Formation of a contract of insurance - Making a contract under an open cover

(Glencore International AG v Ryan, The Beursgracht (No 1) [2001] 2 Lloyd’s Rep 602; Glencore International AG v Ryan, The Beursgracht (No 2) [2001] 2 Lloyd’s Rep 608)

Under a declaration policy, such as an open cover or a reinsurance treaty, the assured is required to declare individual risks to the underwriters. Should he fail to do so, there is a possibility that the risk does not attach at all, which is the case where the agreement is not obligatory on both sides: if the assured has a discretion, then failure to declare is to be treated as an exercise of the discretion against coverage; and if the assured has a discretion then failure to declare means that insurers have not had the opportunity to consider the risk. However, even assuming that the agreement is obligatory on both sides, there may well still be reporting obligations: what is the position if a declaration is not made. Glencore International AG v Ryan, The Beursgracht (No 1) [2001] 2 Lloyd’s Rep 602 and Glencore International AG v Ryan, The Beursgracht (No 2) [2001] 2 Lloyd’s Rep 608 , decisions of Judge Hallgarten QC, consider both the nature of a declaration policy and the failure of the assured to make a declaration prior to loss. The first decision was on assumed facts and dealt with preliminary issues. The second decision was the trial itself. At the trial an additional series of questions relating to defence costs also arose.