Insurance Contracts CP - Law Reform Commission

e prejudicial to the life of the assured 59 is a material non-disclosure, 60 even in the absence of specific
questions being presented.
E
What the Proposer does not have to disclose
3.41 The Commission believe that many examinations of the duty of disclosure is flawed insofar as
there can be an undue emphasis placed upon the nature of the duty and materiality – that is, attention is
drawn to the nature of the information – rather than the context in which negotiation has taken place. The
correct approach to the duty of disclosure must marry the duty with the exceptions thereto in order to
accurately state what must be disclosed. 61 While Carter v Boehm 62 is correctly regarded as creating a
duty of utmost good faith that requires full disclosure of material facts, it should be noted that, in the
result, the insurer was held not to be entitled to avoid the policy. In a recent article in which Carter v
Boehm was given a rigorous re-examination Watterson concludes that the exceptions created by Lord
Mansfield suggest that the duty of disclosure is much more limited than is generally thought and that
Carter v Boehm is not a pro-insurer case. 63 The exceptions that Carter v Boehm provided to the duty of
utmost good faith have been put onto a statutory footing in the form of section 18(3) of the Marine
Insurance Act 1906.
3.42 These exceptions have been used very liberally by Irish judges and they afford a variety of
counterweights to the duty of disclosure. An insurer who fails to inspect a property for example, or who
fails to ask questions relating to a risk will be in danger of being held to have waived the need for
disclosure. A specialist in a particular industry who has been put on notice of the existence of facts which
he or she, as a prudent insurer should investigate, may be fixed with the knowledge that such an
underwriter will be deemed to possess.
(1) Knowledge
3.43 Knowledge of any circumstance which is known or presumed to be known to the insurer. The
insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in
the ordinary course of his business, as such, ought to know. 64
3.44 MacGillivary treats this exception to the duty of disclosure as being divided into two distinct
classes. Firstly, there is ―no duty to disclose matters of common knowledge and public awareness of
which any reasonably well informed person is presumed to be aware‖. 65 In Leen v Hall 66 Ballyheigue
Castle County Kerry was insured against damage by riot, civil commotion, war, rebellion and fire. It was
destroyed by the IRA in 1921, the proposer failing to disclose that the Crown had used the dungeon to
house Sinn Fein prisoners previously. The jury apparently concluded that civil commotion was public
knowledge in the County at that time. As in many instances of insurance contract law, the test is easier to
state than to apply and the individual facts or each case are critical. The leading case is Bates v Hewitt 67
A confederacy cruiser, The Georgia was dismantled and sold to the plaintiff who obtained insurance from
the defendant underwriter in 1864. In 1863 and early 1864 The Georgia had attracted considerable
59
60
61
62
63
64
65
66
67
Joel v Law Union Insurance Co [1908] 2 KB 863.
Most cases are in fact misrepresentation cases, that is, a question was asked but answered incorrectly.
This is reflected in the IIF Non-Life Code of Practice which states that an insurer will not repudiate liability ―on
grounds of non-disclosure of a material fact which a policyholder could not reasonably be expected to have
disclosed.‖
(1766) Burr 1905.
In Mitchell and Mitchell, Landmark Cases in the Law of Contract (Hart 2008).
Marine Insurance Act 1906, section 18(3)(b).
Inspection by an insurer of the risk or property in question will generally involve acquisition of constructive
knowledge: Pim v Lewis (1862) 2 F & F 778.
(1923) 16 2 ILR 100.
(1867) LR 2QB 595.
74