The High Court has ordered AIG Europe (Ireland) Limited to pay Manor Park Homebuilders Limited €1,015,000 under an insurance policy covering Ongar House, a protected structure damaged by fire in September 2002.
In a judgment delivered on 13 June 2008, Mr Justice Bryan McMahon found that AIG breached its duty of utmost good faith by failing to adequately investigate the risk and deal fairly with the insured. The court held that the policy’s basis of indemnity was reinstatement and ordered payment of the full €1,015,000 sum insured.
Ongar House stood at the centre of the 165-acre Ongar Stud Farm in County Dublin, which Manor Park had bought for development. The house was vacant from April 2001. Its ground-floor openings were blocked with concrete after an attempted break-in, while steel shutters secured the upper-floor openings. AIG provided fire, aircraft and explosion cover from 3 May 2002. The house was extensively damaged by fire on the night of 14–15 September that year. AIG repudiated the policy in November 2002.
AIG argued that the burglar alarm was not operational when the policy was agreed, and that information about the alarm and shutters affected the cover. The judge found that the concrete-block work had been done from outside and did not require entry into the house; the alarm could have remained operational. He found it was operating when the contract was made. It later stopped working when the electricity supply was disconnected in May 2002, as part of steps taken in response to the previous insurer’s requirements.
The court held that the broker’s statements about the alarm and shutters were neither warranties nor terms of the AIG contract. It found no misrepresentation about the alarm and concluded that the omission about the blocked ground-floor openings was innocent and not material to the risk. The judge also said that even if the alarm had not been working when the contract was made, that fact would not have been material in the circumstances.
In reaching the good-faith finding, the court noted that AIG had not surveyed the property, issued a policy document or clearly set out conditions or warranties. The underwriter had recorded that the account was written “as a favour” to the broker and agreed in evidence that maintaining the broker relationship was his primary consideration. The court found that AIG’s approach fell short of the standard expected of a reasonably prudent insurer.
The order was for payment of €1,015,000 on foot of the policy. The judgment did not specify a separate award of interest or costs.