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Insurance - What do you need to disclose to your insurer? |
In a recent insurance case that went before the High Court, a company appealed against its insurer's refusal to cover a claim, which occurred during a one month goodwill extension of the policy, because the insurer had not been invited to renew. |
The company's broker had negotiated the one-month extension to the policy when it was experiencing difficulty in placing the cover with other underwriters. |
The broker had not told the insurer that it would not be invited to be a renewal insurer after the extension period. |
When the company notified the insurer of a major claim during the extension period, the insurer declined to indemnify on the basis that it would have refused to grant an extension to the policy if it had been disclosed that it was not going to be invited to be a renewal insurer. |
According to the Insurance Contracts Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that the insured knows, or a reasonable person could be expected to know, to be relevant to the decision of the insurer whether to accept the risk. |
The company initially unsuccessfully argued that this was a commercial matter, and not relevant to the decision of the insurer whether to accept the risk. |
However, the High Court found that the information was not relevant and that the counterargument would allow the Act to be used as a "charter for avoidance of claims by insurers". |
Further complex debate is likely about the definitions of 'commercial' and 'accepting the risk'. Contact Paul Clark if you would like to discuss these matters. |
Paul Clark |
paul.clark@cmlawyers.com.au |
