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UK Court of Appeals speaks on the materiality standard for contract avoidance

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In North Star Shipping Ltd v Sphere Drake Insurance Plc, [2006] EWCA Civ 378 (April 7, 2006), the UK Court of Appeals stated that when a party seeks to avoid insurance on the basis of the non-disclosure of a “material circumstance,” a material circumstance “is one that would have an effect on the mind of a prudent insurer in estimating the risk and it is not necessary that it should have a decisive effect on his acceptance of the risk or the amount of premium to be paid.” Id., paragraph 18.