The Gazette 1989

GAZETTE

SEPTEMBER 1989

2. Notify the Gardai in some cases. 3. Present full details in writing. 4. Provide all the proof required. 5. Act in accordance with policy conditions. Insurers will have their own experts, loss adjusters and, where necessary, the legal profession to look after their interest. The policy- holder must fend for himself. The consultant has a particular role to play when claims arise - very often this is the first intimation the policyholder has that his insurance arrangements may prove to be inadequate. Most claims are processed without difficulty, but a significant number arise each year where insurers and their policy- holders do not see eye to eye. Problems may arise under the following headings:- 1. In the initial negotiations This may be due to non-disclosure of material facts which entitle the insurer to avoid the policy from inception. This is an implied condition in all insurance contracts - it doesn't have to appear in the policy. The duty to disclose material facts doesn't just arise during pre- liminary negotiations - it also arises at each renewal of the policy. A material fact is one which influences the mind of a prudent underwriter in deciding whether to accept the risk and, on what terms. Proposal form wordings usually warn proposers of their duty in this respect. Much will depend on the circumstances of the non-dis- closure, if the consultant had to concede the point and, on the attitude of the insurer as the non- disclosure defence is usually successful. In practice insurers often rely on the non-disclosure defence where their real reason for refusing i ndemn i ty is not sustainable. 2. Material risk alterations not advised to insurers. Apart from the duty to disclose material facts at each renewal of the contract, many policies bear a condition that alterations which increase risk at any time, must be advised to insurers and accepted by them. 3. Cover exists but is inadequate. This is a common problem and normally results in the policyholder bearing part of the loss. A typical

which everyone knows what is expected of him. 3. A coherent plan under the control of a member of senior management to ensure that factory layout is neat, orderly and safe - with machinery/ plant adequately guarded. 4. Insofar as is possible, a division of activities into self-contained units. 5. A contingency plan so that should the premises be destroyed e.g. by fire, arrange- ments can be made to continue production elsewhere with as little disruption as possible. 6. Many firms depend on others for parts or raw materials - contingency plans to use alternative suppliers should be updated frequently. A suppliers factory might burn down or a shipping strike in South America could disrupt the supply of raw materials. 7. A detailed examination of accidents and losses in the previous five years identifies areas for specific attention. 8. Many of the suggestions would have little to do with insurance e.g. it should be a company rule that key personnel do not fly together in the same aircraft. 9. If the concern is involved in the manufacture of food, drink, tobacco, cosmetics or pharma- ceuticals - a special study will be recommended to render packaging as contamination proof as possible. This is a new and extremely d i f f i cu lt problem. Claims The end product of insurance is the claim and it is important to remember that it must be dealt with in terms of the contract which existed at the time of the loss. There may be different views on the precise content of that contract and it may be thought that the policy does not correctly or fully express the agreement entered into by the parties. In some cases insurers may take the view that no contract ever existed, being void ab initio due e.g. to failure to disclose all material facts in the preliminary negotiations. When the loss arises, insurers adopt a passive role initially, whilst the policyholder must:- 1. Notify insurers immediately.

example would be a building insured for £100,000 w i th a replacement cost of £200,000. 4. Insurers say loss not covered. They may be quite correct in their interpretation but that is not always the case. The onus is on the policy- holder, and his advisers, to show that cover applies to the particular incident. If pursued, the ultimate decision lies with the Supreme Court. Ambiguities will be held against insurers, as drawers of the document. 5. Insurers maintain that the incident is excluded by policy exception. If the policyholder's consultant does not agree with this interpre- tation, he will negotiate with in- surers and, if necessary, recommend arbitration. 6. Cover deficiency due to error or omission on the part of the intermediary. Insurers having opted out on the grounds of non-disclosure, a claim could lie against the intermediary, particularly if he is a broker if, e.g. during negotiations with insurers he failed to disclose material facts within his knowledge. The Supreme Court decision re Chariot Inn is relevant. 7. Breach of Warranty. A warranty is a stipulation that something will, or will not, be done - e.g. warranted that a burglar alarm be operative at all times when the premises is closed for business. A breach of warranty entitles insurers to refuse to deal with the particular loss. 8. Insurers refuse to provide indemnity because of breach of policy conditions. This may arise after the loss has taken place - e.g. failure to report the loss to insurers within the specified time or provide full details, proofs, etc. The role of the consultant is to interpret the contract and advise the policyholder, or his solicitor, on the correct course of action. He cannot guarantee to obtain what the policyholder wants - he does undertake to obtain what the policyholder is entitled to. In some cases this could be nothing. Having examined all relevant documen- tation and discussed the matter with the policyholder, the con-

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