Group Colleges Australia
1.What is the duty of disclosure?
Ans:The insurance company needs information from the consumers to decide whether make a contract or renew a contract with consumers. And also the insurance company wants to decide the price of the contract and terms and conditions of the contract on the basis of the information which is provided by the consumers. The law enforces a duty of disclosure on consumers when they are looking to take a new insurance cover or wants to renew the existing insurance cover. Insurance company may be able to reject to pay a claim or a part of claim if the policyholder has not compiled with their duty of disclosure. However, the insurance company must establish the following: The insurance company noticeably inform the policyholder in writing about the duty of disclosure and the consequences of non-disclosure. The policyholder knew that the insurance company required information about certain matters. The policyholder fail to provide information or present the information in wrong way.\ The above mentioned elements discussed in detail as follow:
Insurance Company`s Responsibility:
According to the Insurance Contracts Act under the section 22, before a contract of insurance is entered into, the insurance company must inform the consumer, in writing, of the general nature and effect of the duty of the disclosure, including the consequences of non-disclosure. An insurance company who has no compiled with the section 22 of the Insurance Contracts Act may not exercise any rights in respect to non-disclosure unless the non-disclosure was fraudulent [S22 (3)]. Consumer`s Responsibility:
According to the Insurance Contracts Act under the section 21,a consumer is required to disclose all matters known to them that they know to be relevant to the insurer`s decision to accept the risk, or that a responsible person in the circumstances could be expected to know is relevant to the insurer. Even if the proposal is a joint policy, the policy of disclosure applies on each of the member of joint policy. If one of the member of joint policy fraudulently completes his part of the proposal form, the insurer can void the contract under S 28(a) of Insurance Contact. This can be explain by a very famous case Advance (NSW) insurance Agencies Pty LTD v Matthews(1989) 166 CLR 606. Mr. and Mrs. Matthews took out household contents insurance policy after their house has been thieved. They took a proposal form from the insurer and completed the form at home. On the proposal form they answered no to the following question: 1. Had any claim been rejected previously?
2. Were there any other facts relating to the risks which are going to be insured, or about the person makes the application, which should be disclosed to the insurance company to allow them to make a true assessment of the application prior to acceptance? 3. Had they ever had a loss which involving a claim of more than one $1000?
After two weeks the policy had been issued, Matthew’s premises were damaged by the fire, and some goods were stolen from their premises. When the claim was made on their insurance policy, the insurance company investigates and revealed that: Mr. Matthews had been a partner in a business that suffered a loss cause by fire in 1980 and that claim had been rejected by insurance company. This had led to litigation, which was eventually settled. When the Matthews had been burgled, the loss of the contents had cost them less than $1000 but the replacement had been cost more than $1000. As a result, Advance Insurance rejected Mr. Matthews claim on the basis of non-disclosure and misrepresentation. Issue:
Does failure by one co-insured to disclose a material fact mean that the innocent co-insured loses their rights under an insurance policy?...
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