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Insurance Law M05 > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

Insurance contract are contracts of utmost good faith under which insurance act?

A

Marine Insurance Act 1906

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2
Q

What does the utmost of good faith mean?

A

legally obliging all parties entering into a contact to act honestly, not mislead, or withhold critical information from one another

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3
Q

Which act abolished the duty of good faith for consumers and replaced It with the duty to take reasonable care to not misrepresent?

A

Consumer Insurance Act 2012

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4
Q

Which act replaced non consumer duty of good faith to the duty of fair presentation?

A

Insurance Act 2015

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5
Q

What is a misrepresentation?

A

A false statement of fact that induces the other party to enter into a contract.

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6
Q

What is a material fact defined as?

A

to what ‘prudent’ insurer would deem material rather than the opinion of a reasonable person.

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7
Q

When is it fraudulent misrepresentation?

A

When there is deliberate intention to mislead

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8
Q

When is it negligent misrepresentation?

A

When the statement is false out of not taking sufficient care to check it

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9
Q

Insurer remedy for misrepresentation in Consumer vs Non consumer

A

Consumer: 2012 act online negligent or fraudulant (not innocent)
non-consume: all
They can avoid the contract and keep the premium

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10
Q

Contracts for sale of goods are subject to the doctrine of “Caveat Emptor” what does it mean?

A

Let the buyer beware

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11
Q

What is an agents role in breaching fair presentation duty?

A

The insurer can seek remedy for the breach (Section 4 of the IA 2015 regulates this)

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12
Q

Example cases where misrepresentation has influenced the judgement of underwriters?

A

Container transport international Oceanus mutual uw- UW just has to prove a prudent uw would not have written

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13
Q

What is an example of inducement with misrepresentation?

A

If a lead underwriter was induced into a contract (misrepresentation material) the following markets that trusted the leader were also induced.

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14
Q

Example things which may be material facts?

A
  • special or unusual facts
  • ## concerns which led the insured to seek coverage
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14
Q

Physical vs moral hazard

A

Physical:
- adequate description of the insureds subject matter
- details of unusual features
(eg.. fire insurance (construct of building, nature of its use, fire detection and fire fighting equipment)
Moral:
- character and behaviour of the insured itself
-

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14
Q

Which act removed the legislation that outlawed discrimination?

A

Equality Act 2010

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14
Q

What is the strongest indication of a moral hazard?

A

Criminal activity

15
Q

What are protected characteristics?

A

Age
Disability
Gender reassignment
marriage and civil partnerships
pregnancy and maternity
race
religion
sex sexual orientation

15
Q

In what line of insurance is there no duty to disclose that a risk has previously refused by underwriters?

A

Marine insurance

15
Q

What matters do not need to be disclosed?

A

Matters of law
Factors which lessen the risk
facts known by the insurers
facts which the insurer ought to know
information that is waived by the insurers
Facts that outside the scope of specific questions
Facts which an inspection of the risk should have revealed
Facts which the proposer does not know
Convictions that are spent (Rehabilitation of Offenders act 1974

15
Q

What is the duration of the duty for fair presentation?

A

Under CIDRA 2012 and IA 2015 the duty of fair presentation is at the beginning of commencement of negotiations and ends when the contract is formed.

Duty is revived at renewal
or during changes in the contract

15
Q

FCA Duty has principle 12 to “act to deliver good outcomes for retail customers” what are the three rules for how firms deliver good outcomes for retail customers?

A

act in good faith towards retail customers
avoid causing foreseeable harm to retail customers
enable and support retail customers to pursue their financial objectives.

16
Q

What does the Star Sea case show about the duty of good faith during the claims process?

A

vessel went to sea unseaworthy - break duty of good faith. Owner did not disclose this had also happened two times before.

Claim process.

17
Q

What is the remedy for fraudulent claims?

A

IA 2015 codifies the remedy.

Insurer is not liable for the claim
Insurer may recover an sums paid
treat the contract as being terminated (claims prior to fraud are still valid)

18
Q

Do pre contractual duties (good faith and misrepresentation) apply to compulsory insurance?

A

yes
employers liability
Motor insurance - insurers cannot avoid a policy after the event has occurred, but they can for misrepresentation before

19
Q

In non-consumer business how can a breach of fair presentation take form?

A

Mis representation
Non-disclosure

It can be innocent, negligent or fraudulent

Remedy is proportionate to the seriousness of the breach.

20
Q

What is an insurers remedy when non-consumers breach fair presentation?

A

If they can prove:
1- They would not have entered into the contract
2- They would have entered on different terms

The remedies are:
1- avoid the contract, and if reckless, keep the premium
2- avoid the contract, and if accidental, return the premium.
3- For fraudulent misrepresentation, the insurer can claim damages (under Tort)
4- waive the right to withdraw and see the policy out (silence, can be construed as a waiver)

OR, proportionate remedies:
1-if they would have entered on different terms, the contract can be treated on those terms
2- if they would have charged higher, claims can be reduced proportionally (premium charged/ higher premium * 100)

21
Q

When you can contract out of the IA 2015 misrepresentation term?

A

In non-consumer insurance to the detriment of the Insured. BUT transparency must be met

22
Q

Where does the burden of truth lie for misrepresentation?

A

The insurer

23
Q

Does the duty on pre contractual information apply to the insured or the insurer?

A

The insured only. If the Insured breaches this is under the Marine Insurance Act 1906

24
Q

What two duties does the duty of fair presentation of the risk in non-consumer insurance impose on the insured?

A

A duty not to misrepresent material facts

A duty to disclose all material facts

25
Q

Distinguish between innocent and deliberate or reckless misrepresentation

A

If false, but not intentional - this is innocent

Deliberately saying something so the other is at a disadvantage is fraudulent

26
Q

What is meant when it is said ‘a contract of insurance is a contract based upon utmost good faith’

A

The duty to act honestly and in far dealing throughout contractual relationship

27
Q

How does the law define a material fact in non-consumer business insurance?

A

s.7(3)IA 2015
A circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take on the risk

28
Q

In non-consumer insurance, if the insured fails to disclose a material fact, and subsequently a loss occurs. Do the insurers have to prove there is a connection between non-disclosure and the loss to seek remedy?

A

No - they only need to establish that the non-disclose was material to the risk generally

29
Q

In non-consumer, what two cases might there be a continuing duty of disclosure under a general insurance policy?

A

Agreed change in contract

Change in risk or increase in risk clause in the wording

30
Q

In non consumer, can insurers avoid the policy for breach of duty of fair presentation of the risk in the case of compulsory employers liability insurance?

A

Yes

31
Q

In non consumer insurance can insurers reject a claim but allow the policy to stand when there is a breach of fair presentation?

A

Yes - IA 2015 proportional remedy
higher premium/ different terms

32
Q

In non-consumer how do the remedies for breach of the duty for fair presentation vary according to deliberate/reckless/innocent?

A

If deliberate or reckless, they can avoid the risk and keep the premium.

Otherwise avoid and return the premium

33
Q

Explain the circumstances under which an insurer can avoid the policy taken out by a consumer insured?

A

If a qualifying misrepresentation was deliberate of reckless.

Insurance Law M05 (10 decks)

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