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MO5 > Pre-contractual information Duty > Flashcards

Pre-contractual information Duty Flashcards

1
Q

What type of contract is an insurance contract?

A

A contract of utmost good faith

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2
Q

How has the pre contractual information duty changed? And what Act changed it?

A

Under MIA 1906 the duty of utmost good faith applied to the insured’s pre contractual information. A breach would lead to avoidance by the insurer.

This was changed the Consumer Insurance (disclosure & representations) Act 2012. Now consumers have to take reasonable care not to make a misrepresentation of the risk.

For non consumer insurance it was changed by the Insurance Act 2015 to a duty of fair presentation of the risk.

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3
Q

What two pre contractual duties do the parties to a contract have?

A

Not to misrepresent information about the risk

A duty to disclose all material facts relating to the contract

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4
Q

What is misrepresentation? And what does it do?

A

A false statement of fact

Induces the other party to contract

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5
Q

To affect the validity of an agreement, the misrepresented information must be what? (5)

A 
Be one of fact (not opinion)
Be made by a party to the contract
Be material 
Induce the contract
Cause some loss or disadvantage to the person who relied upon it
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6
Q

What are the three types of misrepresentation?

A

Fraudulent (deliberate)
Innocent
Negligent

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7
Q

What type of misrepresentation can an insurer look to remedy in non consumer insurance?

A

All types

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8
Q

What type of misrepresentation can an insurer look to remedy in consumer insurance?

A

Fraudulent & negligent only

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9
Q

What remedies are available for fraudulent misrepresentation? (2)

A

The onnocent party can claim damages (in the tort of deceit)

An insurer can keep any premium paid

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10
Q

The 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

How or why does the consumer rely on the positive duty of disclosure in non consumer insurance?

A

Unlike buying a car, insurance cannot be tested upfront
The proposer has to trust the insurer will pay claims
The proposer will not know details of the cover that they are to receive unless the insurer makes the info available to them

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12
Q

How or why does the insurer rely on the positive duty of disclosure in non consumer insurance?

A

The proposer is the only one who has full knoledge of the subject matter so the insurer relies on them disclosing the correct information

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13
Q

In non consumer insurance what duty does an insurance proposer have above and beyond a consumer proposer?

A

A positive duty of disclosure, which goes beyond a mere duty not to misrepresent
The IA 2015 that the proposer must seek out information about their business

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14
Q

When is an Agent considered to be the insurers Agent in consumer insurance?

A

If they are an AR of the insurer

If the Agent collects info from the consumer with express authority to do so from the insurer

Has the authority to bind the insurer to cover and does so

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15
Q

What is the ‘actual inducement’ test?

A

In order to avoid a contract for non disclosure in business insurance the insurer will have to prove that the undisclosed (or misrepresented) material fact is material to the contract (something the UW would have wanted to know)
AND
the UW was induced by the non disclosure or misrepresentation into entering the contract.

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16
Q

Is inducement a matter of fact?

A

Yes

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17
Q

Does materiality prove inducement?

A

No

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18
Q

The IA 2015 says an insurer may seek remedy for a breach of the duty of fair presentation of the risk, but only if the risk is a qualifying one. How does it qualify?

A

If the insurer would not have entered the contract

Or would have on different terms

19
Q

What is the statutory test for a remedy for breach of the duty of fair presentation in non consumer insurance?

A

Inducement

20
Q

How to prove inducement in cases of non disclosure?

A

What would the insurer have done if the true position had been disclosed to him prior to the conclusion of the contract?

21
Q

How to prove inducement in cases of misrepresentation?

A

What would the insurer have done if there was no misrepresentation?

22
Q

What is the ‘nexus’ question?

A

Need there be a connection between the missing facts and the loss?

23
Q

What is the answer to the nexus question?

A

No. The right to avoid a contract does not depend on a link between the non disclosure (or misrep) and the loss

24
Q

What must a proposer do if they are aware of something that could be material to the risk?

A

Must disclose it wheter asked or not

Proposer can ‘sign post’ rather than disclose. This should lead the UW to probe!

25
Q

What are the two categories of matters requiring disclosure to insurers?

A

Physical hazards

Moral hazards

26
Q

What information does not need to be disclosed to the insurer? (9)

A 
Matters of law
Factors that lessen the risk
Facts known by the insurers 
Facts the insurer ought to know (notorious facts, info in public domain, facts about a trade the UWs insure)
Info waived by insurer 
Facts outside the scope of specific Qs
Facts an inspection should have revealed
Facts the proposer does not know 
Convictions that are spent
27
Q

When does duty of disclosure begin and end on insurance contracts?

A

At the start of negotiations & when the contract is formed

Revived at renewal

28
Q

When is there a continuing duty of disclosure?

A

Changes in contract

Increase of risk

29
Q

Which Act sperated the duty of fair presentation of the risk from the duty of good faith in non consumer insurance?

A

The IA 2015

Duty of fair presentation is on the insured

30
Q

How long does the duty of good faith last?

A

Throughout the policy

31
Q

What duty does making a fraudulent claim breach?

A

Duty to act in good faith

32
Q

What remedy is available to insurers for a fraudulent claim?

A

The IA 2015 states it is forfeiture of the entire claim and option to terminate the contract from the time of the fraudulent act

33
Q

What kind of falsehood must exist in a fraudulent claim for the insurers to seek remedy? And who must prove?

A

Must be substantial
Wilfull
Material (had a decisive effect on insurers willingness to pay the claim)

The insurer must prove the fraud

34
Q

What happens in injury claims if dishonesty is found?

A

Entire claim rejected

Used to be paid for genuine part

35
Q

In non consumer insurance when can an insurer avoid the contract for a breach of the duty of fair presentation? Do prems need to be returned?

A

If the qualifying breach was deliberate or reckless

No

36
Q

In non consumer insurance what happens if a breach of duty of fair presentation was neither deliberate or reckless, what can insurer do?

A

Can avoid if would not have entered, must return premium
If would have entered, treat as if on alternative terms
If would have entered but at higher premium, reduce proportionally the amount of the claim
= prem charged/higher premium x 100

37
Q

In consumer insurance, what is a qualifying misrepresentation that allows the insurer to seek remedy?

A

PH failed to take reasonable care to avoid misrepresentation

Insurer wouldn’t have entered contract without misrepresentation

38
Q

In consumer insurance what makes a misrepresentation qualifying?

A

It must be deliberate, reckless or careless

39
Q

What remedies are available to insurers in consumer insurance for a deliberate or reckless misrepresentation?

A

Avoid the contract
Can keep premiums
(Unless this would be unfair to the consumer)

40
Q

What remedies are available to insurers in consumer insurance for a careless misrepresentation?

A

Can avoid if would not have entered
Must return premium
If on diff terms then treat as if is
If higher prem then reduce claim amount

41
Q

Which Act deals with a breach the duty of fair presentation by the insurer of the risk?

A

MIA 1906

42
Q

When were the Insurance Conduct of Business (ICOBS) rules last revised?

A

January 2008

43
Q

What is the difference between misrepresentation and a breach of the duty of fair presentation?

A

Misrepresentation is for consumers
Fair presentation is for non consumers
(Includes a positive duty of disclosure, a duty to seek out info about their business)

MO5 (11 decks)

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