CII I10 cheat sheet

Insurance Law and Practice (CII I10)

• Utmost good faith (uberrimae fidei) is a mutual duty owed by insurer and insured; the insured's side is now largely codified by the Consumer Insurance (Disclosure and Representations) Act 2012 for consumers and the Insurance Act 2015 for non-consumer risks.

• CIDRA 2012 abolished the consumer duty to volunteer information: the consumer must take reasonable care to answer the insurer's questions fully and accurately, and only qualifying misrepresentations (deliberate/reckless or careless) give the insurer remedies.

• Insurance Act 2015 duty of fair presentation requires a non-consumer insured to disclose every material circumstance it knows or ought to know, or give the insurer sufficient information to put a prudent insurer on notice to make further enquiries.

• Material circumstance is one that would influence the judgement of a prudent insurer in fixing the premium or determining whether to take the risk; knowledge is aggregated across the insured's senior management and those responsible for the insurance.

• Insurance Act 2015 remedies for breach of fair presentation are proportionate: avoid the policy and keep premium for deliberate/reckless breach; for careless breach, avoid or apply terms and reduce claim proportionately, or reduce claim proportionately if the breach would not have changed the terms.

• Insurable interest: Life Assurance Act 1774 requires interest at inception of a life policy; Marine Insurance Act 1906 s.4 requires interest at the time of loss for marine; indemnity policies generally require interest when the loss occurs.

• Indemnity is the core principle for property and liability cover: the insured is restored to the pre-loss financial position, subject to sum insured, average and policy limits; valued and reinstatement policies are agreed exceptions.

• Subrogation (Marine Insurance Act 1906 s.79) transfers the insured's recovery rights against third parties to the insurer after paying the claim; the insured must not prejudice those rights, and the insurer cannot recover more than it paid.

• Contribution applies where two or more policies cover the same loss on the same interest: each insurer pays its rateable proportion, and the insured cannot recover more than the loss (avoiding double recovery).