Non-disclosure: Insurance and Good Faith
Non-disclosure covers a situation where insured party failed to disclose the material facts, even if he may not be asked directly. This fact is known by the insured, and insurance company will not know at the point of accepting the insurance coverage. Under English law, all parties to an insurance contract are to act in uberrimae fidei (utmost good faith). Insured must disclose all material facts (ie: subject matters that will affect an underwriter decision whether to accept the risk), even it’s not specifically asked.
Otherwise the policy is void or voidable. And in our case, BH knew about the previous claims matter and did not inform PIC about it. Which this is a material fact that would influence the underwriter judgment in proposing the premium and determining the risk. The objective test clearly shows that the knowledge of past claims history of insurer is important for underwriter assessment. Hence, it gave rise to effect of distorting the true information. The effect to non-disclosure is that PIC has the right to void the contract and refuse claims under it.
The General rule to Duty to Disclose is found in Woolcott v Sun Alliance and London Insurance Ltd. Misrepresentation by the insured… avoiding the contract. It is usually considered less important than the doctrine of non-disclosure and has often been subsumed by it as a result. Nevertheless, it is different from non-disclosure as misrepresentation focuses on the untruth of statements made by the insured whereas non-disclosure deals with the insured’s silence.
It is usual for the insurer to plead both grounds of avoidance since the duty to answer questions correctly on a proposal form is also part of the insured’s duty of good faith. ( www. SingaporeLaw. sg – Misrepresentation Act) Insurance law said it’s the duty of the insurer to answer question or provide information honestly and carefully. The misquoted on the worker wages is a clearly a misrepresentation. The false statement of fact PIC evidently relied on BH’s statement; result in wrong judgment which gives rise to the doctrine of misrepresentation.
Even if BH had been negligent, did not check, it is still a misrepresentation. See: Redgrave v Hurd (1881) 20 Ch D 1;Quah Poh Hoe Peter v Probo Pacific Leasing Pte Ltd  1 SLR 14). It‘s arguable that BH false statement fall under a negligent misrepresentation, innocent misrepresentation or fraudulent misrepresentation. Negligent Misrepresentation arise when the false statement is made by representor without due care.
It’s a false statement made without fraudulent intention, where in our case it’s for BH to prove that the wrongly declared wages is a careless mistakes, which he would have check the documents and not relying on figures ie: if figures are prepared by a junior clerk. See: Howard Marine & Dredging v Ogden & Sons (1978) Innocent Misrepresentation arises when the representor made the false statement without fraud and without fault. BH may have made the false declaration thinking that he has reasonable grounds to believe in its truth.
It’s for BH to assert the declared wages is a unfortunate human error ie: typo error instead of $800,000. 00 was type written as $80,000. 000. BH would have opportunity check but instead of relying the representation is true. See: Redgrave v Hurd (1881) In view that question mentioned BH had inadvertently misquote, hence it’s unlikely to be a fraudulent misrepresentation (= tort of deceit). Where representor made untrue statement deliberately, and lies on the info provided.
See: Derry v Peek (1889) In misrepresentation, the laws aim to put the insurance company back in the position as though it would have been had been informed with full information. ie: If the insurer would have charged more, the claim should be reduced proportionately to the under-payment of premium. PIC has the option to rescind the contract because of BH false statement, by communicating his intention to BH clearly and unequivocal. Once rescinded, it’s final & the contract is voidable. And this brings PIC back to the original positions, as if it never exists