Disclosure Of Material Circumstances

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The Duty Of Fair Presentation

 

The Insurance Act 2015 introduced a number of reforms, including the Duty of Fair Presentation. Purchasers of commercial insurance have a duty to disclose every material circumstance that they know, or ought to know, about the risk.

A material circumstance is something that would influence the judgement of an insurer in deciding whether to insure the risk and on what terms. The duty applies at inception, renewal and throughout the duration of the policy. The information must be disclosed in a clear and accessible manner, after all necessary enquiries have been made and it must be complete and accurate.

The Duty of Fair Presentation includes disclosing the following:

  • Information that you, your firm’s senior management, or anyone responsible for arranging your insurance knows or should know in relation to your business.
  • Information that would be revealed by a reasonable search of information available to you or by making enquiries. This could include information held within your business or by someone else.

Failure to make a fair presentation of risk may result in an insurer avoiding the policy and refusing all claims. Depending on the circumstances, premiums may not be returned.

Examples of Material Circumstances

We have included below some examples of material circumstances. However, please note these have been provided as examples only and the list is by no means exhaustive.

Material Circumstances include any partner, director or any other person responsible for managing the business or subject of the insurance proposal, or any other business which they are (or have been) involved having:

  • Unspent (or pending) convictions, cautions, criminal offences or prosecutions
  • Been an officer of a company or a policyholder:
    (i) Served with a Prohibition, Enforcement or Improvement Notice/Order by any regulatory bodies, including (but not limited to) HSE Fee For Intervention
    (ii) Prosecuted or cautioned for failing to comply with any Health & Safety, Welfare, Environmental Protection or other legislation
  • Been disqualified from holding company directorship or similar
  • In either a business or personal capacity, any:
    (i) Solvency related issues e.g. bankruptcy, administration, receivership, liquidation, CVA, IVA or other insolvency proceedings or arrangements
    (ii) County court judgements (CCJs) or other proceedings in respect of debt
    (iii) Recovery action by Customs and Excise or the Inland Revenue
  • In either a business or personal capacity, had an insurance policy cancelled, refused, declined, voided, a claim repudiated and/or special terms imposed
  • Residency status other than as a permanent UK resident with a UK passport and bank account

Business & Property Material Circumstances include:

  • Ownership, contractual responsibilities to insure and noted interests N.B. Cover can only be provided where an Insurable Interest exists
  • Corporate Structure, including associated companies, subsidiary companies and/or trading styles
  • Business Activities, including details of products, processes, customers, industries, imports, markets supplied to, contract terms, subrogation rights etc
  • Employees, including manual work, work away, work at height, work a depth, work at hazardous locations, heat work, use of woodworking and other dangerous machinery, exposure to noise, exposure to dangerous substances etc
  • Premises location, construction, sums insured, security etc
  • Properties that don’t comply with the following Standard Acceptance Criteria:
    (a) Standard construction
    – Residential & Commercial: BSST (Brick, Stone, Slate, Tile)
    – Industrial: Brick/Block, Steel Frame, Profile Metal, Non-Combustible Sheeting Roof
    (b) No composite panels and/or combustible linings
    (c) No flat roof areas
    (d) No basements or cellars
    (e) No high risk adjoining or neighbouring premises
    (f) Not built before 1900
    (g) Not listed
    (h) Not dual tenure, multi tenure and/or sub-let
    (i) Heated solely by fixed mains gas/electric heating systems
    (j) No form of portable heating
    (k) Separated from adjoining premises with full fire-wall separation
    (l) Maintained in a good state of repair
    (m) Not in an area with a known history of subsidence; where there have been previous issues with subsidence, heave or landslip; in close proximity to trees; where there are visible cracks; and/or built on made up ground
    (n) Not within 250 metres of a river, canal, lake, tidal waterway, sea or other body of water
    (o) Not within a floodplain or an area previously affected by flood
    and, where applicable:
    (p) No unattended fork lift truck charging (unless within an area at least two metres clear of any combustible materials)
    (q) No unattended processes
    (r) No hazardous processes, including storage of chemicals or other hazardous materials
  • Special or Unusual Risk Features, including any particular concerns which led you to seek insurance cover
  • Non-Compliance with Legislation 
  • Anything which would generally be understood as being something that should be disclosed for the type of risk in question

Material Circumstances include Previous Claims or Losses, irrespective of whether a claim is made

The full claims and loss history/experience for the proposer needs to be disclosed. This includes details of paid and outstanding claims. In addition, details need to be provided of any potential claims, circumstances, incidents and/or losses. Disclosure is required whether insured or not, and irrespective of whether claims/losses relate to the current risk address or profile.

Insurers need details of all claims or losses for underwriting purposes. In addition, it is helpful to provide details of any subsequent risk mitigation measures. Disclosure needs to include incidents which may have led to a claim, but for which you did not actually make a claim.

In the event that claims or losses occur following an insurance quotation being issued, full details need to be provided to insurers for their further consideration of the risk, irrespective of whether a claim is to be made.

Where details of claims or losses have previously been provided, any disproportionate deterioration of a claims experience needs to be disclosed to insurers.

Motor Fleet Material Circumstances include any:

  • Vehicles that are leased, hired or owned by employees, directors or anyone other than the policy holding company
  • Private cars with 8 or more seats
  • Commercial vehicles with 6 or more seats
  • Vehicles that are modified in any way from the point of manufacture
  • Vehicles that are imported
  • Vehicles that are left hand drive
  • Vehicles that have been previously written off
  • Vehicles used to carry hazardous goods
  • Vehicles used in hazardous locations
  • Vehicles used to carry goods which do not belong to the policyholder
  • Vehicles used for hire or reward
  • Vehicles used for any purpose other than the policyholders business and/or social, domestic and pleasure purposes
  • Vehicles used outside of the U.K.
  • Vehicles driven by any driver without a full UK licence, for a minimum of 2 years
  • Drivers with any driving offences in the past 5 years (whilst some motor fleet insurers will allow drivers with  fixed penalty endorsements, others require all convictions to be disclosed for acceptance prior to vehicle use)
  • Drivers who have been disqualified from driving in the past 10 years
  • Drivers who have DVLA notifiable medical conditions or disabilities

If you have any doubt as to whether a circumstance is material, please advise us and we will confirm in writing by return. For further advice and guidance please:

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Call Us on 01384 442 165 (Monday – Friday 9am – 5pm) or Visit our Offices

Please remember that if any material circumstances change during the policy period, you must always notify your insurers immediately. N.B. Failure to disclose a material circumstance could invalidate your policy cover.