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

4.43 We would also point out that a simple failure to answer a question may also
amount to a misrepresentation. There are two ways of not answering a question.
In some cases, failure to answer a question may appear to a reasonable person
to be an answer in itself. For example, in Roberts v Avon Insurance Company
Limited 28 the applicant was asked to complete the following declaration which
contained a blank space:
I have suffered no similar loss, except...
It was held that a failure to fill in the blank space was in itself a definitive answer
that there had been no similar losses. In our view, insurers should have a remedy
for implied answers of this type.
4.44 In other cases, however, it will be clear that no answer has been given. When the
insurer reads the form, it should be aware that the question has been missed.
Here we think the onus should be on the insurer either to decline the application
or to follow up the issue with the insured. This is the view taken in Australia. The
1984 Act precludes an insurer from raising an allegation of non-disclosure or
misrepresentation when a question in a proposal form has not been answered or
has an obviously incomplete answer. 29
Inducement
4.45 Where the consumer has made a misrepresentation, the next stage is for the
insurer to show that had it known the true facts it would not have entered into the
contract on the same terms. This is no different to the current law’s requirement
that the insurer prove inducement, under the second limb of the test in Pan
Atlantic. 30
4.46 Suppose the proposer omits to mention a medical test they have undergone. The
insurer has been induced if, had it known the true position, it would have charged
more or added an exception. The situation is different if the insurer would have
ordered a medical examination, but that examination would have given the
proposer a clean bill of health and the insurer would ultimately have accepted the
proposal on same terms. In that case, there is no inducement.
Conclusions: misrepresentation, inducement and materiality
4.47 We think that it is worth considering whether the rules on misrepresentation and
inducement should be stated expressly in any new Insurance Act. We think that it
would serve to clarify the position and, most importantly, to bring home to
proposers and their advisers the full extent of the obligation to answer questions
honestly and carefully. We would welcome views on this question.
4.48 We provisionally propose that the insurer will not have a remedy for
misrepresentation unless the consumer made a misrepresentation which
induced the insurer to enter the contract.
28
29
[1956] 2 Lloyd’s Rep 240.
Insurance Contract Law Act 1984, s 21(3).
30 Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] AC 501.
83