Whether Evans Will Be Entitled to Compensation by the Insurer Intoinsure - Case Study Example

Name: Professor’s name: Paper: Date: Issue: there is an issue of whether Evans will be entitled to compensation by the insurer "INTOINSURE". Rule: The Marine Insurance Act of 1906 Section 17 provides that: A contract of marine insurance is founded on utmost good faith and, if the utmost good faith is not adhered to by either party, the contract may be voided by the other party. Section 18 provides that the insurer provides all material circumstance of which he's aware. This applies to all insurance contracts despite the name. Analysis: The MIA protects the insurer by allowing him to avoid the policy where there's misinterpretation, non-disclosure or failure of the insured to act in good faith. In Economides v. Commercial Union Assurance, where the issue of non-disclosure is concerned, the house of Lord ruled that the insurer pays the policy where there was innocent misinterpretation or non-disclosure by the insured The Insurance Ombudsman Service established in 1980 was established to investigate disputes among consumers and businesses with a value4 of up to a hundred thousand euros. They tried to break down negligence to varying degrees and grouped them into five categories. Whether the insured: 1. Failed to read the questions 2. Failed to understand the questions asked 3. Understood the question but didn't have a way of knowing the answer 4. Understood the question, though they know the answer but gave an inaccurate response 5. Understand the question, but didn't take enough care of the reply because they didn't realise it mattered. Regarding the five categories, the insured may be entitled to claim if the insurer is partly to blame for the lack of clarity if the questions asked. If the insured however contributed to his negligence, then the claim may be reduced on a sliding scale as per his contribution. In the case of Carter v. Boehm (1766), Lord Mansfield ruling was that insured should not withhold any information that he has knowledge about to mislead the underwriter who is the insurer. Mr. Cater, who was Fort Marlborough's governor, had insured him against an attack that Fort later came to lay claim. Mr. Cater, the insurer contended it on the grounds of non-disclosure. The judge, however, ruled that the insurer should have been in a good position to understand the hostility during that time in Europe. It is therefore insisted that the insurer should ask comprehensive questions to the customer so as to assess the risk fully. When this is done, and it is later discovered that the insured had answered the question recklessly or dishonestly, then the insurer is allowed to refuse the claims. It is also important to note the aspect of a careless mistake on the part of the insured. In this case, the insured deserves some of the claims. The case of Carter v Boehm provided the first case of the doctrine of utmost good faith. A look at presented circumstances between Evans and "INTOINSURE" provides that the insurer asked numerous questions. Did the insurer act by the law? Yes, it is required that the insurer asks the insured clear questions. As stated, they asked numerous questions regarding the building integrity including specific questions about the construction of the building roof and walls among others. Was there negligence on the part of the insurer? This would be answered by questioning the questions posed to the insured. "INTOINSURE," asked relevant questions including specific issues of the wall and roof construction. It is noted that Evans misunderstood the questions. This may be due to lack of structural knowledge. It is said that he was also impatient.it may have led to him: 1. Failing to read the questions carefully. Impatience may make one want to get over and done with whatever activity they are doing. As a result, Evans may have hurried through the questions to get over and done with them. 2. Failing to understand the questions asked. It is said that he misunderstood maybe some of the questions asked. It isn't mentioned that he asked for clarification. The insurer may claim that the insured understood all the questions asked and didn't need to clarify anything to him. 3. Understanding the question, thinking he knows the answer and giving an inaccurate response. It might have been a possibility since he answered the questions based on his knowledge and his understanding. As a result of the above, he said that the cottage had no structural issues. It is said that he left the question on wall and roof construction incomplete. Did Evans deliberately refuse to answer the questions related to the walls and roofs or was he innocent on the grounds that he didn't know what to comment on them? The insurer can argue a case of misrepresentation where the insured refused to disclose material facts that would directly contribute to the risk he was being insured against. The insurer is said to have followed up based on the responses. On this basis, one needs to question why the insurer didn't question Evans on the issue of walls and the roof. The MIA protects either party where the other party owes them a duty of utmost good faith. Evans may have neglected this part due to his lack of knowledge. "INTOINSURE" as an insurance company providing building insurance policy may have done more for Evans. The insured's knowledge on structural matters maybe scarce but the insured must have taken it upon themselves to advise him maybe to get a structural engineer to provide full assessment on the condition of the wall and the roof. There was negligence by the insurer and their failure to act in good faith. When Evans was questioned by an employee of "INTOINSURE" on the renovations done, he said that the work was done by a qualified tradesperson but failed to mention that he has made to the relevant Building Services Authority about the tradespersons due to their unsafe and questionable workmanship. The mistake made by "INTOINSURE" was the failure to have this in writing. However, as stated above, the MIA protects the insurer by allowing him to avoid the policy where there's misinterpretation, non-disclosure or failure of the insured to act in good faith. In case of a