XN000022-1986-01-27 — Page 8

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MONDAY, JANUARY 27, 1986

ON THE DISCLOSURE OF MATERIAL FACTS, MR DE SPEVILLE SAID THE EXISTING LAW ON NON-DISCLOSURE PROVIDED THAT A PERSON SEEKING INSURANCE MUST DISCLOSE ALL 'MATERIAL FACTS' TO THE INSURER.

+A MATERIAL FACT IS ONE WHICH A PRUDENT INSURER WOULD CONSIDER MATERIAL. IT MAY BE THAT THE PERSON APPLYING FOR INSURANCE INNOCENTLY OMITS TO DISCLOSE A FACT WHICH THE INSURER WOULD REGARD AS MATERIAL, HE POINTED OUT.

IN THAT CASE, HE SAID, THE INSURER WOULD NEVERTHELESS BE ENTITLED TO AVOID THE INSURANCE CONTRACT.

MR DE SPEVILLE SUGGESTED THAT THE RULE COULD RESULT IN INJUSTICE WHERE THE NON-DISCLOSURE WAS WHOLLY INNOCENT.

+ THE COMMISSION THEREFORE RECOMMENDED THAT A CONTRACT OF INSURANCE SHOULD NOT BE RENDERED VOIDABLE OR UNENFORCEABLE BY REASON OF NON-DISCLOSURE OF A FACT UNLESS THAT FACT WAS MATERIAL TO THE PARTICULAR CONTRACT OF INSURANCE AND THE INSURED KNEW, OR A REASONABLE MAN IN HIS CIRCUMSTANCES OUGHT TO HAVE KNOWN, THAT THE FACT NOT DISCLOSED WAS MATERIAL TO THE INSURER IN RELATION TO THE PARTICULAR CONTRACT OF INSURANCE.

RELATED TO NON-DISCLOSURE WAS THE QUESTION OF MISREPRESENTATION. MR DE SPEVILLE POINTED OUT THAT THE INSURER COULD AVOID THE POLICY WHERE A MATERIAL FACT HAD BEEN MISREPRESENTED BY THE INSURED PERSON, WHETHER OR NOT THE INSURED WAS AWARE THAT THE FACT WAS MATERIAL TO THE INSURER.

+THE COMMISSION HAS PROPOSED A SIMILAR REFORM TO THAT PUT FORWARD IN RELATION TO NON-DISCLOSURE, HE SAID.

WHERE PROCEEDINGS ARISE IN COURT IN RESPECT OF A DIFFERENCE OR DISPUTE ARISING OUT OF A CONTRACT OF INSURANCE, THE COMMISSION RECOMMENDS THAT THE COURTS SHOULD BE EMPOWERED TO DISREGARD A FAILURE BY AN INSURED TO OBSERVE OR PERFORM A TERM OR CONDITION OF THE CONTRACT OF INSURANCE IF IT IS JUST AND EQUITABLE IN ALL THE CIRCUMSTANCES TO DO SO AND IF THE INSURER HAS NOT BEEN MATERIALLY PREJUDICED BY THE FAILURE.

THE COMMISSION STRESSES THE LANGUAGE DIFFICULTIES WHICH MAY ARISE IN RELATION TO INSURANCE CONTRACTS, WHICH ARE GENERALLY PRODUCED ONLY IN ENGLISH, TO ENSURE THAT ADEQUATE NOTICE IS GIVEN TO PEOPLE TAKING OUT OR RENEWING INSURANCE, THE COMMISSION RECOMMENDS THAT ALL PROPOSAL FORMS AND RENEWAL NOTICES SHOULD BEAR A PRINTED WARNING IN BOTH ENGLISH AND CHINESE TO THE EFFECT THAT A FAILURE TO DISCLOSE ALL FACTS WHICH THE INSURER MAY THINK RELEVANT TO HIS ASSESSMENT OF THE RISK MAY LEAD TO AVOIDANCE OF THE POLICY.

THE COMMISSION FURTHER RECOMMENDS THAT A CHINESE SUMMARY OF THE INSURANCE COVER SHOULD BE PROVIDED IN EVERY CASE AND, WHEREVER PRACTICABLE, THE POLICY HOLDER SHOULD BE SUPPLIED WITH A COPY IN ENGLISH AND CHINESE OF ANY WARRANTY ON WHICH THE INSURER INTENDS TO RELY. ANY EXEMPTIONS IN THE POLICY SHOULD BE DRAWN SPECIFICALLY TO THE ATTENTION OF THE POLICY HOLDER BY PROVIDING HIM WITH DETAILS OF THE EXEMPTIONS IN BOTH LANGUAGES.

TURNING TO

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