Chapter 5: Utmost Good Faith

Front 1

What is the definition of utmost good faith?

Back 1

A positive duty voluntarily to disclose, accurately and fully, all facts material to the risk being proposed, whether requested or not.

Front 2

To whom does the principle of utmost good faith apply?

Back 2

Applies equally to both insured and insurer. In addition, it applies to any intermediary acting on behalf of their principle, whether policyholder or insurer.

Front 3

How can insurers alter the common law position regarding the timing of disclosure?

Back 3

The common law position of utmost good faith, which means disclosure requirements exist up to the inception of the policy, are revived at renewal and can be altered by policy conditions to require continuing disclosure of material changes.

Front 4

What is a material fact?

Back 4

One which would influence the judgement of a prudent insurer fixing the premium or determining whether they will take the risk.

Front 5

Give three examples of material facts in relation to moral hazard.

Back 5

1. Claims history

2. Refusals to insure by other insurers.

3. Criminal convictions.

Front 6

Which material facts do not need to be disclosed?

Back 6

1. Matters of law

2. Facts that are common knowledge

3. Facts that lessen the risk

4. Facts where the insurer has waived it's right to the information.

5. Facts that a survey should have revealed.

6. Facts that the insured does not know (and ought to know).

7. Facts covered by policy terms

8. Spent convictions.

Hint 6

There are 8.

Front 7

When one party is found to have breached their duty of disclosure, what option is open to the aggrieved party?

Back 7

The aggrieved party may set the contract aside ab initio (from the beginning) which means that the insurer will refuse to pay the claim in question.

Front 8

Explain the difference between non-disclosure and misrepresentation.

Back 8

Non-disclosure is failing to reveal a material fact.

Misrepresentation is when a material fact is stated wrongly or exaggerated.

Front 9

What is utmost good faith?

Back 9

A positive duty to disclose, accurately and fully, all facts material to the risk being proposed, whether requested or not.

Front 10

The insured must make a full and complete disclosure of all material facts relating to the contract unless:

Back 10

They are defined as a 'consumer' under the Consumer Insurance (Disclosure and Representations) Act 2012 when they have to take reasonable care to answer insurers' questions fully and accurately.

Front 11

The Financial Conduct Authority (FCA) rules require an intermediary to explain the importance of _____________.

Back 11

The duty of disclosure.

Front 12

Who else also has the duty of disclosure to the insured?

Back 12

The insurer.

Front 13

For retail customers, unless there is evidence of fraud, FCA rules state that insurers will not refuse to meet a claim on the basis of what?

Back 13

The non-disclosure of a material fact that the insured could not have been expected to disclose.

Front 14

Policy wordings can modify what?

Back 14

The duty of disclosing, making it a continuing one.

Front 15

An insurer who fails to further investigate unanswered questions or inadequate or unclear information is deemed to have what waived?

Back 15

Their right to the information and cannot subsequently claim non-disclosure.

Front 16

An insurer is estopped from avoiding a policy ab finito if _______________.

Back 16

Their previous behaviour suggests they have waived that right.

Front 17

Certain facts, though material, do not need to be disclosed either because of what two things?

Back 17

1. The insurer ought to know them.

2. The insurer could find them out.

Front 18

Non-disclosure gives grounds for avoidance by the insurer where a fact is ________________.

Back 18

1. Within the knowledge of the insured.

2. Is not known by the insurer.

3. Would have caused the insurer to impose better terms or to have not entered into the contract at all.

Hint 18

3 things

Front 19

For claims involving policy holders who are eligible to complain to the Financial Ombudsman Service (FOS), what approach may insurers take?

Back 19

They may take a fairer approach than avoiding the policy if they would have accepted the risk on different terms.

Front 20

Financial Conduct Authority (FCA) rules state that insurers will not refuse to meet a claim on the grounds of __________________.

Back 20

Misrepresentation of a fact material to the risk, unless misrepresentation is negligent.

Front 21

There are certain insurances which are required by a statute and this impacts on an insurer's rights following a _____________

Back 21

Breach of the duty of disclosure.

Front 22

There are specific remedies available to insurers where the policyholder is a _____________.

Back 22

'Consumer' as defined by the Consumer Insurance (Disclosure & Representation) Act 2012.

Front 23

Compulsory insurances are certain insurances which are required by ___________.

Back 23

Statute

Front 24

When do compulsory insurances impact on an insurers rights?

Back 24

Following a breach of the duty of disclosure.