Legal Tips

Duty of Disclosure

Document Date: 10-Dec-2010

1. What is meant by duty of disclosure?
2. What constitutes a material fact?
3. When does a breach of the duty arise?
4. What happens if there is a breach of the duty?

1. What is meant by duty of disclosure?
   
   Under a policy of insurance the insured has a duty to disclose all material facts to the insurance company. This duty begins from the time the insured submits a proposal on his life until the contract of insurance is concluded. The duty also arises whenever a fresh contract is concluded including renewals.
   
   

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2. What constitutes a material fact?
   
   A material fact is one that would influence an insurer in his decision on whether to accept the risk or in determining the premium to be charged.
   
   

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3. When does a breach of the duty arise?
   
   This duty is said to have been breached if it is found that the insured has misrepresented a material fact or has failed to disclose a material fact.
   
   

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4. What happens if there is a breach of the duty?
   
   The insurer is entitled to refuse to pay a claim and even declare that the insurance policy is void.
   
   Alternatively, the insurer can waive his rights and allow the policy to continue.
   
   

[Ref: LG/VY/Mar 2011]