The rights which the insurer has, as a result of a non-disclosure of a relevant fact are set out in section 21 and section 60(b) Insurance Contracts Act.

Risk of non disclosure

Section 28(2) allows an insurer to avoid a contract if the non-disclosure was fraudulent. It is very difficult for an insurer to prove that a non-disclosure was fraudulent and this section rarely comes up.

Section 60(2) allows an insurer to cancel a policy on the grounds of non-disclosure. This is straight forward.

However, the most common situation which we would see arise is for the insurer to rely on section 28(3) which says:

If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) of otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

The argument which the insurer makes is that if the relevant information had been disclosed the insurer would not have accepted the risk. As a result, the insurer says that they are entitled to cancel the policy back to inception. This means that the insurer is entitled to deny any claims made under the policy. However, the insurer has to refund the premium. If the non-disclosure was made 3 years ago, the insurer is required to refund the premium for those 3 years.

Insurers do not communicate their underwriting criteria to brokers and criteria does vary between insurers and sometimes the same insurer will have different criteria for different products.

For example:

Some insurers will decline a building risk if the building contains asbestos; others will accept those buildings. The same issue arises with EPS.

Sometimes, insurers who own systems can produce different outcomes depending on the policy selected. In one recent claim, an insurer accepted a particular risk under one policy (a domestic landlords policy) but declined it under another policy (a commercial landlords policy) on the grounds that they would not accept a building with wooden construction under the commercial policy (they did under the domestic policy).

If an insurer relies on non-disclosure to deny a claim and the dispute ends up in FOS or court, the insurer will need to be able to prove its underwriting criteria from the documentation.

However, insurers are much more likely to have clear underwriting criteria today than they did say 20 years ago. There are two reasons for this:

The prevalence of online underwriting – computers are programmed to say yes or no based on strict criteria; computers are not programmed to exercise a discretion.

Statements form FOS have forced insurers to clearly set out the underwriting criteria in written documents.

SOURCE: Lessons from Triage, STEADFAST.

For more information, please feel free to contact GRACE INSURANCE.

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We, at Grace Insurance love a good cup of coffee, brewed to perfection, served with a smile and a warm inviting aroma. We support small local businesses and one of the ways we show our support is by having an insurance product that looks after the interest of small business owners in the Hospitality area.

Grace Insurance-Business Insurance

Our hospitality insurance offers a range of covers.

The insurance products that we have available for local small businesses in the hospitality industry are flexible and can be easily customised to meet the needs of your coffee shop.

What are the typical events that you may take out cover for?

You will have to consider your risk of the following:

– Property and fire – is there a possibility of damage to buildings, contents, stock, tools and equipment caused by fire, natural perils like storms, and/or malicious damage?

– Theft and burglary – may you suffer from a break-in and theft of business stock, contents and equipment?

– Public and products liability – there may be claims against your business for damage or injury caused to an individual or their property as a result of your work.

– Glass – if you have shop fronts, windows, glass shelving, display cabinets, sign writing and advertising signs, are there a possibility that these may break or be damaged?

– Money – is there a possibility that money could be stolen from our premises?

But wait, there is more! 

Yes, you have more cover options for your small business that you may want to consider as well.

Business Interruption

Have you thought what will happen if your business is closed or in the process of rebuilding following damage caused by an event that you are insured against? While your business is interrupted, you still have ongoing expenses.

General property

If you have to leave your main premises of work, and you take property with you or it is stored at a worksite away from your main premises, and it is lost, damaged, or stolen, do you have insurance that will cover that loss?

Machinery breakdown

Are you insured against the breakdown of the machinery that you need to run your business?

Fraud and dishonesty

We would like to think that all our employees will operate within our own high moral set of conduct, yet, it does happen that we suffer at the hand of fraudulent and dishonest employees who are intent on making improper financial gain.  Are you covered against such an occurrence?

Electronic equipment

Our computers, printers, phones and other electronic equipment is the lifeblood of our communications to our clients and suppliers.  What happens when this equipment ceases to function properly? This can be a very costly expense.

