Banque Keyser Ullman (UK) Insurance Co v Skandia [1991] 2 AC 249.
Facts
The plaintiff bank had made loans against property which the borrower had informed them valuable, and had also taken out insurance policies from the defendant to protect themselves against the risk of any shortfall on the realisation of the property. The borrower defaulted on the loan repayments, and it transpired that he had fraudulently misrepresented the value of the property. The defendants sought to avoid paying out on the insurance, relying on a ‘fraud exception’ clause in the policy. In the course of this disagreement, the plaintiff discovered evidence of a separate fraud by the brokers involved in the loan, which the defendant had been aware of before the loan had been made but had not disclosed. The plaintiff argued that the defendant owed a duty to disclose the information, and that had they done so they would not have trusted the broker, would not have entered the loan agreement, and would not have suffered any loss.
Issues
The issue was whether the defendant owed a duty to disclose the loss, and additionally whether a causal link could be established between the failure to disclose it and the loss suffered by the plaintiffs.
Decision/Outcome
The House of Lords held that no causal link could be established; even if the defendants had disclosed the information, the policies would still have been repudiated under the fraud exception clause. The mere fact that the defendant knew the plaintiff would not have entered the loan agreement but for his breach of duty (in failing to disclose the information) was insufficient to establish causation.
In reaching this conclusion, the House was willing to assume, without deciding, that a duty to disclose the information did exist.
Updated 19 March 2026
This case summary is broadly accurate. Banque Keyser Ullman SA v Skandia (UK) Insurance Co Ltd [1991] 2 AC 249 remains good law as an authority on causation in the context of non-disclosure in insurance contracts. The House of Lords’ reasoning — that a causal link between the insurer’s failure to disclose and the plaintiff’s loss could not be established because the policies would in any event have been repudiated — continues to be cited in discussions of ‘but for’ causation and the limits of duties of disclosure.
One important subsequent development to note concerns the broader law of good faith and disclosure in insurance contracts. The duty of utmost good faith (uberrimae fidei) in insurance law, which formed part of the background to this case, has since been substantially reformed by the Insurance Act 2015 (in force from 12 August 2016) and the Consumer Insurance (Disclosure and Representations) Act 2012. These statutes replace the pre-contractual duty of disclosure regime under the Marine Insurance Act 1906 for consumer and most commercial insurance contracts, and importantly abolish the insurer’s right to avoid for non-disclosure outright in favour of proportionate remedies. The core causation reasoning in Banque Keyser Ullman remains instructive, but readers should be aware that the statutory framework governing disclosure duties in insurance has changed significantly since this decision was handed down.
