Insurance contract law Essay Example

assured’s managing director was an ex convict.The High Court held such a conviction was relevant and should have been disclosed and accordingly the insured’s claim was dismissed. The Supreme Court on appeal, made an extensive review of the principles relating to the duty of disclosure and more specifically in respect of cases with incomplete or missing proposal forms.

With the decision in Carter v Boehm , waiver has become a possibility, but in general courts have been unwilling to accept the occurrence of such waivers.Accordingly in Roberts v Avon , it was held that the insurer’s failure to seek clarification for an unanswered question on the proposal form by the assured and the insurers' failure to seek further details did not amount to a waiver of the duty of disclosure. In Woolcott v Sun Alliance , a person intending to purchase a house did not reveal in the mortgage application that he had been incarcerated, consequently, it was held that non obtention of a proposal form did not prevent the insurers from relying on non-disclosure.Nevertheless, courts have at times disregarded precedent and viewed this duty of disclosure pragmatically; accordingly in Roselodge v Castle , the evidence of underwriters was rejected as it was deemed to be unreliable. The situation obtaining in the English law is different and it would have been immensely helpful if the House of Lords had accorded similar treatment to English law, however, such a result seems impossible without legislation.

? Insurers’ Duty of Good Faith in English LawA number of anomalies in the law in respect of disclosure on the placing of insurance contracts were emphasized in Drake Insurance plc v

Provident Insurance . The underwriting issues focused on in this case are discussed in the sequel. The peculiarities in the facts of the case were, first, that due to the rigidity of the underwriting process, the difference that complete disclosure would have made to the insurer could be ascertained. Second, there was an omission to inform the insurer about two matters, one adverse to and the other favourable to the risk.

The facts of the case were that Mrs. Kaur was involved in an accident while driving her husband's car. Her husband, Dr Singh, had a motor policy with Provident which covered her and she also had a policy with Drake. Dr Singh did not disclose to Provident that he had a speeding conviction and Provident utilized this non disclosure to avoid honouring the policy. Mrs.

Kaur's policy with Drake contained a clause limiting Drake's liability, in instances of double insurance, to one-half of the loss.Drake gave Mrs. Kaur full indemnity, thereby indicating to Provident that it did not accept Provident’s avoidance of liability. Subsequently, Drake sued Provident for a contribution in equity as there had been double insurance. Provident replied that, first, it was not liable as the speeding offence had not been disclosed and secondly, that Drake was liable for one-half of the loss and hence, the additional amount paid by it was voluntary.

The Court of Appeal decided unanimously that Drake had not acted as a volunteer and that Provident, due to its conduct after notification of the claim, had waived any breach of the duty of disclosure by Dr Singh. The importance of this case lies in the observations made in the judgments

in respect of the duty of good faith. The Court of Appeal discussed three aspects of the duty of good faith and these are, whether, (a) the particular facts were material; and (b) whether failure to disclose facts persuaded the insurer to underwrite the risk.The court also held that if Provident had ignored the fact that the accident was a “no fault” accident, evasion of the contract would have been in bad faith. Although Provident had stated that it would avoid the contract, it had all the same accepted that an insurance contract existed in respect of the replacement car and as Provident was at that time unaware of the speeding conviction it was therefore bound by the original policy and was accordingly liable to make a contribution in equity to Drake of 50% of Mrs.

Kaur’s claim.