Whether Evan Will Able to Rely upon His Comprehensive Building Insurance Policy for Full Indemnity - Assignment Example

Students Name Title Course Code Name Word count: 2015 1. The relevant issues in insurance law and whether Evan will able to rely upon his comprehensive building insurance policy for full indemnity. The first relevant issue is non-disclosure[NBR12]. Whereby Evan being the insured, failed to disclose relevant information to his insurer ‘Intoinsure’. For example, Evan as the insured didnot give the right information concerning renovation status of the ‘classic victoria cottage in Ballarat Victoria, which he took a comprehensive insurance for with the said insurance firm. Just when Evan was applying for the policy, the insurance firm seeked clarification about the condition of the building especially in the area of roofing and walls among other areas. However, Evan openly acknowledged that there was no structural issue with the building. This is what the insurers based formation of the policy on. This means that there was an non- disclosure from the side of Evan that led to the firm accepting Evans application and signed him for the policy. The other issue here is the pre-contract duty: according to section 21 of the Insurance Contracts Act 19841 it is required that the assured discloses all material facts of the property that is being insured before entering in to an agreement. In this case, it was the obligation of Evan to ensure that he discloses all the material facts about the construction status of his cottage to the insurer[Sta10]. However, when we look at the issues raised, we find that Evan did not disclose the entire information regarding the state of the building as the insurer was assessing his policy. For example, he said that the walls were in good condition when the reality is that they were not. In addition, he informed the insurer that renovations were done by professional contractors and the work was completed. This was described verbally while he failed to mention trouble with the walls and the roofing of the building. However this does not mean that Evan may not be entitled to the cover. According to Lord Atkins in the case of Bell v Lever Bros2where the Lever bros after drawing up a contract to provide payment to one another if they agree to terminate their employment, came to later find out that the defendants committed breach of duty meaning that would end their employment without notice and compensation. For this reason, the lever brothers decided to bring an action with regard to this mistake with the thought that they were under a legal obligation to pay compensation. It was later held by Lord Atkins that this was a mistake to quality meaning that it did not make the contract any different from what it was intended to be. The other issues is the interpretation of section 21 of the insurance contracts act of 19843 where the duty of disclosure discusses that the insured person has a duty to disclose to the insurer, every matter that is known by the insured so long as it is relevant to the decision of the insurer[Low08]. This should be done for the insurer to decide whether he will accept the risk and under what terms will the risk be accepted or in a situation where any reasonable person would view it as being an obvious action. Meaning that according to this section, Evan failed to follow the act since he did not provide all the information that was deemed relevant by the insured. To add on the above, when he answered questions, he did not disclose all the information asked by the insurer. In fact at some point he lied to the insurer that the building was in good condition and that all the renovation prior to signing the insurance where made by professionals and that they were perfectly done. However, there is another twist in this, were according to the section 214, the insured is actually under obligation to disclose what he knows as being facts of the property being insured. This means that Evan was only under the obligation to disclose what he knows as being factual. In this regard, the test of materiality would come when the insurer considers it relevant to decide on the fact as to whether he should accept to take the risk or not when fixing the premium requested by Evan[Gre08]. This means that Evan could use this as defence, since the insurer had the choice to accept the fact presented by Evan or avoid them in general if this would have influenced the decision by the insurer. For example, in the case of Container Transport international v. Oceanus Mutual Underwriting Association (Bermuda) Ltd5. It was held by the court of appeal that the insurer was entitled to avoid a contract under section 21 of the Insurance and contracts act 1984 if the insured undisclosed before the premium was agreed on. With this regard, the insurer would have assessed the information provided by Evan verbally and physically visiting the site and decide on the type of premium that was well suitable for Evan. According the case of Container Transport international v. Oceanus Mutual Underwriting Association (Bermuda) Ltd.It was held that the decisive influence test that directed a full and accurate disclosure in order to lead the insurer in to a much preferred decision was irrelevant as the insurer had already calculated the risk. This is because the test for materiality did not matter in the case; instead, the non-disclosed information should have been of the same nature which the insurer used in knowing the facts. Here we look at the prudency of the insurer and not the facts that were disclosed[NBR12]. With this regard, it can be argued that Evan will be able to rely on his comprehensive insurance policy for full indemnity. One of the ways that he can do this is by arguing that what he disclosed to his insurer was based on facts well known to him. By him stating that the building was in good condition and that it had been that way when the insurer was assessing the building. Also the fact that he did not disclose the complaints made to relevant building authorities puts him in a better position to argue for his comprehensive insurance. We also realize that most of the information given to the insurer was done verbally and the insurer accepted Evan’s application based on the verbal responses provided. This means that the insurers prudency is what is at stake here, meaning that the insurer is not in a position to argue against the premium signed for Evan and that they are obligated to pay for full compensation[Gre08]. 