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

C.27 The FOS has explained that in these circumstances it does not expect proposers
to recall what questions they have been asked. Insurers must either re-ask the
questions or send a copy of the application form. This would not extend,
however, to changes that affect the fundamental nature of the contract, such as a
terminal diagnosis or the destruction of the insured property before the cover
started.
Non-disclosure at renewal
C.28 This form of non-disclosure is most likely to arise in contents insurance (which
concerned four of the six cases in our sample). It is common for a renewal notice
to ask about changes in circumstances. In Case 20, for example, the renewal
notice stated:
We would remind you of the importance of informing us of any
material changes that may have taken place since the inception of
your insurance policy. Should you be in any doubt, please contact us
immediately.
C.29 Here the insurer attempted to avoid the policy on the grounds that the
policyholder had not mentioned that, since inception, a county court judgment
had been registered against them. The ombudsman overturned the insurer’s
decision. The form had failed to clarify what the insurer needed to know, and few
policyholders would realise that a county court judgment was material to the
insurer.
C.30 In Case 124, the complainants had renewed their pet insurance by direct debit.
They received a renewal notice that mentioned the general duty of disclosure on
page 4, but the duty was not emphasised in any way. The ombudsman held that
if the insurer had wanted an update on the pet’s health on renewal they should
have asked specific questions.
C.31 The FOS is prepared to hold that a non-disclosure in response to a renewal
notice may be sufficient to avoid a policy, but ombudsmen tended not to be
sympathetic to wide requirements to disclose anything an insurer may think
material. In five out of the six cases, the insurer’s decision was overturned. In
case 102, for example, the ombudsman found that the complainants had
behaved recklessly in not reading the notice on page 2 of the renewal form and
therefore failing to mention their son’s criminal conviction. However, given the
circumstances of the conviction and the complainants’ excellent claims record,
the ombudsman was not convinced that the insurer had been influenced in their
decision (as required under stage 2 of the procedure).
Non-disclosure during the policy
C.32 Surprisingly, there were four cases in the sample where the insurers attempted to
argue that a policyholder had an ongoing duty to inform them about changes to
their circumstances during the course of the policy. Two were travel policies; two
were motor policies.
365