Insurance Law can

Misrepresentation

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  Law of misrepresentation has simple test, complications arise along the way
  

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  Loss: an insurance policy names specific losses which trigger indemnity. In an “all-risks” policy, all losses are covered subject to exclusions, terms and conditions
  
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    An insurance policy is a contract of speculation in the sense that it offers the insured compensation only should a loss occur in the future by chance.
    
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    In other words, a loss must be fortuitous to be insurable. Any loss named in the insurance policy must arise from a random event, as opposed to an inevitable event or the insured’s own intentional act.
    
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  Indemnity: should the insured loss occur, compensation paid by the insurer (referred to as “indemnity” for property insurance, or “benefit” for life and disability insurance) is intended to put the insured back in the same financial position after the loss as it was before.
  
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  Premium: 1) amount of premium generally reflects the likelihood that the insured/policyholder will make a claim in the future, 2) premiums create a pool from which insurance is paid if a loss does occur
  
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  Underwriting: the second stage, person interested in insurance goes through broker or intermediary, underwriting is activity insurer does in response to application. a) Insurer looks at info to determine what coverage applicant is eligible for, b) what exclusions (or endorsements) should be included in the policy to restrict the circumstances a claim would be paid, and c) what premium the insurer should charge, commensurate with the risk.
  
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    Important point is that insurer has number of template form policies available, insurer uses information insured provides to determine what template fits
    
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    Underwriter is limited by the products insurer has to offer
    
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    Endorsement: additional terms in a policy, a floater
    

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  Sections relevant to material misrepresentation
  
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    Part 2: s.17, 29
    
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    None of statutory conditions apply to life insurance s.8(1), accident & sickness s.8(b), surety insurances s.29(2)
    

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  Person commits material misrep at time they apply for insurance, and insurance company underwriting
  
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  Typically not discovered until claim is made and insured is investigating a loss
  
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    Difficult to win w.r.t. insurer since the insured usually represents a sympathetic figure
    
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    But courts do come down hard where insured has made a misrepresentation
    

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  Concept of having insured having to disclose all facts material to risk is longstanding concept via Carter v Boehn [1776] HL:
  
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    Insurer decided to insure Fort of Marlborough, was attacked and overtaken by French
    
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    Insurer tried to deny claim on basis that insured didn’t represent the dangers of fort sufficiently, court didn’t uphold on this basis
    
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    Court held that insurer ought to have known about activities taking place in that region including conflict between British and French, since this was public knowledge
    
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    Insured also has a duty to disclose all relevant matters and respond truthfully to any questions asked
    
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    This was first case to deal with breach of duty of good faith, and requirement of duty of good faith on both parties
    

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  W.r.t. the balance of power during application stage, applicant holds all the power
  
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    Insurer is vulnerable and dependent on truthfulness of applicant
    
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  When loss occurs, balance of power shifts again
  
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    Insured in position of dependency on insurance company, former want funds from the latter
    

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  Test for material misrepresentation: when the loss has occurred, and assuming loss has occurred within 2 years of policy being issued, then insurer is entitled to investigate circumstances of loss and voracity of statements made by insured or policy holder in the application materials
  
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    If loss occurs three years after policy issue, only chance to avoid policy is by proving fraud
    
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  In order to void policy, insurer must prove
  
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    Applicant did not disclose a fact or facts or inaccurately described facts that were provided, and true state of affairs is within his/her knowledge, and that the facts were material to the risk
    

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  Test: Burden lies on insurer to prove that insured did not disclose all material facts in the application. Insurer must prove
  
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    There has been a misrepresentation/omission/non-disclosure of material fact within insured’s knowledge
    
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    That the misrepresentation was objectively material to the insurance company
    
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      A misrepresentation is material to risk where a reasonable insurance company, had it known the true facts, would have a) not issued the policy, b) charged a higher premium, or c) put in exclusion or endorsement to mitigate risk
      
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  The misrepresentation doesn’t have to relate to the cause of loss
  
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    E.g. someone dies in car accident, then it is discovered that person lied about not-smoking on application
    

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  Omission is the same as a misrepresentation, provides insurance company potential to void policy
  
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    But under s.29(3), has a higher threshold w.r.t. property insurance. Must prove a fraudulent omission to void a policy within 2 years
    

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  There are some things that insured don’t have to disclose, should have been in insurer’s knowledge include
  
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    Where facts are notorious within the industry
    
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      E.g. in Carter, insurance company said that insurer should have known about conflict between nations
      
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    Limits to notoriety: insurer not required to make inquiries based on mere clues from insured, relevant standard is that insurer only presumed to know facts due to public character or notoriety (Lafarge, para 30)
    

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  To void a policy insurer must
  
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    Write to insured to notify them that policy is being rescinded, must include all premiums that insured has paid
    
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  Until insurance company has voided the policy, the policy is still enforceable
  

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  If a policy lapses (usually because you can’t pay), there’s a grace period of 30 days, and if event happens, then beneficiary is still entitled to what benefit was promised. After the 30 days, then there is another two years to reinstate the policy (by completing evidence of insurability form and submitting premiums outstanding and interest)
  
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  Branch v Empire Life: guy died, his policy lapsed and reinstated multiple times. Insurer wanted to know what date the 2 year incontestability period ran from after it was reinstated – incontestability runs from the date policy was reinstated