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We draw your attention to the Duty of Utmost Good Faith. This Duty applies to you whenever you arrange for an insurance cover. The Duty involves you disclosing to the Insurer(s) all facts that are known to you, which are material to the risk for which you are asking the insurer to provide cover.

A fact is “material” if it will influence an insurer in deciding whether or not to insure the risk you have asked them to cover or in deciding the terms upon which the insurance cover will be provided, including the cost (premium) of that insurance.

Failure to disclose material facts may result in you being uninsured in the event you ask the Insurer(s) to pay a claim under the policy.

If you are in doubt about whether you have information which should be disclosed to your Insurer(s) or whether Insurer is aware of that information, you should contact your Consultant before cover is arranged.

Examples of Matters that should be disclosed:

  • Any claims made in recent years (preferably the past five years, and at a minimum the past three years) and in addition any unusual, large or material claims from any time in the past, for the particular type of insurance;

  • Refusal by an insurer to renew a policy;

  • Any unusual feature of the insured risk that may increase the likelihood of a claim.

  • Any material change to the risk, including during the period of insurance.

To assist Insurers in protecting your interests, it is important that you tell us every matter that:

  • You know, or

  • A reasonable person in the circumstances could be expected to know,

  • Is relevant in the insurer’s decision whether to offer the insurance and, if so, on what terms.

Insured Values:

It is important that the values and other information provided to your Consultant and Insurers for the purpose of insurance are accurate. For example, values for Property Insurance should reflect the underlying coverage. If the insurance for property is based upon Reinstatement &/or Replacement then the values declared must be similarly based, including sufficient allowance for changes in statutory or local government requirements since the building was originally built, professional fees including architects and engineers fees, the costs of demolition and removal of debris and inflation during periods of insurance and/or reconstruction. Similarly, where specialist imported plant is insured for reinstatement and/or replacement, allowance may need to be made for fluctuations in monetary exchange rates.

Failure to declare correct values may lead to underinsurance, including the application by insurers of “conditions of average” to claims, including partial loss claims. Under some circumstances, insurers may be in a position to void the insurance where incorrect values have been provided, as a breach of the Duty of Utmost Good Faith.

Contracts and Agreements:

Normal contracts (eg: sales contracts, distribution agreements, building contracts, leases) in the course of business often allocate risk and responsibility. Where there is any increase in your risk as a result of the execution of contracts, you should advise your Consultant. Take care not to advertently or inadvertently prejudice your insurer’s rights of recovery against parties with whom you execute contracts. Any prejudice, waiver or limitation of insurer’s rights will result in declinature of claims or avoidance of the Policy.

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