Misrepresentation, Non-Disclosure and Breach ... - Law Commission

4.142 The proposer should take care to give full and accurate answers to those
questions. However there may be cases in which the proposer reasonably thinks
that the question does not require information that the insurer has at its fingertips.
A policyholder who is renewing motor insurance and is asked whether
anything has changed since the last renewal may reasonably think it need not
mention the accident that it discussed with the very same insurer two weeks
earlier. The person who is told that “we will contact your doctor” may reasonably
think they can leave the questions about previous illnesses blank. The
householder who is asked “are there any other factors affecting the risk that we
might want to know about” might reasonably think that they do not have to
provide crime statistics for the area they live in. It is a question of
reasonableness. Was it reasonable in all the circumstances for the consumer to
give the answer that they did? If so, the insurer should not be able to reject the
claim on this ground.
4.143 We provisionally propose that in considering whether an insured acted with
insufficient care in failing to give information, the judge or ombudsman
should consider how far it was reasonable for the insured to assume that
the insurer would obtain that information for itself.
4.144 In particular, if the insurer indicated that it may obtain information from a
third party (by for example asking the insured for consent to obtain it) it
should not be allowed to rely on an honest misrepresentation if the insured
reasonably thought that the insurer would obtain the relevant information
from the third party before accepting the proposal.
A CONTINUING DUTY OF DISCLOSURE
4.145 Our comparative work has thrown up a question which may become more
important if innocent misrepresentation is no longer a ground for avoidance. If
later the insured discovers that they have made a misrepresentation, should they
have a duty to inform the insurer?
4.146 There are two situations which must be distinguished. The first is where the
insured learns that they have made a misrepresentation before their proposal has
been accepted, the second where that happens only afterwards.
Further disclosure before the proposal has been accepted
4.147 The current law of misrepresentation requires that a party who has stated a fact
that at the time was true, but which ceases to be true before the contract has
been made, must correct the statement. 76 Thus if a proposer states that they are
in good health, as they honestly believe they are, but before the proposal has
been accepted they are told that they are suffering from cancer, they must inform
the insurer.
4.148 We think this should remain the law, provided that the consumer acted
unreasonably (or dishonestly) in failing to tell the insurer. We agree with the
approach to this question taken by the FOS, which is that the insurer should
normally warn consumer insureds of this duty.
76 th
For example, With v O’Flanagan [1936] Ch 575. See Chitty on Contracts (29 ed 2004),
paras 6-017 and 6-018.
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