Disclosure and increase of risk

The long and detailed decision of Mr Justice David Steel in Scottish Coal Company Ltd v Royal and Sun Alliance Insurance plc [2008] EWHC 880 (Comm) was concerned with a decision by the assured to change its method of working, giving rise to a loss. The insurers unsuccessfully argued that they were entitled to avoid the policy by reason of the assured’s failure to disclose the change, or to deny liability by reference to various policy terms including reasonable care, inspection and material change of risk provisions.

Scottish Coal: the background

The claimant, SCC, was one of the two subsidiaries of Mining Scottish Ltd, which operated open-cast coal mines in Scotland. One of those mines was Longannet, the last underground coal mine in Scotland. The mine was next to Longannet Power Station, which was built specifically to burn coal from the mine. Coal was mined by means of a system that involved the driving of two underground parallel roadways, some 200 to 300 metres apart, and up to 2km in length. The roadways were connected by another roadway, the face line. Cutting took place along the face line, and as the cutting occurred, hydraulically powered supports moved forward to hold the ceilings above the cutting machines. The roof area then collapsed behind the supports. The cutting of the face continued to just short of the main roadway, leaving a ‘barrier pillar’ to take the vertical stress.