dispute, "INTOINSURE" may present the filed complain as evidence that Evans had failed to mention to them that he questioned the workmanship of the tradesman. The plaintiff may argue that the insurance company had not asked Evans anything pertaining the renovations. But the defendant may claim that Evans owed the insurer the duty of good faith and should have taken it upon himself to mention the renovations. Moreover, the renovations have a direct effect to the soundness of the structure and hence there would be a case of misrepresentation. The defendant may use the filed complaint to evidence renovations done and question the quality of work done by the tradesperson. It would however not be possible for the insurer to claim that the insured lied that the renovations had been done by a qualified people since this as answered verbally and no documentation were made. Conclusion: Evans is liable for misrepresentation while "INTOINSURE" is liable for failure to act in good faith. It is clear that Evans would have done a better job of providing relevant information that he didn't. He needed to take his time to read and answer the questions asked. He should have asked for assistance where he though he was unable to give the right answers. "INTOINSURE" should have advised Evans to get a structural engineer to help him with analysis on the soundness of the structure. It would be unfair for "INTOINSURE" to deny Evans the claim for his policy completely as both parties didn't take up their responsibility well. The claim may be agreed on a sliding scale. Misrepresentation This can define as a case where the insurer is unable to assess the risk fully due to lack of comprehensive details provided by the insured. Meaning that the risk the insured is being insured from can arise from a broader spectrum other than what he has provided. The insured may also misrepresent crucial information that may be material to the risk hence leading to losses. The insurer is required to ask for relevant information in the clearest form and have it in writing. It is only when the insured lies in writing to questions asked that the coverage is affected. The court would, however, rule that, unless the lie presented by the insured directly relates to the risk, then the coverage isn't affected. Justification for an insurer to negate the claim of an insured Where the insured provided statement that they knew was not true or didn't believe it was true. The case of Derry v. Peek (1889) is a good example of such a case where the defendant had highlighted that they would be able to use mechanical or steam power as opposed to other firms. This prompted the plaintiff to buy shares. It later turned out that this wasn't the case. With this in mind, an insurer can negate the claim of the insured if they made them believe something that wasn't true as they took up the coverage. If the insured had gotten a fire coverage and the insurer had asked them of the fire protection measures they had taken and the insured highlights that all necessary precautions and fire protection systems were installed and had been tested and found to be in good working condition. The insured knowingly had the fire protection system installed and didn't have it tested to see if they worked. In case of fire and the insurer realizes that the sprinkler system, for example, didn't respond to the fire, and then the insurer can refuse to play the claims on this grounds. Where the insured fails to provide some form of information which would be relevant to the risk that they are seeking cover. An example being the case Pan Atlantic Insurance Company Ltd v Pine Top Insurance Company Ltd (1994). It was realized that the losses incurred were greater than what they had disclosed. If an insurance company asks the customer information, say for example if they were seeking cover medical insurance. The customer, when asked about the family medical history, claims they don't have such a case in their family. After obtaining the cover, the insured suffers a kidney failure, and it is discovered that this is a hereditary disease in the insured's family. With this light, the insurer can argue the insured did not provide relevant information in court to avoid the policy. Where the insured fails to comply to any regulations set in the contract drawn or is involved in fraudulent dealings. If the insured failed to pay the required penalties of the premiums example where if you make your premium payments later than a set date, you are required to pay a certain percentage of the premium as penalty. In other cases, it may be discovered that the premium payments that the insured claimed to have made were not made, and then the insurer may refuse to pay claims in case of anything. Where the insured lies about the claim in the contract. The case of Skuratow v. Commonwealth Insurance Co. [2005] provides an example where the insured wanted to lay claim on their missing truck. The problem was that the insured's wife, who ran the business made false claims that the premium payments were up to date. When the insured made the same statement to the investigator, his wife didn't correct him. When the case was presented, the fact that Skuratow's wife had made false statements. The statements were seen to be reckless as the insured tried to explain that he didn't know the payments weren't up to date. This led to the dismissal of the case. An insurance company can hold false statements made by the insured that directly link to the contract as grounds to avoid the coverage. Reference 1. Financial Ombudsman Service. Ombudsman News.2005; (46):8-12 2. Emily M. Weitzenböck. English Law of Contract:Misrepresentation. 2012.Norwegian Research Center for Computers & Law 3. Roderick S.W. Winsor. Misrepresentation and non-disclosure on applications for insurance.1995. Blaney McMurtry LLP 4. Canadian insurance law blog. Skuratow v. Commonwealth Insurance Co. [2005] B.C.J. No. 2257 British Columbia Court of Appeal http://insuranceblog.harpergrey.com/2005/10/articles/summaries/skuratow-v-commonwealth-insurance-co-2005-bcj-no-2257-british-columbia-court-of-appeal/ 5. International Journal of Law and Management. Insurance law: fit for purpose in the twenty-first century? 2010; 52 (1):21-39 Read More