The duty of disclosure must be observed throughout the negotiations and continues until the completion of the insurance contract. Generally there is no such duty to be observed during the continuation of the policy period unless by means of a policy condition it is made continuous or contractual when it becomes a contractual duty of utmost good faith. But sometimes insurance contracts are breached like other contracts as well. Following are are the causes of the Breach Of Insurance Contract:
Causes Of The Breach Of Insurance Contract
- Non-disclosure of Facts: This refers to the omission to disclose a material fact unintentionally or because he innocently thought the information to be immaterial.
- Concealment of material fact: This refers to concealing or suppressing a material fact deliberately, knowing it to be material.
- Innocent misrepresentation: This refers to making an inaccurate or false statement pertaining to material facts innocently and believing it to be true.
- Fraudulent misrepresentation: This means making of false statements, pertaining to facts material to the risk, intentionally and with the intent to deceive the insurers. The maker of such a statement knows it to be false, but nevertheless he makes it recklessly with a careless disregard for the veracity.
Fraudulent misrepresentation is actionable not only under the law of contract but also under the law of tort. It should be definitely remembered that any breach, as mentioned here, renders the contract voidable at the choice of the aggrieved party, e.g. the party who has suffered as a result of this breach.
So, if the insured makes any breach of contract, the insurers may:
- a) Repudiate liability regarding any claim,
- b) Cancel the insurance policy if still in force, or
- c) Overlook the breach. While the breach is overlooked as such, the contract remains absolutely unaffected.
In general, it is at the time of claims that the information of this duty comes to light through the surveyors or other personal references, unless of course it comes to light beforehand through some other media. Whatever it is, within a reasonable time of acquiring such knowledge of breach the insurers must decide the course of action they are going to take. Otherwise, lapse of an unreasonable time, or a behavior indicating waiver, would mean that the insurers have overlooked the breach.
General Good Faith: Despite what has been said so far as to the duty of utmost good faith, the insured is always expected to act towards insurer in General good faith throughout the tenure of the insurance contract. This would usually mean that the insured must take reasonable precaution in preventing or minimizing losses.
