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Insure Your Future, Read the Print

Insure Your Future, Read the Print
June 17
10:00 2017

Insurance policies are so important, yet after 12 years of legal practise I am astonished that so many of my clients are either not insured or do not really understand how insurance policies work.

Recently, I had a client who came to me after he had been burgled.

He had home and content insurance which was a huge relief, however when making his claim he accidently put in an iPhone (belonging to his wife) that he thought was stolen.

Upon inquiry by the insurance company it found that the iPhone that had been claimed for was still active and they traced phone calls back to my client’s home phone number.

When questioned by the insurance company as to the whereabouts of the phone my client explained that when he filled out the claim he believed it was stolen but later found that it was actually in the house.

He asked the insurance company to exclude the iPhone from his claim. But what happened next shocked this gentleman beyond belief. The insurance company declined the entire claim worth $65,000 based on the fact that the insurance contact was now void due to lack of utmost good faith.

After many months of negotiations I was able to come to a compromise situation with the insurance company. However, it ended up costing my client a lot in legal fees.

This situation could have easily been avoided had my client had a better understanding about how insurance contracts work.

So below I will take you through some of the salient features of insurance contracts to ensure you do not find yourself in an unfortunate situation.

 

What is Insurance?

Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

An entity which provides insurance is known as an insurer, insurance company, or insurance carrier.

The law that governs the world of insurance is contract law.

Insurance is simply a contract in which one party (the “insured”) pays money (called a premium) and the other party promises to reimburse the first for certain types of losses (illness, property damage, or death) if they occur. Insurance contracts are contracts of utmost good faith.

 

Utmost Good Faith

Utmost good faith is a legal doctrine (sometimes called Uberrimae Fidei).

The principle means that every person who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering them insurance.

In the insurance market, the doctrine of utmost good faith requires the party seeking insurance discloses all relevant personal information.

For example, if you are applying for life insurance, you are required to disclose any previous health problems you may have had.

Likewise, the insurance agent selling you the coverage must disclose the critical information you need to know about your contract and its terms. The doctrine of utmost good faith provides general assurance that the parties involved in a transaction are being truthful and acting in an ethical way.

This can include ensuring all relevant information is available to both parties while negotiations are taking place or amounts are being determined. The doctrine of utmost good faith imposes a duty on a customer to disclose all material facts which are, or ought to be, known to him or her and are material to the formation of the contract.

The test for materiality centres on the prudent insurer and whether the customer’s failure to disclose a fact might have influenced the insurer’s assessment of the risk.

Insurance contracts deemed void for non-disclosure

There are two traps for the unwary customer: failing to make any disclosure or making a misrepresentation by disclosing incorrect or incomplete information.

The common law remedy for breaching the duty of utmost good faith is that the contract is void ab initio – that is, it is as if the contract never existed. For most insurance contracts, the remedy for a misrepresentation is cancellation.

 

What Insurance Policies do you need?

Insurance is very important and the urge to protect yourself against any calamity is understandable. Most people would rather pay a little bit of money every month rather than worry about coming up with a larger amount of money during a time of crisis.

On the flip side, some people might think that they have nothing to worry about.

The costs for the above types of insurances can be spread over monthly payments and yes you may never need to make a claim with your insurance company but are you willing to take the risk?

My advice is to get insurance and be open, honest and upfront with all your dealings with the insurance company.

They have the ability to find out a lot more about you then you may think.

Prior to signing up to any policy make sure you fully understand what you are and are not covered for and if in doubt ask the insurance company to explain the same in writing.

Never rely on verbal information given to you over the phone by a sales representative.

If in doubt please do consult your lawyer first. Don’t wait till it is too late, make sure you are insured now.

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you said it
"I wouldn't want to miss this opportunity. I want to make sure that I am by her side when my first child is born."
Jasa Veremalua
Fiji Rugby 7s rep
June 2017
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