Under current law, a business policyholder has a duty to disclose every material fact known about the risk to be insured. Failure to do so may lead the insurer to refuse claims. In some cases, not every material fact is known. Information may not be deliberately withheld. The proposal is that insurers ask the relevant questions to help ensure that every material fact is disclosed. Fairer consequences of breaches where the policyholder was not deliberately misleading are also being proposed.
An insurance
warranty is an important term. Unless the
insured exactly complies with the conditions of a policy, the insurer may
refuse claims. It makes no difference if
the breach is trivial, not material to the risk or if the policyholder remedies
the breach prior to the loss incurred.
For example if a
policy requires stock to be stored 6 inches off the floor to minimise flood
damage and the insured does not comply, the insurer may not pay a claim
following a burglary.
Proposals include that the insurer’s liability is suspended only for the duration of the breach and were applicable be relevant to the particular risk only. This would be subject to freedom of contract for business insurance.
Get in touch, talk through your insurance needs, and make sure you and your business are covered by the right policies.