The Duty of Disclosure Guide

What is the Duty of Disclosure?

Essentially the Duty of Disclosure is where you inform your Insurer, prior to a Contract of Insurance being entered into, of your history and circumstances in order that they may make an informed decision whether or not to insure you, and if so on what terms.

In other words, the basis of an Insurance Contract is telling the Insurer everything that they need to know on the basis of utmost good faith so they can determine if they will insure you.

A Duty of Disclosure generally takes the following form in Australia with respect to Commercial Property policies:

Duty Of Disclosure Form Example:

You have a Duty of Disclosure to tell us everything you know or should know, that is relevant to our decision to insure anyone under the policy, including you, and on what terms.

It includes matters we specifically ask about when you apply for a policy, or renew or alter your policy, and any other matters which might affect whether we insure you and on what terms.

The information you tell us can affect:

• the amount of your premium
• if we will insure you
• if special conditions will apply to your policy.

You do not need to tell us of anything which:

• reduces the chances of you making a claim or
• we should know about because of the business we are in or
• we tell you we do not want to know.

If you are unsure it is better to tell us. If you do not tell us something which you know or should know is relevant, we might reduce a claim, refuse to pay a claim, cancel your policy or, if fraud is involved we can treat the policy as if it had never existed.

The Insurance Contracts Act provides that an applicant for Insurance is required to disclose every matter known to them that they know to be relevant to the insurer’s decision to accept the risk, or that a reasonable person in the circumstances could be expected to know is relevant to insurers.

It is also a requirement of the Act that the Insurer informs the applicant in writing of the Duty of Disclosure and the consequences in the event of non-disclosure, misrepresentative disclosure, or fraudulent disclosure.

The general “Duty of Disclosure” applies to eligible contracts, as defined under the Act and as follows:
“An eligible contract of Insurance is a contract of Insurance in the following classes of Insurance:

• motor vehicle
• home buildings
• home contents
• sickness and accident
• consumer credit, and
• travel.”

For more information on Duty of Disclosure or any Insurance policy questions please contact Nepean Brokers at 03 5982 2330.

(Source: Financial Ombudsman Service – http://www.fos.org.au/circular3/Nondisclosure.html )

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