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GAZETTE
SEPTEMBER 1989
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.
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
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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