Consequences of non-disclosure Flashcards
What is the general rule if an insured breaches duty of disclosure?
The insurer can avoid the contract entirely ab initio. If breach is fraudulent the insurer can keep the premium and sue for damages.
An insurer can refuse payment of a particular claim but leave the policy open in for for the future - true or false?
False - insurers can’t refuse certain claims but then keep the policy open in the future, they have the right to ignore the breach but must pay the claim and leave the policy in force.
Impact of FCA rules on non-disclosure;
ICOBS - Insurance conduct of business sourcebook contains rules, main requirement is that insurers must not unreasonably reject a claim.
Impact of FOS’s approach on non disclosure;
FOS will look at whether the Q was asked clearly and answered correctly, whether the insurer was induced and the kind of non-disclosure.
Insurers will generally take a fairer approach than common law (which states insurers can avoid the policy and refuse payment of claim) instead charging an additional premium in hindsight.
Misrepresentation - facts stated wrongly or exaggrerated
Where a customer deliberately or recklessly answers wrongly the insurer is entitled to avoid the policy.
Misrepresentation must concern facts not opinions - true or false?
True - only facts.
Which act sets out remedies to deal with misrepresentation in consumer contracts?
CIDRA
CIDRA remedies for dealing with misrepresentation;
Misrepresentation was a reasonable mistake - insurer must still pay claim
Misrepresentation was careless - insurer to apply compensatory remedy (i.e. apply an exclusion or increasing premium)
Misrepresentation was deliberate/reckless - insurer can avoid contract and not pay claim, also able to keep premium
What is a qualifying misrepresentation?
Where a misrepresentation is deliberate, careless or reckless.
IA sets out remedies for breaching fair presentation in non-consumer contracts;
An insurer has a remedy for a breach of duty of fair presentation if the insurer can demonstrate that;
- it wouldn’t have entered into the contract at all
- it would have entered the contract but on different terms
According to the IA what is a qualifying breach?
A breach that triggers a remedy - there are 2 categories of breach (deliberate/reckless OR neither deliberate or reckless)
According to the IA, if a breach of fair presentation was deliberate or reckless what rights does the insurer have?
Insurer can avoid the contract, refuse all claims and keep the premium.
For all other breaches, that weren’t reckless or deliberate, the remedy depends on the impact;
- If the insurer wouldn’t have entered into the contract at all they can avoid it and refuse claims, but, they MUST return the premium
- If the insurer would have still entered the contract, but on different terms, then the contract will be treated as if those terms applied unless the insurer chooses not to apply them
- If the insurer would have entered the contract but charged a higher premium then claims can be reduced proportionately
Which act states that a warranty must be exactly complied with whether material to the risk or not?
Marine Insurance Act
Immediate termination of a contract was widely seen as harsh, so which act amended this?
IA - under IA a breach of warranty no longer automatically terminated an insurance contract, instead, the insurer will not be responsible for any losses during the time of suspension (when breach occured) but will be responsible for losses occuring after the breach has been remedied.