2. How ‘misrepresentation’ can be a justification for an insurer to negate the claim of an insured. According to insurance law, misrepresentation is usually looked at the same way that non-disclosure would be explained. However, the difference come where non-disclosure is about the duty that is placed on the insured to provide information voluntarily so long as the insurer finds it to be relevant in drafting the policy. When it comes to misrepresentation, one will look at a situation where the insured failed to provide the information asked by the insurer correctly[Low08]. According to Sections 236, 247, 258, 269 2710 of the Insurance Contracts Act 1984, a misrepresentation may occur under several circumstance. First in a situation where the insured asked ambiguous questions that did not direct the insured to answering the questions correctly. Here an ambiguous question is a statement that is made in relation to a question directing the insurance policy or the provision of the insurance type, in this situation, it is expected by the insurer that the insured understood and answered the questions according to what the insurer expected[Gre08]. However, in section 3111 of the act, the insured may use misrepresentation to negate Evan’s comprehensive premium. According to this section, if there was any proceeding by the insured with regard to the contract between Evan and the Insurer that was avoided by Evan intentionally, by is action to disown his duty to disclose all the facts known to him, then the court may on the rules of natural justice, disregard the avoidance. But as this is done, it will be able to allow the insurer, ‘INTOINSURE’ to disregard the comprehensive premium offered to Evan so long as they can be able to prove that non-disclosure was intentional, for this reason a new premium will be offered to Evan as part of remedy[NBR12]. Also under subsection (2)12 the act of misrepresentation can be argued where the court finds that there insurer was not prejudiced by the failure of Evan to disclose however, if the insurer was prejudiced this can be seen as being minimal. At this point the court will have the power to weigh the misrepresentation by the insured against the loss that would be incurred by the insurer if the misrepresentation is not included in the premium. This means that every response that was made by Evan with regard to the condition of the property before it was valued by the insurer during the initial negotiations must be true. However, since it was discovered during the second assessment of the building after the storm that Evan hid information from the insurer during the assessment, then it means that the insurer can use this defence to negate Evan’s claim[Sta10]. According to the law on misrepresentation, there is a recognizable difference between what the court can judge as being a misrepresentation with regard to facts, and a misrepresentation with regard to what the insurer expected. With regard to Evan and ‘INTOINSURE’ insurance firm, it can be agreed that what was represented by Evan during the initial negotiations of the contract and what was found to be the facts on the ground after the heavy storm was different. This makes what was represented by Evan as being immaterial to the formation of the policy, meaning that there was an act of misrepresentation. It is also true, that Evan did not act in good faith when the insurer came to assess the property in the first place. An act of good faith is realised when the insured would disclose information based on his knowledge no matter if the fact that were present to him where not the actual facts at the end of the day. In the case of Economies v Commercial Union Assurance Co13. for example, we find that a particular student insured the contents of his flat for 12,000 pounds. At this the student drafted and completed a proposal that had stated terms and conditions that the 12,000 pounds represented the full replacement value of the contents and items that were listed down. However, other items such as jewelleries and other valuables did not cover more than a third of the total value insured. His parents later came to the country and claimed that the jewelleries carried more value and the insurance value should be raised to 16,000 pounds. Later the flat was broken in to and property valued at 31,000 pounds was stolen. The insurance company did not pay for the claim on the ground that the insured misrepresented the actual value of the properties he had insured. The court held that when the student was making a statement, he did it on the belief that the total value of his valuables covered under the house hold contents insurance policy, he did under the obligation of being honest. This means that he did this in good faith and that he was honest according to section 31 of the insurance and contracts act of 198414. However, with regard to Evan the case is different. None of the responses made by Evan were done in good faith. As a matter of fact, Evan knew about the building and had complaint to the relevant authorities; however, this information was hidden from the insurer. In addition, the walls and roofs were in bad condition; however, Evan said that they all in good condition and that the renovations were done and completed by competent contractors. Meaning that he insurer was totally misrepresented and would use this grounds to negate Evan Comprehensive claim. Works Cited NBR12: , (Rao, 2012), Sta10: , (Drummond, 2010), Low08: , (Lowry & Merlkin, 2008), Gre08: , (Pynt, 2008), Read More