Business Law Assignment

Business Law Assignment Words: 1317

The insurance company needs information from the consumers to decide whether make a contract or renew a contract with consumers. And also the insurance company wants to decide the price of the contract and terms and conditions of the contract on the basis of the information which is provided by the consumers. The law enforces a duty of disclosure on consumers when they are looking to take a new insurance cover or wants to renew the existing insurance cover.

Insurance company may be able to reject to pay a claim or a part of claim if the leaseholder has not compiled with their duty of disclosure. However, the insurance company must establish the following: The insurance company noticeably inform the policyholder in writing about the duty of disclosure and the consequences of non- disclosure. The policyholder knew that the insurance company required information about certain matters. The policyholder fail to provide information or present the information in wrong way. The above mentioned elements discussed in detail as follow: Insurance Company’s Responsibility: According to the Insurance Contracts Act under the section 22, before a contract of insurance is entered into, the insurance company must inform the consumer, in writing, of the general nature and effect of the duty of the disclosure, including the consequences of non-disclosure. An insurance company who has no compiled with the section 22 of the Insurance Contracts Act may not exercise any rights in respect to non-disclosure unless the non-disclosure was fraudulent [ASS (3)].

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Consumer ‘s Responsibility: According to the Insurance Contracts Act under the section 21 consumer is required to disclose all matters known to them that they know to be relevant to the insurer’s decision to accept the risk, or that a responsible person in the circumstances could be expected to know is relevant to the insurer. Even if the proposal is a Joint policy, the policy of disclosure applies on each of the member of joint policy. If one of the member of Joint policy fraudulently completes his part of the proposal form, the insurer can void the contract under S 28(a) of Insurance Contact.

This can be explain by a very famous case Advance (NEWS) insurance Agencies Pity LTD v Matthews(1989) 166 CLC 606. Mr.. And Mrs.. Matthews took out household contents insurance policy after their house has been thieved. They took a proposal form from the insurer and completed the form at home. On the proposal form they answered no to the following question: 1. Had any claim been rejected previously? 2. Were there any other facts relating to the risks which are going to be insured, or Business Law By formalization company to allow them to make a true assessment of the application prior to acceptance? . Had they ever had a loss which involving a claim of more than one $1000? After two weeks the policy had been issued, Matthews premises were damaged by the fire, and some goods were stolen from their premises. When the claim was made n their insurance policy, the insurance company investigates and revealed that: Mr.. Matthews had been a partner in a business that suffered a loss cause by fire in 1980 and that claim had been rejected by insurance company. This had led to litigation, which was eventually settled.

When the Matthews had been burgled, the loss of the contents had cost them less than $1000 but the replacement had been cost more than $1000. As a result, Advance Insurance rejected Mr.. Matthews claim on the basis of non-disclosure and misrepresentation. Issue: Does failure by one co-insured to disclose a material fact mean that the innocent co- ensured loses their rights under an insurance policy? Decision: The High Court held that S 21 forced a duty on each person who becomes insured to disclose all material matters to the insurer.

Comment: Even if only one of the co-insured’s was responsible for a fraudulent non-disclosure, the insurance company would be able to avoid the contract under ASS 2. What it the duty of “utmost good faith”? Mans: Insurance contracts are not similar to the contract sale of goods or provision of services. Insurance contracts are the contracts of the utmost good faith. This is because the arties which are going to make a contract is not an equal position with respect to knowledge of the possible risk involved.

The person who has the greatest knowledge of the risk involved is the proponent. It means that person who has the knowledge about the risk should have to disclose all those facts that could influence the insurance company as to whether or not it will accept the risk. Under the Insurance Contracts Act, both the parties are required to act in a good faith towards each other ASS and reinforced by S 14, which provides that both the insurer and insured must to rely on any provision of the insurance contract if this would mean that one of the parties was not acting in utmost good faith.

Neither party will be able to rely on any provision of the contract where this has not occurred. A very famous case of Utmost good faith is “CARTER V BOONE (1766) 3 Burr 1905 a land mark English contract law case, which Lord Mansfield established the duty of utmost good faith or barriers fide in insurance contracts. ” Mr.. Carter was the Governor of Fort Marlborough(now Bungle),which was established by the British East India Company in Sumatra, Indonesia. He called himself Governor but was self-appointed.

He was an employee of British East India Company. He took out an insurance policy against the fort which attack but what was insured? The French made an attack on fort and Mr.. Boone denied the insurance claim and Carter sued Him. A witness captain Tryout testified that Carter knew that the fort was built to resist attack from natives but not European enemies. Lord Mansfield held that Carter had failed in his duty of utmost good faith in failing to disclose these material facts. He stated “Insurance is a contract based upon speculation.

The special facts, upon which the contingent chance is to be imputed, lie most commonly in the knowledge of the insured only; the underwriter trusts to his representation and proceeds upon the confidence that he does not keep back any circumstances in his knowledge, to mislead the underwriter into a belief that the circumstances does not exists, and to induce him to estimate the residue as if it did not exist. Good faith forbids either party by hiding what he privately knows, to draw the other into the bargain from his unawareness of that fact, and his believing the opposing. 3. Mans: Section 22: Stylus can take the advantage of the SEC 22 of the Insurance Contracts Act 1984 as it s clearly mentioned in the SEC 22 that before entering into a contract the insurer should have to clearly inform the consumer in writing of the general nature and the effect of the duty of disclosure and also if the SEC 21 A applies to the contract it also the duty of the insurer to inform the consumer in writing the general and the effect of SEC 21 A. So it means that it is not only the fault of Stylus.

The insurance company also responsible for this as according to the ICC ACT 1984 sec 22 it is clearly mentioned that insurance company should have to tell the consumer in writing about the mineral nature and the effect of the duty of disclosure. Section 23: According to the SEC 23 the insurer should have to make the contracts questions very clearly so that the consumer can understand the question clearly and answer it correctly after understanding it properly. So Stylus can claim the money as there is not a clear question about the history of the drivers mentions on the contract.

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