Page 73 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes (c) In Marine Insurance: Type of packing, mode of carriage, name of carrier, nature of goods,
the route.

(d) In Personal Accident Insurance: Age, height, weight, occupation, previous medical history
if it is likely to increase the choice of an accident, Bad habits such as drinking etc.

(e) Burglary Insurance: Nature of stock, value of stock, type of security precautions taken.
As mentioned, this is not an exhaustive list but only a few examples.
Details of previous losses are a material fact which is relevant to all policies.
Following are the facts which need not be disclosed:

1. Facts of Law: Everyone is deemed to know the law. Overloading of goods carrying
vehicles is legally banned. The transporter cannot take excuse that he was not aware of this
provision.
2. Facts which lessen the Risk: The existence of a good fire fighting system in the building.

3. Facts of Common Knowledge: The insurer is expected to know the areas of strife and areas
susceptible to riots and of the process followed in a particular trade or Industry.
4. Facts which could be reasonably discovered: For example, the previous history of claims
which the Insurer is supposed to have in his record.
5. Facts which the insurers’ representative fails to notice: In burglary and fire Insurance it is
often the practice of Insurance companies to depute surveyors to inspect the premises and
in case the surveyor fails to notice hazardous features and provided the details are not
withheld by the Insured or concealed by him them the Insured cannot be penalized.

6. Facts covered by policy condition: Warranties applied to Insurance policies i.e. there is a
warranty that a watchman be deployed during night hours then this circumstance need
not be disclosed.

Duration of Duty of Disclosure

The duty of disclosure remains in force throughout the entire negotiation stage and till the
contract is finalized. Once the contract is finalized, then the contract is subject to ordinary simple
good faith. However when an alteration is to be made in an existing contract then this duty of
full disclosure recovers in respect of the proposed alteration. The duty of disclosure also revives
at the time of renewal of contract since legally renewal is regarded as a fresh contract.

Example: A landlord at the time of proposal has disclosed that the building is rented out
and is being used as an office. If during the continuation of the policy the tenants vacate the
building and the landlord subsequently rents it out to a person using it as a godown then he is
required to disclose this fact to the Insurer as this is a change in material facts and effects the
risks.

Notes Please note that in long term Insurance Business, the Insurer is obliged to accept the
renewal premium if the Insured wishes to continue the contract and there is no duty of
disclosure operating at the time of renewal. Normally, Insurer arranges inspection on
each renewal.

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