A company is not a consumer

Step 1 – Who is the insured? The Consumer Insurance Contracts Act 2019 protects a consumer: a natural person acting wholly or mainly outside their trade, business or profession. A limited company is never a consumer, however small. The €2.1m turnover and 12 employees are irrelevant to that classification.

Step 2 – So the common law applies. Kestrel owed a duty of the utmost good faith to disclose every fact material to the risk. A fact is material if a prudent underwriter would regard it as influencing the acceptance or the terms of the risk. A €90,000 fire at a sister site and an HSA improvement notice about extraction equipment are plainly material to a paint-shop risk.

Step 3 – Whose knowledge counts? The company's knowledge includes that of its directors and senior managers, and facts a reasonable business person would have appreciated as relevant. The financial controller's knowledge is the company's knowledge. 'The broker filled in the form' does not transfer the duty; at most it raises a parallel claim against the broker.

Step 4 – Remedy. At common law the insurer may avoid the contract from inception, refuse the €310,000 claim and return the €11,400 premium (retaining it only if fraud is established).

If Kestrel were a consumer: the insurer could not avoid; it could only apply a proportionate remedy (reduction of the claim by the ratio of premium paid to premium properly payable) if the breach was careless, and avoidance only if deliberate or reckless. The exposure falls from €310,000 to a proportionate slice. That single distinction is the whole case.

Broker's position. Completing the proposal from a phone call without reading back the specific risk questions and without a signed statement of fact is weak practice. But three points limit the broker's exposure:

• A broker's duty is to exercise reasonable skill and care in placing cover, not to guarantee the client's answers. The client knows its own fire and its own HSA notice.
• Any disclaimer on the proposal is close to worthless: a broker cannot contract out of the client's own statutory and common-law disclosure duty.
• If the client can show it was never asked the fire/notice question, the broker faces a professional negligence claim for the uninsured loss - up to €310,000 plus business interruption - met, in principle, by professional indemnity cover.

A defensible file would contain:

• A written statement of fact sent to the client, with the material statements highlighted and a signed and dated confirmation.
• A contemporaneous record of the questions asked, including a read-back of the fire and regulator questions.
• A documented explanation of the consequences of non-disclosure, given before inception.
• Evidence that the expiring policy's claims history and any prior insurer correspondence were reviewed.

Practical point: the broker should now notify its PI insurers, notify the Central Bank if a reportable error or breach arises under its own regulatory obligations, and take its own legal advice before corresponding with Kestrel's insurer or the client about liability.

The fire damage itself is a covered property loss; the €310,000 will be adjusted under the policy (subject to average, any per-peril deductible and the insurer's reservation on non-disclosure).

Business interruption following the fire is normally covered where it flows from the insured damage, for the indemnity period in the schedule.

The prohibition notice is a different matter:

• Statutory fines and penalties are uninsurable as a matter of public policy - an insured cannot insure against its own punishment.
• Defence costs for regulatory proceedings are usually excluded or tightly sub-limited in commercial combined policies; they are not part of the property section.
• Where the HSA closure stops production independently of the fire, business interruption cover does not respond to that separate cause. Closures for regulator action are not the same peril as fire following damage.
• If the fire is the sole and effective cause of the closure, the loss is more likely to fall within the fire BI cover; if the HSA had grounds predating the fire, the insurer will argue the closure was inevitable.

Recommendation: request the HSA notice in full, its date and its stated cause, and separate the loss calculation into fire-caused and notice-caused components before conceding anything. Do not allow the insurer to treat the notice as an aggravating factor in the coverage dispute - it is a separate question and may strengthen the argument that the fire was a foreseeable consequence of the very equipment issue that was never disclosed.