Chapter 5: Good Faith and disclosure Flashcards
consumer insurance act 2012 (Cidra)/ IA2015 what does it address
imbalance between bargaining positions between insurers and insureds
duty of good faith
contracts subject to legal principle of good faith- parties must tell truth in negotiations
duty of disclosure act
important during proposal- common law once policy in place duty of disclosure reignited at renewal
marine insurance act 1906
every circumstance is materila which would influence judgement of insurer in fixing premium or determining risk
consumers duty of disclosure- consumer
CIDRA removes commmon law duties on consumers to disclose information that is material- replaced with duty to not misrepresent
duty to make fair representation
IA2015 changes obligation on parties during placement- insurers must make fair presentation of risk
measure of insured and insurers knowledge
insured knows only what is known to them or individuals responsible for insurance
what non individuals ought to know
knows only what is known to one or more individuals- senior management team
what insurers ought to know
insurer knows something if it known to one or more individuals who participate on risk
insurer ought to know what an agent knows
common knowledge
agents duty
non consumer- insurer can seek remedy for breach of fair presentation if agent does
CIDRA on intermediary
considered to be insurers agent if intermediary is AR of insurer and collects information
authority to bind cover
insurers duty of disclosure
duty of disclosure to insured- notify of entitlement to discount-
effects of FCA rules
insurers and intermediaries must provide sufficient info- demands and needs
disclosure post contract at inception
duty of disclosure starts when negotiation begins and ends when contract is formed- no further info need to be divulged unless it effects policy
disclosure for public liability
continuing requirement- insured must notify on extensions of activity for cover to apply
limitation of insurers rights to information
IA2015 non consumers are only under duty to fair presentation- if question asked but PH provides partial info and insurer doesn’t seek further details, insurer waived right to info
Limitation insurers rights p2
if insurers clarify material circumstances they are unable at later date to claim they require further info
features of material circumstance
courts test by loking at it from insurers POV
breach of duty for insurers
have right to avoid policy- if insurer chooses not to , they waive their right and treat policy as remaining in force
material circumstances
IA2015 ‘ circumstance or representation is material if it would affect judgement of insurer in determining to take risk’
material circumstances in non life proposals
material circumstances relate to physical or moral hazard
physical hazard- fire insurance: construction of building
theft- nature of stock
moral hazard- applies to non life insurance
insurance history, convictions etc
circumstances that dont need to be disclosed
information that lessens risk
info insurer knows
info insurer ought to know
presumed to know
info waived by insurer
spent convictions
changed under rehabilitation of offenders act 1974
life and similiar sentences for violence
never
more than 4 year conviction
7 years from end of sentence
one to 4 years conviction
4 years from end of sentence
one year or less conviction
1 year from end of sentence
driving endorsements convictions
5 years from date of conviction
driving disqualifications
end of disqualifications
fine conviction
1 year from conviction
for offenders under 18:
rehabilitation period halfved for less serious offences- time that conviction ‘live’ known as ‘buffer period’
conseqences of misrepresentation by consumers
non negligent misrepresentation considered unreasonable grounds for refusing to pay claim
deliberate- insurer can avoid policy
remedies available to insurers under CIDRA
consumer insurance (disclosure and representations 2012) CIDRA replaces duty on consumeres to volunteer info before taking insurance
remedies for insurers p2
misrepresentation by mistake- insurer may have to pay claim
if deliberate- insurer avoid contract and refuse claim and keep premiums
careless misrepresentation- increased premiums/ refuse to offer terms- what they would have done with correct information
consequences of breach of fair representation
non consumer contract unless insurer opted out of duty- insurer only be able to avoid policy if deliberate breach
remedies available to insurers under IA2015
remedy if insurer shows for breach of duty they wouldn’t have entered into contract/ done so on different terms
breach that triggers remedy- qualifying breach
original placement
deliberate breach insurers may avoid contract , refuse all claims and retain premium
if insurer would have entered into contract but charged higher premium then claims can be reduced proportionally
x=premium charged/ higher premium x 100
variations of contract
IA2015 breach deliberate insurer puts on notice that contract terminated from time variation made- premiums not returned
if insurer agreed on variation on different terms- contract treated as if those terms applied and higher premium
reduce propoertionally insurer pay x% of claim
x=premium charged/ p x 100
What is p for formula-
p: total premium insurer would have charged
original premium
breach of warranty marine insurance act 1906:
provides that warranty must be complied with whether material risk or not
breach of warranty marine p2
IA2015 breaches of warranty no longer terminate contract- insurer’s liability suspended from time of breach- liable for losses after breach remedied
IA2015 material circumstances if complied with could reduce risk of:
particular kind of losses
losses at particular location
losses at particular time
