Chapter 5

Question 1

Principle of good faith

Answer 1

Good faith means that disclosure must be made in a reasonably clear and accessible manner, material
representations of fact expectation or belief must be substantially correct

Question 2

ab initio

Answer 2

An insurer is estopped from avoiding policy ab initio if their previous behaviour suggests they have waived those rights.

Question 3

A material circumstance

Answer 3

is one which would influence the judgement of a prudent insurer in fixing the premium or determining whether they will take the risk

Question 4

Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA)

Answer 4

came into force on 6 April 2013. CIDRA removes the common law duty on consumers to disclose
any information that a prudent underwriter would consider material and replaces this with a
duty to take reasonable care not to make a misrepresentation

Question 5

Insurance Act 2015 (IA 2015

Answer 5

which came into force on 12 August 2016, extends much of the legislation set out in CIDRA to non-consumer insurance contracts

Question 6

Kettlewell v. Refuge Assurance Company (1909)

Answer 6

ensuring that statements made are true: misleading an insured about policy cover is a breach of good faith

Question 7

Commercial property

insurance

Answer 7

A policy condition requires continuing disclosure of removal to another location, or circumstances that increase the risk of damage

Question 8

Motor insurance

Answer 8

There is usually an nonerous policy condition that requires continuing disclosure of all material changes by the insured, during the currency of the policy.

Question 9

Public liability insurance

Answer 9

The continuing requirement for disclosure for this class of business arises from
the fact that insurers tightly define ‘the business’ of the insured in the policy.
This means that the insured must notify any extension of activities for cover to apply. A condition requiring ongoing disclosure of material circumstances may
be coupled with this.

Question 10

policy endorsements

Answer 10

Many insurers will also include policy endorsements – which form part of the contract – that place responsibility on the insured to notify of all material changes.

Question 11

Physical hazard

Answer 11

material circumstances that concern possible physical

hazards in relation to non-life proposals E.g fire insurance ,theft insurance and motor insurance

Question 12

Moral hazard

Answer 12

They relate either to the insurance history of the insured or to their personal
history or attitude:
• Insurance history
• Personal history

Question 13

What is the legal duty of a proposer?

Answer 13

To take reasonable care not to make a misrepresentation. Information provided must be true to the best of their knowledge

Question 14

What acts set out the duties of consumers and business/commercial?

Answer 14

Consumers - Consumer Insurance (Disclosure and Representation) Act 2012

Commercial - Insurance Act 2015

Question 15

How does the duty of disclosure apply to the insurer

Answer 15

Notify insureds of entitlements to discounts

Only taking on risks the insurer is registered for

Ensuring statements are true + not misleading about coverage

Question 16

When does the duty of disclosure exist?

Answer 16

starts when negotiations start and ends when the contract is formed (inception). It begins again when renewal negotiations take place. During the policy there is no duty of disclosure unless the circumstances effect the policy cover. EG for motor insurance if you change your car you must declare it, but you do not have to declare a conviction for fraud until renewal

Question 17

What material circumstances need to be disclosed

Answer 17

Physical and moral hazards