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Category: Insurance case law · Reviewed by Apex Insurance Brokers · Last reviewed June 2026
HIH Casualty and General Insurance Ltd and others v Chase Manhattan Bank and others [2003] UKHL 6 — House of Lords, 2003.
Citation, court and year verified against the official House of Lords judgment published by the United Kingdom Parliament (https://publications.parliament.uk/pa/ld200203/ldjudgmt/jd030220/hih-1.htm).
The litigation arose out of a sequence of contingent loss insurance policies known as “film finance” or “pecuniary loss indemnity” cover. Chase Manhattan Bank, as financier of a slate of feature films, sought protection against the risk that revenues from the films would be insufficient to repay loans extended to the production companies. HIH Casualty and General Insurance, together with co-insurers, wrote successive layers of such cover.
The policies were placed through brokers, and the underlying information presented to the insurers as to the films, their budgets, sales projections and revenue forecasts was supplied by a film production consultancy acting on behalf of the borrower. It later transpired that material aspects of that information had been false. The films failed to generate the predicted revenues, the loans defaulted and Chase Manhattan sought indemnity under the policies. HIH and its co-insurers contended that they had been induced to write the cover by misrepresentation and non-disclosure, and that they were entitled to avoid.
Chase Manhattan responded by pointing to express terms in the policies which were designed to insulate the bank from defences founded on the conduct of its representatives. The policy contained a “truth of statement” clause and a related provision under which the insurers were to be deemed to have waived all rights and remedies arising from misrepresentation, non-disclosure or breach of warranty otherwise than where actual fraud on the part of the insured itself was established.
The principal question was whether such exclusionary wording could effectively exclude the insurers’ remedies for the fraudulent misrepresentations and non-disclosures of the bank’s agents, and if so on what terms.
Two related issues fell for decision. First, as a matter of construction, did the truth of statement and related clauses in the policies exclude remedies in respect of fraudulent misrepresentation and non-disclosure by the insured’s agents, or only innocent or negligent breach? Second, as a matter of public policy, could a party to a contract effectively exclude liability for its own fraud or for the fraud of its agents?
The case also raised subsidiary issues as to the scope of the duty of disclosure where the proposer’s principal source of information was a third-party intermediary acting on their behalf, and as to the construction of the entire agreement clause and similar provisions which are now standard in commercial insurance wordings.
The House of Lords held that as a matter of construction the exclusionary wording did not, on its proper interpretation, exclude the insurers’ remedies for fraud committed by the bank’s own agents. Clear words would be required to achieve such a result, and they had not been used. The wording protected Chase Manhattan from the consequences of innocent or negligent misstatement by its agents but not from fraudulent misstatement.
The House further held, as a matter of public policy, that a party cannot contract out of liability for its own fraud and that very clear words would be required to exclude liability for the fraud of one’s agents. Whether such an exclusion would ever be enforceable in respect of an agent’s fraud was left open, although Lord Bingham and Lord Hoffmann doubted that it could be. The principle is one of considerable importance in the construction of warranties, condition precedent clauses and entire agreement provisions in commercial insurance.
On the facts, the insurers were entitled to avoid the policies and the bank’s claim failed.
A party to an insurance contract cannot, as a matter of public policy, exclude liability for its own fraud. Exclusion of liability for the fraud of an agent of the insured requires clear and unambiguous wording, and may itself be subject to limits of public policy not finally resolved.
As a matter of construction, general “truth of statement” or waiver-of-defences clauses in commercial insurance policies will not be read as excluding the insurer’s right to avoid for fraudulent misrepresentation or non-disclosure unless the wording so requires in terms.
The duty of disclosure rests on the proposer notwithstanding that information has been gathered by an intermediary; the proposer remains responsible for the integrity of the presentation made to the underwriter.
HIH v Chase Manhattan is the leading modern authority on the interaction between the duty of disclosure, the law of misrepresentation and the construction of exclusionary clauses in commercial insurance contracts. It is regularly cited in disputes over the scope of “truth of statement”, entire agreement and similar wordings.
The case is preserved in its essentials by the Insurance Act 2015. Section 9 of the Act permits the parties to a non-consumer contract to contract out of the default regime of remedies for breach of the duty of fair presentation, but only on terms which satisfy a transparency requirement under section 17. Section 14 abolishes the doctrine of avoidance for utmost good faith generally. The fraud principle articulated in HIH survives untouched: section 12 preserves the insurer’s full right of avoidance, without return of premium, in cases of deliberate or reckless breach of the duty of fair presentation.
For brokers the case underlines the importance of ensuring that placing information sourced from third parties is independently verified where possible, and that the client is made aware of its disclosure obligations notwithstanding the involvement of the broker. For insureds it is a reminder that “truth of statement” clauses provide only limited protection.
By Apex Insurance Brokers on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Apex Insurance Brokers on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
Only in the clearest terms. Lord Bingham stated that if a party seeks to exclude the ordinary consequences of fraudulent or dishonest misrepresentation or deceit by his agent, acting as such, inducing the making of the contract, that intention must be expressed in clear and unmistakable terms on the face of the contract.
No. The House of Lords held that general words, however comprehensive, will not be construed to relieve a principal of liability for the fraud of an agent; the language must alert commercial parties to so extraordinary a bargain.
Placements are made through agents. This decision sets the standard a wording must meet before it can shut out the consequences of an agent’s dishonesty, which is central to how broker and intermediary risk is allocated.
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