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Chapter 5 Good faith 5/9

‘Spent’ convictions
Convictions that are ‘spent’ under the Rehabilitation of Offenders Act 1974, as amended by the Legal
Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), need not be disclosed. The LASPO
changes have applied in England and Wales since 10 March 2014 and rehabilitation periods for both
community orders and custodial sentences now comprise the period of the sentence plus an additional
specified period.

Example 5.5
Under LASPO, an adult offender sentenced to two and half years’ custody must disclose their conviction for the
period of the sentence plus a further four years (giving a total rehabilitation period of 6.5 years). A fine must be
disclosed for one year from the date of conviction.

Be aware
Under the LASPO changes, a conviction resulting in a custodial sentence of more than four years’ imprisonment is
never ‘spent’. This applies to both adults and minors under the age of 18.

D Consequences of non-disclosure and
misrepresentation

Prior to the changes introduced by the Consumer Insurance (Disclosure and Representations) Act 2012
(CIDRA) and the Insurance Act 2015 (IA 2015) the general rule was as follows: Chapter
If the policyholder is in breach of the duty of disclosure, the insurer was entitled to avoid the contract
entirely, ab initio (from the beginning). In other words, a claim would not be payable. 5
If the non-disclosure was fraudulent (often termed ‘concealment’), the insurer could have kept the
premium and sue for damages. What the insurer could not do was to refuse the payment of a particular
claim, but leave the policy in force for the future. The insurer had the right to ignore the breach, but in
this case had to pay the claim and leave the policy in force. Reference copy for CII Face to Face Training

The legal rule was that non-disclosure arises and gives grounds for avoidance by the insurer where
a fact:
• is within the knowledge of the policyholder;
• is not known to the insurers; and
• would, if known, have caused the insurers to either not accept the risk at all or accept it on different
terms (for example premium charged).

Question 5.3

Neil bought an old building to use as a store for his stock. He was told by the previous owner that the building was
subject to flooding from time to time as the stream nearby often burst its banks. Neil did not give this information to
his insurers.
Could the insurers refuse liability in the event of a claim for flood damage to Neil’s stock? Give reasons for your
answer.

D1 Remedies for breaches of the duty of fair presentation

As stated above, prior to the implementation of IA 2015, an insurer would be entitled to avoid the whole
contract where the proposer had breached the duty of utmost good faith by not disclosing all material
information. The undisclosed information need not have related to a loss; instead, the insurer simply
had to show that it was unknown to the insurer and was material to the risk.
However, the Act distinguishes between breaches of duty which are:
• deliberate or reckless; and
• innocent or negligent.
Apart from fraud, under IA 2015 an insurer is only entitled to avoid a policy entirely where the breach of
duty of fair presentation is ‘deliberate or reckless’, and where the insurer can show that it would not
have entered into the contract had it known the information, or would only have done so on different
terms. The insurer may also retain any premium paid.