Category: Insurance case law · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed June 2026
Technology and Construction Court decision on basis clauses, the duty of fair presentation and the construction of warranties in a commercial energy insurance dispute.
Mutual Energy Ltd, a company involved in the construction and ownership of energy infrastructure in Northern Ireland, held a policy with Starr Underwriting Agents Ltd in respect of certain risks connected with a major interconnector project. The policy formed part of a wider programme of cover for the project. A claim arose under the policy in respect of damage said to fall within the insuring clauses.
The insurer declined the claim and sought to rely on a series of provisions in the policy and the placing documentation. These included terms drafted as basis of contract clauses, by which the insured was said to have warranted the truth of statements made in the proposal or its equivalent, and terms which imposed continuing obligations on the insured in connection with the management of the project. The insurer also relied on alleged failures of pre-contractual disclosure.
The case was decided shortly before the Insurance Act 2015 came fully into force in respect of all non-consumer contracts of insurance. As such, the policy in issue was subject to the pre-Act law of fair presentation as understood at common law, while the parties were necessarily aware of the impending reforms. The judgment is therefore of interest both as an example of the application of the pre-Act law in a substantial commercial context and as a transitional case bridging the old and new regimes.
The Technology and Construction Court was asked to construe the policy, to consider the effect of the basis clause and similar provisions, and to determine whether on the facts the insurer was entitled to decline the claim. The judgment provides a clear statement of how such clauses were to be approached at common law and offers guidance which remains influential under the Act.
The principal issues were the construction of the basis clause and related provisions, the proper approach to alleged breaches of warranty and of fair presentation, and whether the insurer was entitled on the facts to decline the claim. The court was required to consider the boundary between warranty and condition, the effect of the basis clause in converting representations into warranties, and the impact of the impending statutory abolition of basis clauses under section 9 of the Insurance Act 2015.
A subsidiary issue concerned the construction of the policy’s insuring clauses themselves and whether the loss fell within cover before any question of breach of warranty or non-disclosure was reached. The court approached the issues in the conventional order, considering the scope of cover before turning to the insurer’s defences.
The Technology and Construction Court held in favour of the insured in substantial respects. On the construction of the policy and the placing documents, the court was unwilling to read basis clause language so as to convert ordinary representations into warranties unless the language clearly so provided. The court applied established principles of contra proferentem construction, reading ambiguous wording against the insurer who had drafted it, and emphasised that the harsh consequences of a true basis clause require clear words.
On the alleged breaches of fair presentation, the court applied the Pan Atlantic test and concluded on the evidence that the matters relied upon by the insurer either had been disclosed in substance, were not material, or had not induced the underwriter to write the risk on the terms agreed. The insurer’s defences accordingly failed and the insured was entitled to indemnity, subject to the further procedural and quantum issues raised on the facts.
The judgment is notable for its careful treatment of basis clauses against the background of the impending statutory reform. The court did not anticipate the reforms in its decision but did emphasise that the existing common law principles of construction provided substantial protection against unfair operation of such clauses.
Basis of contract clauses and analogous provisions purporting to convert representations into warranties are to be construed strictly against the insurer relying on them. Clear words are required to achieve that effect, particularly where the consequence is that the policy will be void from inception irrespective of the materiality of the representation.
The duty of pre-contractual fair presentation is to be applied by reference to the established Pan Atlantic test of materiality and inducement. The insured discharges the duty by conveying the substance and significance of material matters to the underwriter; the insurer cannot rely on technical defences which do not engage with the substance of the placing presentation.
Mutual Energy v Starr is one of the last substantial decisions on basis of contract clauses before the entry into force of the Insurance Act 2015. Section 9 of the Act abolishes basis of contract clauses for non-consumer contracts, completing the policy direction long signalled by the courts and consistent with the approach taken by the Technology and Construction Court in this case. The Consumer Insurance (Disclosure and Representations) Act 2012 had already achieved the same result for consumer contracts.
The decision retains importance for two reasons. First, it remains a clear modern statement of the contra proferentem approach to insurance contract construction, which continues to apply alongside the Insurance Act 2015. Second, it illustrates the careful working through of the Pan Atlantic test in a substantial energy infrastructure context, a kind of risk which remains heavily litigated under the new statutory regime.
For brokers, the case is a reminder that basis clauses are no longer effective in non-consumer contracts and that the duty of fair presentation under section 3 of the 2015 Act is now the primary discipline for placing presentations. For insureds, it confirms that the courts will not readily construe technical wording so as to defeat coverage where the substance of the risk has been fairly presented.
By Matt Bartlett, Director, on 2026-06-06. Next review: 2026-12-06.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-06. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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