Disclosure of Material Facts – Duty of Fair Presentation 

Purchasers of commercial insurance have a duty to disclose every material fact that they know, or ought to know, about a risk.  A material fact is something that would affect the judgement of an insurer in deciding whether to accept a risk and on what terms – at inception, renewal and on variation of a policy. This information must be disclosed in a clear and accessible manner, after all necessary enquiries have been made, to ensure that the information provided is both complete and accurate.

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

Material Facts can include, but are not limited to, any partner, director or any other person responsible for managing a business which is the subject of the insurance proposed, or any other business in which they have been trading:

– having any convictions, criminal offences or prosecutions pending, other than motor offences, or received an official caution within the last three years

– been declared bankrupt/insolvent, or the subject of bankruptcy proceedings

– been officers of a company that has been declared insolvent, or had a receiver, administrator or liquidator appointed, or entered into arrangements with creditors in accordance with the Insolvency Act 1986 or any subsequent legislation

– been the subject of a county court judgement (CCJ) in respect of debt, either as private individuals or in connection with any business

– been the subject of a recovery action by Customs and Excise or the Inland Revenue

– been disqualified under the Company Directors Disqualification Act 1986 or any subsequent legislation

– had a proposal refused or declined or ever had an insurance cancelled, renewal refused, a claim repudiated or special terms imposed

– been officer of a company subject to Prohibition or Enforcement action by any regulatory bodies or been served with a prohibition or improvement notice

In respect of Liabilities, Material Facts can include, but are not limited to:

– Not having a written Health & Safety policy, and documented risk assessed working practises, if you have 5 or more employees

– Handling, storing or transporting any hazardous substances, such as toxic chemicals, explosive substances, gases, asbestos, radioactive substances or any materials giving rise to dust, fumes or vapours

– Employees exposed to noise levels above 80 db(A), not being supplied with appropriate ear defenders

– Representation outside the UK

– Manual work away from the premises (exhibitions to be referred as well)

– Manual work outside of the UK

– Working at height or depth

– Supplying products which will knowingly be used:
— in aircraft missile or for aviation or aerospace purposes
— for the safety or navigation of marine craft of any sort
— on off-shore rigs/platforms
— in the marine, mining, petrochemical or nuclear industries
— for medical or surgical purposes
— for safety critical purposes
— in USA/Canada

– Working in, on or at hazardous locations i.e.
— power station or nuclear installation
— oil rig oil drilling platform or refinery
— offshore oil
— chemical works
— computer installation or computer room
— tower steeple chimney shaft blast furnace dam canal viaduct bridge or tunnel
— airports
— ship dock pier wharf breakwater or sea wall
— railway or tramway

– Waiving rights of recovery against any suppliers

– Accepting additional liabilities by agreement or contract with any customers, suppliers or sellers

– Using Fork Lift Trucks on the public road, without separate Road Traffic Act insurance cover in place.
N.B. Case law has defined a public road to be ‘where it is natural to suppose that the public may be found, such as car parks, laybys, loading bays, private roads through trading or industrial estates…’

– Not complying with the statutory inspection requirements in respect of all: lifting equipment; boiler plant/pressure systems; local exhaust ventilation (LEV) systems; power presses; and electrical equipment.

In respect of Premises, Material Facts can include, but are not limited to:

– composite panels and other non-standard construction (i.e. not constructed of Brick, Stone, Concrete or Dwarf brick with profile metal cladding with Non-Combustible linings on a Steel frame and roofed with Slates, Tiles, Concrete, Metal, Asbestos or profile metal cladding with Non-combustible lining, GRP roof lights)

– built on made up ground; in an area with a known history of subsidence; having any visible cracks; and or the premises or any adjacent property previously suffering from any subsidence, heave or landslip

– in an area previously affected by flood

– high risk adjoining or neighbouring premises

– not maintained in a good state of repair

– not solely occupied by the proposer

– any alarm system not being under the proposer’s sole control

– machinery left operational whilst the premises are unattended

– not heated by: low pressure hot water apparatus; fixed oil-fired space heaters (not tropical type); wall mounted or fixed overhead electric or gas radiant or convector heaters (sited clear of combustible materials); and/or freestanding
electric fires restricted to office and rest room areas only

– combustible waste not being cleared up on a daily basis

– fire extinguishers not being installed to scale and subject to an annual maintenance agreement

– non compliance with minimum levels of physical security

The following is an example of a typical minimum security requirement, however the policy wording will provide specific details of the terms that apply to this quote:

– wooden exit doors are secured by BS3621 five lever mortice deadlocks
– in addition, any double doors have flush or barrel bolts, top and bottom
– in addition, hinge bolts are fitted top and bottom to any outward opening doors or key operated locks or bolts fitted top and bottom
– external aluminium or UPVC doors are secured by a cylinder operated mortice pivot bolt lock including anti-turn cylinder collar, and if double leaf flush bolts on the first closing leaf
– steel exit doors, and all sliding exit doors, are secured by a substantial padlocking bar and high quality close shackle padlock with minimum of five levers or mortice hook bolt lock which has five or more levers and/or conforms to BS3621specification for thief resistant locks with matching steel box striking plate
– opening basement and ground floor windows and fanlights and other opening windows fanlights and skylights which are accessible from roofs balconies canopies fire escapes or downpipes, are secured by:
(i) key-operated window locks with the keys removed when in operation
(ii) or solid steel bars not less than 16mm (5/8”) diameter and not more than 125mm (5”) apart securely fixed to the brickwork or masonry surrounding the window
(iii) or lockable steel expanded metal window gates or weld mesh grilles
(iv) or shutters that are used to cover the whole of the window opening
– where installed, roller shutters, are secured by locking bolts or other devices specifically agreed by insurers.