January 2008. The bakery was insured by the defendants against a number of risks, including, fire.