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

Case study: clear questions should be asked on renewal
A renewal notice for contents insurance 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.
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 him. 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. (Case 20)
Inducement
3.39 The FOS follows the decision in Pan Atlantic by requiring the insurer to show that
had it known the true state of affairs it would not have entered into the contract on
the same terms. In practice, insurers usually send a letter stating that had they
known the facts they would have acted differently. Complainants almost never
challenged such statements, and ombudsmen were left to exercise their own
judgements about whether the insurer had in fact been induced. Usually, the
ombudsman accepted the insurer’s statement at face value. There were only a
few cases in which the issue of inducement was decisive.
Case study: no inducement
In a contents insurance case, the ombudsman found that the policyholders had
acted recklessly in not telling the insurer that their son had been convicted of
theft. They had not read Page 2 of the renewal notice, which asked for such
information.
However, there were particular circumstances surrounding the conviction, and
the policyholders had been insured with the insurer for more than 14 years,
during which they had an excellent claims record. The ombudsman said the
insurer had not discharged their burden of proof to show that they would not
have entered into the contract on the same terms. (Case 102)
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