Duty of disclosure

Question 1

What is the duty to disclose?

Answer 1

Duty on the insured to disclose all material facts of which they have actual/constructive knowledge.

Question 2

What principle underpins the duty of disclosure?

Answer 2

Utmost good faith.

Question 3

What does breach of duty of disclosure result in?

Answer 3

Justifies company’s repudiation.

Question 4

What is the test for materiality?

Answer 4

Whether the undisclosed information is reasonably relevant to the risk or the assessment of the premium.

Question 5

What are the remedies available to the insurer when the duty of disclosure has been breached?

Answer 5

1. Repudiation
2. Refuse to honour the claim and adjust the premiums for the undisclosed risk now known.

Question 6

What facts are considered material?

Answer 6

1. Facts that would indicate the subject matter of the insurance is exposed to more than the ordinary degree of danger
2. Facts that would show that the liability to the insurer would be greater than would normally be the case
3. Facts that suggest that the insured is likely through fraud or negligence to cause risk to materialise
4. Financial status of the insured
5. Previous insurance record
6. Suspicions of the insured

Question 7

What is actual knowledge?

Answer 7

Personal knowledge.

Question 8

When are legal persons deemed to have actual knowledge?

Answer 8

if the directors have actual knowledge.

Question 9

What is constructive knowledge?

Answer 9

Imputed/presumed knowledge, deemed by law to have existed without proof as a fact.

Question 10

When is a legal person deemed to have constructive knowledge?

Answer 10

When they ought to have known in the ordinary course of business and would have ascertained it, had they made inquiries as a reasonable, prudent business is require to make and if employees acquired knowledge of it in the course of their employment and were under a duty to communicate the knowledge to the insured.

Question 11

What factors are not necessary to disclose?

Answer 11

1. Any circumstance that reduce risk
2. Any circumstances that are known or presumed to be known by the insurer
3. Circumstances not considered material
4. Any circumstance that is not necessary to disclose as a result of an express/implied warranty
5. Any circumstance regarding which the insurer has waived its right to disclose.

Question 12

When should the disclosure be made?

Answer 12

1. The period between the proposal being offered until acceptance
2. In indemnity insurance, on every renewal date

Question 13

What is the effect of non-disclosure?

Answer 13

1. Voidable
2. Indication of intention abide by the disclosure despite the non-disclosure results in loss of right to rescind

Question 14

What are the requirements for voidability?

Answer 14

1. Non-disclosure was material
2. Was in the knowledge of the insured
3. Was not communicated to the insurer

Question 15

How can the onus be reversed?

Answer 15

Warranty

Question 16

What is the purpose of the duty of disclosure?

Answer 16

1. Enable the insurer to determine whether or not to undertake the risk
2. Assist the insurer in deciding what premium is to be paid.

Question 17

What does the duty of disclosure include?

Answer 17

1. Answering all questions on the proposal form correctly
2. Disclosing all material facts

Question 18

Which case establishes that the duty of disclosure is not limited to answering the specific questions on the form?

Answer 18

Fine v General Accident

Question 19

Which case formulated the test for materiality irt duty of disclosure?

Answer 19

Oudtshoorn.

Question 20

What did the court hold in Pickering v Standard General Insurance?

Answer 20

Duty to disclose extends to suspicions, opinions or facts.

Question 21

What are the facts of Fine?

Answer 21

Fine had previously had insurance but omitted to disclose such fact.

Question 22

What are the legal principles in Fine’s case?

Answer 22

1. Insurance policies are contract of utmost good faith and therefore there is a greater duty cast upon an insured regarding disclosure of facts known to him than in ordinary contracts
2. Insurer is entitled to be put in possession of all material information possessed by the insured.

Question 23

What is the test for materiality established by Oudtshoorn?

Answer 23

Test of a reasonable proponent.

Question 24

What are the facts of Da Costa?

Answer 24

Da Costa had a car insurance and got into accident but the damaged car was not listed.

Question 25

What are the facts of King’s Prop?

Answer 25

King’s Prop premises burnt down and failed to disclose that the premises were occupied by a tenant which manufactured truck and trailer bodies using highly flammable materials.

Question 26

What are the legal principles in King’s Prop?

Answer 26

1. Failure to disclose entitles insurer to reject a claim under the policy and to treat it as void.
2. Test for misrepresentation and non-disclosure is an objective one
3. Test for inducement is subjective.

Question 27

What is the obiter in King’s Prop?

Answer 27

Legislation has been enacted to preclude insurers from treating misrepresentations that are trivial and non-disclosures that are trivial as grounds for avoiding insurance contracts and rejecting claims.

Question 28

What are the facts of Visser?

Answer 28

Deceased had a life insurance in which they made Visser th beneficiary, turns out the deceased had misrepresented her pre-existing medical condition, which materially affected the assessment of the risk under the policy.

Question 29

Why did the insurance company in Visser lose the appeal?

Answer 29

Did not lead evidence to prove the truthfulness and accuracy of the contents of the hospital records.

Question 30

What is the test for misrepresentation and non-disclosure established in King’s Prop?

Answer 30

1. Test of materiality
2. Onus on insurer to prove materiality
3. Prove causal link between non-disclosure/misrepresentation and conclusion of contract