Chapter 5: Good Faith and Disclosure

Question 1

Which Acts set out the rules for disclosure in insurance contracts?

Answer 1

• Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA) - for consumer contracts
• Insurance Act 2015 - for non-consumer contracts

Question 2

Define the principle of good faith.

Answer 2

That disclosure should be made in a reasonably clear manner and material representations of fact must be ‘substantially correct’.

Question 3

How does good faith effect the insured?

Answer 3

They must disclose all material circumstances when they are a proposer.

Question 4

How does good faith effect the insurer?

Answer 4

Must not introduce non-standard terms after negotiations or withhold that discounts may be available for certain measures to improve a risk.

Question 5

What is the definition for the duty of disclosure?

Answer 5

The requirement of a potential insured to state every circumstance material to the risk.

Question 6

How does the Marine Insurance Act 1906 define ‘material circumstances’?

Answer 6

Any fact that would influence the judgement of a prudent insurer.

Question 7

What is the insured’s duty of disclosure in consumer insurance?

Answer 7

Take reasonable care not to make a misrepresentation. And to take care to answer the insurer’s questions correctly, not to volunteer all material information.

Question 8

What is the insured’s duty of disclosure in commercial contracts?

Answer 8

A duty to make fair presentations. The onus is on the insurer to ask questions.

Question 9

What does the Insurance Act expect an insured to know?

Answer 9

What should have been revealed by a reasonable search of information available to the insured.

Question 10

What does the Insurance Act expect an insurer to know?

Answer 10

Knows something only if it is known to one or more individuals who participate on behalf of the insurer.

They are presumed to know things which are common knowledge.

Question 11

Is there a duty of disclosure during the period of insurance?

Answer 11

Only if this affects cover.

Question 12

What happens to the duty of disclosure at renewal?

Answer 12

It is revived.

Question 13

How does the duty of disclosure differ from long terms and short term insurance contracts?

Answer 13

The duty ceases at inception of a long-term policy (e.g. life or health)