Upmost Good Faith

Question 1

What type of contracts are insurance contracts?

Answer 1

Fiduciary

Question 2

What is a fiduciary contract

Answer 2

A contract with a promise

Question 3

Uberrimae Fidei

Answer 3

Utmost good faith

Question 4

How can a contract be avoided?

Answer 4

If either party is involved in fraud, misrepresentation or non-disclosure

Question 5

When is a contract voidable?

Answer 5

At the discretion of the agreed party

Question 6

What does the MIA say about disclosures?

Answer 6

• All material facts that influence the reasonable judgment of an insurance premium must be disclosed.
• Failure to disclose such information may avoid the contract

Question 7

What are the 2 test of materiality?

Answer 7

• Reasonable insured - What would a reasonable person reveal

- Reasonable insurer - What would a reasonable underwriter want to be identified?

Question 8

When must you disclose new information once the policy starts?

Answer 8

Renewal

Question 9

What president states that if there is a problem with upmost good faith the policy is void

Answer 9

Banque financier v Westgate

Question 10

What is the common law basis for utmost good faith

Answer 10

Carter v Boehm

Question 11

What was utmost good faith defined as in carter v Bohem,

Answer 11

“…contract of speculation. The special facts…lie most commonly in the knowledge of the insured only; the underwriter trusts to his representation”

Question 12

When must you disclose up until?

Answer 12

Inception of the policy

Question 13

Do you have to disclose after the policy is incepted?

Answer 13

Not unless required to by a clause

Question 14

Objective Materiality test

Answer 14

Prove that the insurer would have acted differently if they had known this

Question 15

Subjective materiality

Answer 15

For the fact to be material, it must be relevant to the decision making, the insurer has to prove that they would have acted differently

Question 16

What are the 2 types of material facts?

Answer 16

Physical hazards and moral hazard

Question 17

PhYSICAL HAZARD

Answer 17

Physically impact the risk (Hous has no alarm system)

Question 18

Moral Hazard

Answer 18

Behaviour indicators that increase the person’s risk profile (eg bankruptcy)

Question 19

Where did the 2 types of material facts come from?

Answer 19

Chariot inns

Question 20

If an insurer asks is the fact material, what case does this come from?

Answer 20

Yes, Glicksman v. Lancashire

Question 21

Who is the burden of proof on where there is a dispute of disclosure?

Answer 21

The one arguing for disclosure

Question 22

What must a moral hazard material fact link to

Answer 22

Risk profile

Question 23

What facts don’t have to be disclosed

Answer 23

• Facts that reduce the risk
• Common knowledge (Carter v Boehm)
• Facts that have been waived by the insurer
• If what is being asked is over the top (superfluous)

Question 24

What is the consequence of an innocent misrepresentation of a material fact if the insurer can prove that it wouldn’t have given insurance?

Answer 24

the policy is void and the premiums are repaid

Question 25

What is the consequence of an innocent misrepresentation of a material fact if that fact would have influenced premiums

Answer 25

You are proportionally insured

Question 26

What is the consequence of an innocent misrepresentation of a material fact lead to a condition being left out?

Answer 26

Then that condition is applied retrospectively.

Question 27

What does avoidable mean

Answer 27

The contract is void from the start on the behalf of the aggrieved party. As if the contract had never happened

Question 28

Ab Initio

Answer 28

Contract is void from the start as if it never happened