Upmost Good Faith Flashcards
What type of contracts are insurance contracts?
Fiduciary
What is a fiduciary contract
A contract with a promise
Uberrimae Fidei
Utmost good faith
How can a contract be avoided?
If either party is involved in fraud, misrepresentation or non-disclosure
When is a contract voidable?
At the discretion of the agreed party
What does the MIA say about disclosures?
- All material facts that influence the reasonable judgment of an insurance premium must be disclosed.
- Failure to disclose such information may avoid the contract
What are the 2 test of materiality?
- Reasonable insured - What would a reasonable person reveal
- Reasonable insurer - What would a reasonable underwriter want to be identified?
When must you disclose new information once the policy starts?
Renewal
What president states that if there is a problem with upmost good faith the policy is void
Banque financier v Westgate
What is the common law basis for utmost good faith
Carter v Boehm
What was utmost good faith defined as in carter v Bohem,
“…contract of speculation. The special facts…lie most commonly in the knowledge of the insured only; the underwriter trusts to his representation”
When must you disclose up until?
Inception of the policy
Do you have to disclose after the policy is incepted?
Not unless required to by a clause
Objective Materiality test
Prove that the insurer would have acted differently if they had known this
Subjective materiality
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
What are the 2 types of material facts?
Physical hazards and moral hazard
PhYSICAL HAZARD
Physically impact the risk (Hous has no alarm system)
Moral Hazard
Behaviour indicators that increase the person’s risk profile (eg bankruptcy)
Where did the 2 types of material facts come from?
Chariot inns
If an insurer asks is the fact material, what case does this come from?
Yes, Glicksman v. Lancashire
Who is the burden of proof on where there is a dispute of disclosure?
The one arguing for disclosure
What must a moral hazard material fact link to
Risk profile
What facts don’t have to be disclosed
- 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)
What is the consequence of an innocent misrepresentation of a material fact if the insurer can prove that it wouldn’t have given insurance?
the policy is void and the premiums are repaid