Professional Liability Guide

CHAPTER 8 – NON-DISCLOSURE AND MISREPRESENTATION

These principles were adopted by the New South Wales Court of Appeal in the reasoning of QBE Underwriting Ltd as Managing Agent for Lloyds Syndicate 386 v Southern Colliery Maintenance Pty Ltd. 492 In that decision, Leeming JA distinguished between disclosure and knowledge, holding that: ‘Disclosure and knowledge are two quite different concepts. One connotes an act of communication between insured and insurer; the other connotes a state of mind. The distinction may be illustrated by the different issues which arise in relation to the different concepts.’ 493 Is the ‘matter’ relevant to the decision of the insurer whether or not to accept the risk? The question of relevance to the decision of the insurer is a question of fact in relation to which the insurer bears the onus. 494

In Permanent Trustee Australia Ltd v FAI General Insurance Company Ltd (in Liq) , it was held:

‘The focus of attention is upon the risk, ie the particular insurance hazard … It is not, as such, upon the much broader question of the commercial willingness of the insurer to accept the risk, … Assessment of the risk, ie the insurance hazard, is susceptible to objective ascertainment.’ 495

Relevant matters have been held to include:

knowledge of a previous rejection of cover; 496 and

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failure to disclose previous claims. 497

When will an insured know a ‘ matter ’ is ‘ relevant ’ to the insurer’s decision? In Permanent Trustee v FAI, the following obiter comments were made with reference to section 21(1)(a) of the ICA: ‘… the knowledge of which the subsection speaks, either actual or constructive, is the knowledge of the insured, and not of any insurance intermediary, a term defined by the Act … This is at least to suggest that the reference to the insured is intended to be a reference to the insured personally and not to its agent or broker.’ 498

Accordingly, the insured must personally know of the relevance of a matter to the insurer.

An insurance broker does, however, have contractual obligations and a common law duty of care to its client to make proper inquiries of an insured if the broker knows issues are a matter of concern to an insurer, prior to the insurance contract being entered. For example, in Kotku Bread Pty Ltd v Vero Insurance Ltd & Anor, 499 it was held that a broker has a duty to warn or advise its client of matters of interest to an insurer.

492 (2018) 97 NSWLR 459. 493 Ibid [94]. 494 Permanent Trustee Australia Ltd v FAI General Insurance Company (in liq) (2003) 214 CLR 514, 515. 495 Ibid. 496 Ayoub & Anor v Lombard Insurance Co (Aust) Pty Ltd (1989) 97 FLR 284. 497 Burns v MMI-CMI Insurance Ltd (1995) 8 ANZ Ins Cas 61–287. 498 (2003) 214 CLR 514, 531. 499 [2012] QSC 109 [215].

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