Insurance Contracts CP - Law Reform Commission

public interest in running blockades mounted by the Union forces and the vessel had been laid up in
Liverpool for some time. The underwriter admitted that he had been aware of The Georgia‘s earlier
exploits, but at the time of granting the policy he did not associate the confederate vessel with the risk
being proposed. While the insurer had the means of discovering that the confederate cruiser and the ship
being proposed were one and the same, he was under no duty to investigate and the proposer was not
discharged from the duty of disclosure. Mellor J in his speech indicated that if a proposer was to be able
to calculate just how little was needed in order to discharge the duty, this would be to introduce ―a most
dangerous principle into the law of insurance‖, 68 and the judge stressed that the duty to provide a full and
frank disclosure is at the heart of the duty.
3.45 The second sense in which an insurer may not invoke non-disclosure of material fact is where
the fact is one that an insurer is deemed to know. An insurer who is active in a specific trade or industry
will be deemed to know what the characteristics of the sector are - the kind of goods used and activities
that are undertaken respectively. Unusual risks or activities must be disclosed, however, but it is not
necessary for the proposer to do anything more than disclose material facts. The proposer is not required
to disclose any assessments or opinions or conclusions the proposer has made: insofar as the insurer is
able to make these for himself, non-disclosure is not an invalidating factor. In Kreglinger and Fernau Ltd
v Irish National Insurance Co Ltd 69 the defendants refused to honour performance bonds taken out in
respect of meat processing contracts on the basis that specific undertakings in contracts had not been
disclosed to them. In regarding this contract as a contract of utmost good faith, Davitt P considered that
no breach of the duty of disclosure had taken place. The President drew a distinction between disclosure
of the existence of a contract, the details of which had not been set out, and non-disclosure of material
facts:
―While the duty to make full disclosure of all matters material to the risk rests upon the insured,
and it does not fall to the insurer to relieve him of that duty, by making inquiries, the converse is
to this extent true, that the insured does not have to conduct the insurer‘s business for him.
Where the contract, the performance of which the insurer is asked to cover, contains a clear
intimation that a matter, which is specifically referred to but not fully set out, is of importance,
and full information is to be had for the asking, it would be quite unreasonable and unjust to
allow the insurer to repudiate liability on the grounds that he did not know and was not told the
details of something which he was in fact told about.‖ 70
3.46 Other illustrations of this exception to the duty of disclosure are provided by some decisions
approved and followed by Davitt P in Kreglinger and Fernau. In The Bedouin 71 the insurer was not told
that he was insuring freight under a time charter. The charter contained a standard cesser clause that in
the view of the Court was practically universal in time charters and the insurer was held to have been
given sufficient information to fix him with notice of the risk. Lord Esher MR remarked that the assured is
neither bound to tell the insurer what the law is; nor is he required to tell him of every fact, but only
material facts.
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69
70
71
Ibid at 608. Hasson (1969) 32 MLR 615 at 620 is critical of this decision. The ‗dangerous principle‘ referred to
by Mellor J was concerned with preventing a proposer being encouraged to calculate how little need be
disclosed in order to fix the insurer with knowledge.
[1956] IR 116. Manor Park Homebuilders Ltd v AIG Europe (Ireland) Ltd [2009] 1 ILRM 190. The Canadian
courts are moving towards a due diligence standard for insurers on the basis that ―technology has reduced the
one-sidedness of the obligation of good faith with the growth and availability of information accessible to
particular industries and the public generally.‖ Per Howden JA in De koning v Vector Insurance Network
(Ontario) Ltd [2009] Can LII 43644 (Ont) discussing Coronation Ins Co v Taku Air Transport Ltd [1991] 3 SCR
622. These cases cover transportation policies against statutory rules on disclosure of facts to regulatory
bodies by insureds.
[1956] IR 116 at 154.
[1894] P.1.
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