Chapter 6- Pre Contractual Information Duty

Question 1

All insurance contracts are contracts or what

Answer 1

Utmost good faith

Question 2

What does utmost good faith mean

Answer 2

The insurer and the insured have a duty to deal honestly and openly during their contractual relationship

Question 3

What is a misrepresentation

Answer 3

A full statement of fact that induces the other party to enter into the contract

Question 4

Under misrepresentation to affect the validity of the agreement the false statement must be

Answer 4

Be one of fact
Be made by a party to the contract
Be material i.e. something which would influence a reasonable person
Induce a contract i.e. something that the other party relied upon
Cause some loss or disadvantage to the person who relied upon it

Question 5

What is a material fact

Answer 5

What a prudent underwriter would be material rather than the opinion of a reasonable person

Question 6

What is a fraudulent misrepresentation

Answer 6

Where a person makes a false statement with a deliberate intention of misleading the other and putting them at a disadvantage

Question 7

What is an innocent misrepresentation

Answer 7

Where the statement is false but there is no intention to mislead the other party

Question 8

What is a negligent misrepresentation

Answer 8

Where the statement is false because a person making it did not take sufficient care to check that it was correct

Question 9

In consumer insurance when can the insurer seek remedy for misrepresentation

Answer 9

When it is negligent or fraudulent because it imposes a duty to take reasonable care not to miss represent material facts

Question 10

In business insurance when can insurers seek remedy on the grounds of misrepresentation

Answer 10

When it has been fraudulent negligent or completely innocent

Question 11

When the misrepresentation is fraudulent what can the innocent party do

Answer 11

They may have the right to claim damages in tort of deceit and insurer which has been misled might keep any premium has been paid

Question 12

In business insurance what does it mean by a positive duty of disclosure

Answer 12

Goes beyond and may duty not to miss represent matters which are in fact disclosed. As the insured is likely to know more about the subject matter that the insurer

Question 13

Insurance act sets out what new provision under the duty of disclosure

Answer 13

That the insured gives the insurers sufficient information to put a prudent underwriter on notice that it needs to make further enquiries for the purpose of revealing those material circumstances

Question 14

In business insurance when can agency remedy the breach of the fair presentation

Answer 14

When the insureds agent breaches of duty

Question 15

In common law what does it mean by a person is responsible for the acts of the agent

Answer 15

If the agent at carelessly or recklessly by making a misrepresentation it is treated as if it been made by the principal

Question 16

Under 2012 act and intermediary is considered to be the insurers agent if the intermediary has

Answer 16

Appointed representative of insurer
Collect information from the consumer with express authority from the insurer to do so
Has authority to bind the insurer to cover and does so

Question 17

Under business insurance what is essential to disclose

Answer 17

All facts or circumstances that are material to the risk

Question 18

What happens if the issue of non disclosure arises when there is a dispute about a claim under a policy

Answer 18

Even if it is no connection to the claim did you take nondisclosure insurance would have the right to seek remedy for nondisclosure This is because it is relevant to the particular fact to the risk as a whole not relevant to circumstances of any particular claim

Question 19

Under the insurance act what guidance has been provided to determine whether a fact is material or not

Answer 19

Special/ unusual facts relating to risk

Any particular concerns which led to the insured to seek insurance cover for the risk

Question 20

At common law matters requiring disclosure to be divided into two hazards

Answer 20

Physical hazards that is it like the physical characteristics of the risk

Moral hazards those that relate to the character and behaviour of the insured

Question 21

What are the two facts in a category for physical hazard

Answer 21

An adequate description of the subject matter of insurance

Details of any unusual features of a subject matter

Question 22

What are the example of

And fore insurance the construction of the building, the nature of its use, fire detection and fire fighting equipment

Answer 22

Physical hazard

Question 23

What is it an example of life insurance: age, previous medical history

Answer 23

Physical hazard

Question 24

What is the strongest indication of potential moral hazard

Answer 24

A proposal with a history of criminal activity

Question 25

What are examples of moral hazard

Answer 25

Identity of the insured
Criminal acts
Previous losses and claims under other policies
Any other adverse insurance history
Details of other policies currently in force

Question 26

What matters do not need to be disclosed

Answer 26

Matters of law
Factors which less than the risk
Facts known by the insurers
Facts which the insurance ought to know
Information that is waived by the insurers
Facts that are outside the scope of the specific questions
Facts which inspection of the risk should be revealed
Facts which the proposal does not know
Convictions are spent

Question 27

Under common-law rule when does a duty disclosure begin and end

Answer 27

At the commencement of negotiations on insurance contract and ends when the contract is formed

Question 28

What is the continuing duty of disclosure

Answer 28

A duty to disclose new material facts affecting the risk during the currency of the contract

Question 29

What two cases must there be continuing duty of disclosure

Answer 29

Changes in the contract - where the insured had a duty to notify material facts which relate to the change

Increase in risk clauses- where there has been an increase in risk

Question 30

What happens under continuing duty of disclosure for increase of risk clauses

Answer 30

If there is an Alteration in the property insured which increases the risk of damage. Cover on the property dears unless the alteration is admitted (notified and accepted) by insurers. They are only in breach of condition if the change is permanent

Question 31

What is the remedy for fraudulent claims

Answer 31

The insurer is not liable to pay for the claim if it is fraudulent. Moreover the insurer may recover from the insured any aims paid by the insurer in respect of the claim

Question 32

Does the duty of pre contractual information duties apply to compulsory insurances

Answer 32

Yes

Question 33

In the case of employers liability what happens if the proposer is guilty or misrepresentation or non disclosure

Answer 33

The insurers may avoid the policy in its entirety

Question 34

Under ICOBS the insurer must not unreasonably reject a claim (including by termination or avoiding a policy) other than when there is evidence of fraud. What does it mean by unreasonably rejecting a claim

Answer 34

A rejection of a consumers claim will be unreasonable if it’s for

Non disclosure where the policy couldn’t reasonably be expected to have disclosed the material fact

Non negligent misrepresentation of a material fact

Question 35

ICOBS rules apply to all insurers regulated by who

Answer 35

The FCA and the PRA