SCOTTISH COAL COMPANY LTD V ROYAL AND SUN ALLIANCE PLC

[2008] EWHC 880 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice David Steel, 28 April 2008

Insurance (property and business interruption) – Loss in coal mine caused by collapse of roof – Effect of notice of cancellation at anniversary date (NCAD) clause – Whether assured disclosed change of working methods – Whether insurers had established materiality and inducement – Whether insurers had waived the right to avoid – Effect of increase of risk, reasonable care and inspection clauses

The claimant’s mine suffered a roof collapse in on 4 May 2000. This was the result of a change in its operations under which it decided in March 2000 to mine by means of pillar extraction. The insurance issued by the defendant insurers contained clauses which: required the assured to take reasonable care to avoid loss; placed the assured under an obligation to permit the insurers to inspect the insured property; and terminated the policy in the event of any material change in the original risk. The slip scratched for the insurance stated that there would be a review of the mine, and it also contained a “NCAD” clause which stated that “It is noted and agreed by underwriters hereon that provisional notice of cancellation is given as at 1st April 2000 to the Insured.” On 30 March 2000 the leading underwriters endorsed a slip which removed the NCAD clause. After the loss, insurers reserved their rights and referred to the reasonable care and material increase of risk clauses but made no mention of avoidance. On 23 December 2000 the insurers agreed to extend the policy for a further month on payment of a pro rata share of the premium, and although they contested liability they did not reserve their rights with regard to avoidance. On the assured’s claim under the policy David Steel J held that the insurers had no valid defence.