Chapter 1

Question 1

What 3 things must be present for legal contract?

Answer 1

Offer, acceptance and consideration

Question 2

Why does good faith govern insurance contracts rather than caveat emptor (buyer’s beware)?

Answer 2

Based on promise to do something in event of certain circumstances, promise not tangible until loss occurs

Question 3

What is the Latin for good faith?

Answer 3

Uberrima Fides

Question 4

What does good faith do?

Answer 4

Imposes duty on proposer to provide all information asked for

Question 5

What is the Marine Insurance 1906 definition of material fact?

Answer 5

That which would influence judgement of prudent insurer in fixing premium or deciding to take a risk

Question 6

What was the position under the Marine Insurance Act 1906

Answer 6

Disclose all material facts

Question 7

What information doesn’t need to be disclosed?

Answer 7

Facts of law / public knowledge, spent convictions, improve risk, insured waived rights, survey should have revealed, insured didn’t know, covered in policy terms or insurer already knows (including their employees)

Question 8

What is the position under CIDRA 2012?

Answer 8

Consumer must take care not to make a misrepresentation, answer all questions asked by insurer and answer fully and accurately - abolishes duty to volunteer material facts

Question 9

What is a consumer?

Answer 9

Individual who purchases insurance for own private needs and not related to profession, business or trade

Question 10

What is the position under the IA 2015?

Answer 10

Creates duty to make a fair presentation of the risk, still need to disclose relevant info even if insurer doesn’t ask as often transacted by brokers who are paid to provide advice

Question 11

What is a fair presentation of the risk?

Answer 11

• Disclose every material circumstance know or ought to know - failing this need to notify insurers they need to enquire further
• Ensure clear and accessible with adequate signposting
• All MC substantially correct and made in good faith

Question 12

What did the IA 2015 define a material circumstance as for non-consumers?

Answer 12

Material if would influence judgement of prudent insurer in determining to take risk and what terms

Question 13

FCA Guidance 2021 fair treatment of vulnerable customers definition

Answer 13

Vulnerable customer = due to personal circumstances eg poor health or literacy are especially susceptible to harm

Question 14

What does IA 2015 not require insured to disclose?

Answer 14

Diminishes risk, insurer knows, ought to or presumed to know, insurer waives

Question 15

What is the effect of contracting out of IA 2015?

Answer 15

Both parties agree IA 2-25 provision don’t apply then reverts back to Marine Insurance Act 2015, burden on insurers be transparent when explaining implications - if not then there’s no legal effect

Question 16

What is the duration of the duty of fair presentation?

Answer 16

Starts when negotiations begin and lasts throughout life of policy, change mid-terms then duty revived and new contract is formed

Question 17

What is a breach under CIDRA 2012?

Answer 17

Took reasonable care then no breach and no remedy, only a qualifying breach leads to remedies - depends on insured’s mindset

Question 18

What is a qualifying breach under CIDRA 2012?

Answer 18

Insured failed to take reasonable care and insurer entered insurance contract, breach either:
- Deliberate / reckless and knew or didn’t care was
- Careless

Question 19

What is the remedy for a deliberate / reckless breach under CIDRA 2012?

Answer 19

Void policy and refuse claims
Burden of proof with insurer

Question 20

What is the remedy for a careless breach under CIDRA 2012?

Answer 20

Depends on what insurer would have done:
- Accepted on different terms, policy treated to include those
- Charged higher premium, proportionately reduce claims

Question 21

When doe insurers have a remedy for a breach under IA 2015?

Answer 21

Insured breached duty and this resulted in insurer entering into contract or on different than would have done
Remedy depends of if deliberate / reckless

Question 22

What is the remedy for deliberate / reckless breach under IA 2015?

Answer 22

Insured knew / didn’t care deliberate / reckless
Insurer avoid policy and keep any premiums paid

Question 23

What is the remedy for a not deliberate / reckless breach under IA 2015?

Answer 23

• Insurer not written policy, avoid but return premiums
• Accepted on different terms, contract now includes those
• Charged higher premium, proportionately reduce claims

Question 24

What remedies are available if the misrepresentation is fraudulent?

Answer 24

Known as concealment
Policy is voidable, keep premiums and sue for damages, or ignore breach of good faith so policy continues and pay claim

Question 25

What is a peril?

Answer 25

That which gives rise to a lose

Question 26

What is a hazard?

Answer 26

That which influences operation of a peril
- Physical - nature of risk or measurable dimension
- Moral - attitude and conduct of people

Question 27

How do insurers obtain information?

Answer 27

• Proposal forms
• Brokers
• Surveys
• Supplementary questionnaires
• Meetings with clients
• Call centres
• Internet