Motor Vehicle Insurance

If you have a motor vehicle that you use to operate your business, you should consider whether you want it insured.

Tax audit

Covers the cost of professional fees resulting from an audit or investigation which relates to you paying a tax.

Workers Compensations insurance

If you employ or engage anyone else to work for you, you need workers compensation insurance.

Are you interested in finding a flexible solution to your small business insurance needs?  Grace Insurance are available to answer your questions.  Call us on 0411 234 878 or contact us via our website.

Grace Insurance does not accept any liability arising out of any reliance on the information in this article. We urge you to consult your insurance broker for personal advise, as we only provided general advise.

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The moment that you buy a business or start your own business you enter into the possibility-of-risk realm, regardless of the size or industry type of your business. To manage these risks you will have to consider the various insurance options available to you. Should you be uninsured at the time of an accident you could be financially ruined.

Business Insurance

Typical types of business insurance

To minimise or manage these risks, let’s look at the typical type of insurance a business may need:

• If you employ people, workers compensation insurance is necessary to protect your employees in the event of an accident or illness.
• If you own a motor vehicle that you use for business purposes or during the course of of business, third party personal injury insurance is necessary.  This is often included in your vehicle registration fee.
• If there is a possibility of injuries or damages arising to a third party then public and products liability insurance must be taken out.
• Insurance for assets, revenue and liabilities to protect your business against potential risk is also recommendable.
• Professional indemnity.
• Fire and other damage insurance will minimise the risk  for specified events such as fire, storm (not flood) impact, lightning, explosion and earthquake as well as the removal of the resulting debris.
• Minimise the damages that may result in the interruption of your business by insuring against business interruption.
• Insurance against burglaries, covering of professional fees encountered as a result of tax audits, breakage of glass, personal accident and illness, loss or damage of goods in transit, loss or theft of money, equipment breakdown, fraud and dishonesty, loss or damage to every day specified items. 

When you consult with Frans du Plessis from Grace Insurance he will sit with you and explain the best possible solution to your insurance needs.

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Public Liability

Grace Insurance understands the risk your business could face due to negligence. We can arrange public liability insurance for business to minimise the financial impact any future litigation may have in the event of a public liability claim.

Public Liability Insurance

Grace Insurance understands the risks you face when damage happens as a result of negligent actions that occur during the course of your business activities.

Public liability insurance is applicable when death or injury, loss or damage of property, or economic loss happens because of the negligent conduct of a person, a business, an event or a contractor. This insurance covers the expensive litigation costs as well as the compensation for damages or injuries sustained, should the outcome be to that effect.

Are you a business owner?

Business owners may be liable for damages or injuries to a third party or property. Public Liability Insurance is optional, but should you decide to not have public liability cover, you may find yourself in financial dire straits in the event of legal litigation where a person or property has suffered injury or damage as a result of alleged negligence from your business. The likelihood of legal action due to negligence is unpredictable and public liability will add to your peace of mind when carrying-on business.

Even though public liability insurance is usually voluntary, there are certain instances where it is compulsory. The licensing authority will provide guidance whether the insurance is required or not.

Public liability insurance may be included automatically in property insurance policies, whether it is insurance for a home, commercial property or even marine property. It may be included in most business packages, but is also available separately to larger businesses and in the event of businesses operating without a fixed premises.

There are exclusions to Public Liability Insurance being provided.  Should you be involved in known hazardous activities or criminal actions, those activities and actions will not be afforded public liability cover.

When public liability is included as part of other insurance products, take cognisance of the amount you are covered for. It is your responsibility to ensure that you are sufficiently insured.

What would qualify as personal injury to a third party?

• Death, bodily injury, sickness, disease, disability, shock, fright, mental anguish and mental injury
• False arrest, wrongful detention or imprisonment, and malicious prosecution
• Wrongful eviction
• Assault or battery
• Libel, slander, defamation of character or invasion of the right of privacy, occurring during the period of insurance

Damage to property includes:

• Actual physical loss of or physical destruction of tangible property
• The loss of use of tangible property which has not been physically damaged but cannot be used due to physical damage to other tangible property which occurs during the period of insurance.

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