Does a business need to declare if any of their previous company’s insurance was cancelled or voided when applying for new business insurance?

This is largely dependent on whether the insurer asks ambiguous questions.

Following the latest case of Clarendon Dental Spa LLP v Zurich [2025], an insurer may unintentionally waive the disclosure of the insured declaring any past, cancelled, or voided insurances where their questions are too ambiguous. The standard for this is determined by what it would make a reasonable person believe the scope of disclosure would exclude. In 2023, it was found that 49% of UK businesses bought at least one form of insurance cover.[1] Thus, a large number of businesses will be affected by this case, as they could get into disputes with their insurer.

Relevant Legislation – Insurance Act 2015

• Section 3 – the insured is required to make a fair presentation of any risk, disclosing every material circumstance they know that the insurer ought to be aware of.
• Section 3(5)(e) – however, disclosure is not required of any circumstances as to which the insurer waives this information, so insurers should ask carefully worded rather than ambiguous questions, to sufficiently investigate what they wish to find out.

Previous Relevant Case Law

• Wood v Capita Insurance [2017] – the Supreme court re-evaluated the principles governing contractual interpretation, emphasising the importance of taking a balanced approach that involves considering the literal contractual terms as well as the broader context in which they were agreed upon. This is relevant here regarding what the reasonable person would understand to be the extent of the disclosure of information.
• Ristorante Ltd v Zurich [2021] – when the court is interpreting questions posed by insurers, any ambiguity is generally resolved in favour of the insured. This is because the insurer cannot deem something a misrepresentation if a reasonable person would not consider it to be false, given the question asked. As such, the insurer will be unable to re-write questions in later claims, when doing so would give them a completely different meaning.

Recent Case Law – Clarendon Dental Spa LLP v Zurich [2025]  

This case clarifies the law surrounding the extent of information required to be disclosed to the insurer by the insured.

Clarendon had to answer a statement of facts as part of their insurance renewal process, including a question on whether they themselves “or any partners, directors or family members involved in the business … [had] been declared bankrupt or insolvent, or been disqualified from being a company director”. They answered ‘No’.

Two companies that were former partners of the LLP had shared a common director with Clarendon before becoming insolvent and commencing liquidation proceedings. Zurich stated that not disclosing this information amounted to a breach of the insured’s duty of fair presentation. They claimed that the answer of ‘No’ to their insolvency question was incorrect.

However, the law’s requirement of the insurer providing a fair presentation of any risks, disclosing anything they were aware of, can be waived by the insurer if the questions they ask are narrow and specific. In this case, the extent of the disclosure of information was limited only to the insolvencies of current partners or directors of the policyholder, not former partners, or members of the LLP. Therefore, applying the Supreme Court decision in Wood, it was held that Clarendon did in fact answer the insolvency question correctly, as Zurich had waived the disclosure of the insolvencies of any former partners of the LLP, meaning Clarendon were not required to disclose these.

Future Implications

Where there is ambiguity, the insured are likely to challenge the decision and win. To avoid a similar situation and arising disputes, it is best for questions to the insured to be as clear and unambiguous as possible, ensuring that the questions sufficiently extend to the scope which the insurer wishes to investigate, as the questions cannot later be amended or re-written when a claim arises.

Summerfield Browne Solicitors can help you with your insurance matters. Please do not hesitate to reach out to us for assistance or advice.

[1] 50+ UK Business Insurance Statistics 2024 | money.co.uk