QUESTION: I am a 48-year-old accountant. About 12 months ago I suffered a mild heart attack. I have fully recovered. My cardiologist says I am in good shape and that I am now fit to drive. Should I tell my insurers about the incident? Isn't the important thing the present state of my health and my ability to operate a motor vehicle? Were I to disclose the information, wouldn't this give them an excuse to increase my premium? On the other hand, if I were to say nothing would it affect me in any way?
- W. A., Montego Bay,
St. James.
Answer: I have a strange feeling that you already know the answers to these questions. Accountants are familiar with the laws of contract. They understand the differences between ordinary contracts and insurance contracts. The principles which govern the latter are very different from those that apply to the former. The long and the short of it is that when the correct rules are applied you get right the answers - which I am reasonably sure you have obtained already.
RULES OF THE GAME:
Utmost good faith is a basic principle of insurance. It should be practised by all parties - insured, insurer and intermediary - to a contract. The insured, to cite one example, is under a duty to disclose all material facts to the insurer. Some of the arguments on which this doctrine is based evolved over the last 200 years. Many were the subject of court decisions in the last 20 years. The principles are therefore firmly-rooted and apply to all types of insurance. Insurers can avoid paying a claim where material facts are intentionally or mistakenly not divulged by an insured or applicant (proposer) for insurance. Concealment of information that is privately known is forbidden - even in a society like ours where many play by their own rules.
What is a material fact? It is, simply, information which may influence the insurer's opinion of the risk. The nature of influence relates to acceptance or non-acceptance of the risk. In the case of acceptance, it determines the terms of acceptance. The main impact of the doctrine is to "impose - the duty of disclosure both on an original application and the renewal of (the) contract."
The duty [of disclosure] is not a one-time event. It applies (a) before the start of the contract and until coverage is confirmed by insurers; (b) during the period up to the contract renewal date; and (c) when changes are being made to the insurance during its 12-month term up and until coverage has been confirmed by the insurer. In summary, the duty lasts during the life of the contract.
DO NOT FORGET THE
PROPOSAL FORM:
Applications for motor insurance begin by the answering of questions and the signing of proposal forms. The completed form is always incorporated into the contract by the fine print. One of the many questions in the form deals with the drivers' medical condition. Not surprisingly, insurers feel that this is material to the contract. Questions about this subject vary quite sharply. In the case of local insurers, for example, it can be very general. "Do you or any person who will drive suffer from any physical impairment or any medical condition?" In the case of one Barbadian insurer, it can be very specific? "Have you, or any person who may drive (a) suffered from any defective vision, hearing or other disability or (b) now or within the past five years, suffered from any diabetes, fits, loss of consciousness or any complaint of the heart?" I would argue that when the health status of the insured has changed from what was represented originally then that information should be disclosed. It is as simple as that.
Cedric E. Stephens provides impartial advice on risks and insurance. If you need free information or advice to solve a problem, write to The Financial Editor or, contact Mr. Stephens directly at aegis@cwjamaica.com
