Page 34 - The Insurance Times August 2025

1963) it was stated that the policyholder must disclose Section 5 of the 2015 Act sets out the meaning of the
"every material circumstance" that he "knows or ought to insurer's knowledge and provides that the insurer "knows"
know" to the insurer before signing a marine insurance what is known to the individuals who decide on behalf of
contract and that, a circumstance is material when it "would the insurer whether to accept the risk in question. Thus the
influence the judgment of a prudent insurer in fixing the knowledge of the insurer's claims department may also be
premium, or determining whether he will take the risk". deemed to be knowledge of the insurer. Combined with the
option given to the insured under Section 3(4) to disclose
Under the old provisions, it is the assured who was required only that which would put the insurer on notice of the need
to play the active role without being questioned or told what to make further enquiry, this means that the insurer will
is necessary to disclose and what is not. On the other hand, need to take a proactive role in the disclosure process.
the passive role stipulated for the insurers in this matter
enabled them to ask questions even after the happening of The insurers knowledge will include that which "an insurer
a claim arises an in the event of even a minor breach of the offering insurance of the class in question to insured's in the
duty of disclosure, the insurer could avoid the contract as if field of activity in question would reasonably be expected
it had never existed. to know", in other words, general knowledge.

Sections 18 and 20 of the MIA 1906 on non-disclosure and Section 6 of the 2015 Act clarifies that Knowledge" includes
misrepresentation were therefore replaced in the IA 2015 not only actual knowledge, but also what is termed as "blind
with the newly enacted section i.e. section 3 of the Act eye" knowledge - matters which the individual suspects but
incorporating the concept of "duty of fair presentation", deliberately chooses to ignore for example defects in a vessel
applying only to the business insurance contracts (i.e. "non which are known to him. Failure to disclose such knowledge
consumer"). could also amount to a deliberate breach of the duty to
make fair presentation.
The duty of fair presentation requires the insured party to:
(a) disclosure of every material circumstance which the Section 7(3) states that, an objective test would be applied
insured knows or ought to know, or to determine whether a circumstance or representation is
(b) failing that, disclosure which gives the insurer sufficient material or not. Thus, the question would be whether the
information to put a prudent insurer on notice that it representation "would influence the judgment of a prudent
needs to make further enquiries for the purposes of insurer in determining whether to take the risk and, if so,
revealing those material circumstances." on what terms". In addition, section 7(5) also noted that,
"a material representation is substantially correct if a
However, if no enquiry is made then it is not necessary for prudent insurer would not consider the difference between
the insured business to disclose a circumstance if: what is represented and what is actually correct to be
(a) it diminishes the risk, material."

(b) the insurer knows it,
The remedy of complete avoidance under the 1906 Act for
c) the insurer ought to know it, a breach of disclosure obligations is abolished in the 2015
(d) the insurer is presumed to know it, or Act and replaced with a proportionate system of remedies
for breach of the duty to make a fair presentation... The
(e) it is something as to which the insurer waives.
new Act gives the insurer a remedy when they would be
able to show that, "but for the breach, the insurer:
Further it is clarified that the insured "ought to know"
(a) would not have entered into the contract of insurance
information that would be revealed by a reasonable search
of information available to it. at all,
(b) would have done so only on different terms
The disclosure has to be made in a manner which would
be reasonably clear and accessible to a prudent insurer", If any of the above criteria are met the breach will be a
and, "every material representation as to a matter of fact is 'qualifying' breach, and the available remedy will depend on
to be substantially correct, and every material representation whether the insured knew it was in breach or did not care
as to a matter of expectation or belief is to be made in good whether it was in breach. This would constitute a deliberate
faith" or reckless breach and the insurer would have the remedy

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