Court concludes an insured with policy for buy-to-let property is a not consumer

The Court of Appeal has dismissed an appeal by an insured because he was not a consumer within the meaning of ICOBS and the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations).

The insured took out a policy in 2012 (before the abolishment of ‘basis of the contract’ clauses insurance contracts) and the proposal form contained a ‘basis of contract’ clause so that any statements made in the form were converted into warranties. The insured failed to disclose an offence in his proposal form and following damage to the property by a fire, the insurer refused to pay out under the policy alleging breach of warranty and a material non-disclosure or misrepresentation by the insured. The High Court found in favour of the insurer and refused the insured’s claim for an indemnity under the policy.

 The insured appealed and argued that he was a consumer and therefore the ‘basis of contract’ and ‘subject to’ clauses were unenforceable. However, the court disagreed and applying the Regulations and the rules in ICOBS found that the insured was not a consumer because the purpose of the policy was to protect the property which he was using for the business of letting for rent. The insurance was therefore related to the trade, business or profession of property letting and was business, rather than consumer, insurance. The ‘basis of contract’ clause had contractual effect and the appeal was dismissed.

 

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