Chapter 6- Pre Contractual Information Duty Flashcards
All insurance contracts are contracts or what
Utmost good faith
What does utmost good faith mean
The insurer and the insured have a duty to deal honestly and openly during their contractual relationship
What is a misrepresentation
A full statement of fact that induces the other party to enter into the contract
Under misrepresentation to affect the validity of the agreement the false statement must be
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
What is a material fact
What a prudent underwriter would be material rather than the opinion of a reasonable person
What is a fraudulent misrepresentation
Where a person makes a false statement with a deliberate intention of misleading the other and putting them at a disadvantage
What is an innocent misrepresentation
Where the statement is false but there is no intention to mislead the other party
What is a negligent misrepresentation
Where the statement is false because a person making it did not take sufficient care to check that it was correct
In consumer insurance when can the insurer seek remedy for misrepresentation
When it is negligent or fraudulent because it imposes a duty to take reasonable care not to miss represent material facts
In business insurance when can insurers seek remedy on the grounds of misrepresentation
When it has been fraudulent negligent or completely innocent
When the misrepresentation is fraudulent what can the innocent party do
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
In business insurance what does it mean by a positive duty of disclosure
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
Insurance act sets out what new provision under the duty of disclosure
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
In business insurance when can agency remedy the breach of the fair presentation
When the insureds agent breaches of duty
In common law what does it mean by a person is responsible for the acts of the agent
If the agent at carelessly or recklessly by making a misrepresentation it is treated as if it been made by the principal
Under 2012 act and intermediary is considered to be the insurers agent if the intermediary has
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
Under business insurance what is essential to disclose
All facts or circumstances that are material to the risk
What happens if the issue of non disclosure arises when there is a dispute about a claim under a policy
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
Under the insurance act what guidance has been provided to determine whether a fact is material or not
Special/ unusual facts relating to risk
Any particular concerns which led to the insured to seek insurance cover for the risk
At common law matters requiring disclosure to be divided into two hazards
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
What are the two facts in a category for physical hazard
An adequate description of the subject matter of insurance
Details of any unusual features of a subject matter
What are the example of
And fore insurance the construction of the building, the nature of its use, fire detection and fire fighting equipment
Physical hazard
What is it an example of life insurance: age, previous medical history
Physical hazard
What is the strongest indication of potential moral hazard
A proposal with a history of criminal activity
What are examples of moral hazard
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
What matters do not need to be disclosed
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
Under common-law rule when does a duty disclosure begin and end
At the commencement of negotiations on insurance contract and ends when the contract is formed
What is the continuing duty of disclosure
A duty to disclose new material facts affecting the risk during the currency of the contract
What two cases must there be continuing duty of disclosure
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
What happens under continuing duty of disclosure for increase of risk clauses
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
What is the remedy for fraudulent claims
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
Does the duty of pre contractual information duties apply to compulsory insurances
Yes
In the case of employers liability what happens if the proposer is guilty or misrepresentation or non disclosure
The insurers may avoid the policy in its entirety
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
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
ICOBS rules apply to all insurers regulated by who
The FCA and the PRA
