In our CPD competition published in the 26 September issue of Insurance Times we set a scenario where an insurer refused a claim made by a boat-owner because of alleged discrepancies in the proposal.
The original question can be also seen on the CPD pages of the Insurance Times website in the magazine section for the above date. The answer was published in the issue of 31 October.
The winning entry, set out below, was submitted by David Toser.
What we like about David's answer was that he followed instructions and dispensed with legal argument, focusing instead on market practice as defined by the codes of practice.
Whether he is right or wrong about the outcome does not really matter, as he has expressed an opinion and supported that argument with cogent reasoning and stated his `authority' - in this case the ABI statement of general insurance practice.
We were surprised that he did not refer to the GISC code, nor did he raise the question of the broker's responsibilities in any detail, but the nub of his opinion focused on a market practice (does it really exist?) of fairness towards the customer, which was our key requirement.
This is a rather important learning point when attempting, for example, a discussion-type question in a professional exam. Often - and I have done it myself - there is a temptation to witter on aimlessly and gain few, if any, marks.
The other important point is to read the question. In many cases an answer of this sort in a professional exam will require the stating of case law or statute to support an argument. But, in this case, there was a specific instruction to avoid such diversions. Other entries veered into this complex area.
Frankly, there were no poor entries, but overall, we felt that David captured the spirit of what many would like to believe is the treatment and due consideration that a member of the public might expect.
Thanks to all of you who put pen to paper.
Winning submission in the CPD code-of-practice competition
The ABI statement of general insurance practice requires that, as regards proposals for private insurance, any matters which the insurers have found generally to be material, will be the subject of clear questions.
The proposal form asks for "details of any claims that have occurred in the last five years". It does not ask for the details of any incidents which could have given rise to a claim under this, or a similarly-worded policy, as many proposal forms do, but specifically asks for details of any claims.
It would not be unreasonable for the proposer to infer, that the question is asking only about any previous insurance claims submitted in the previous five years in relation to any vessel of which he was the legal owner, or under his control, at the time of the incident giving rise to the claim.
In answering "No" the proposer believed that, as the three previous incidents referred did not involve vessels which he owned in his personal capacity, then he was correct in providing this answer, and it was not an attempt, on his part to conceal such incidents.
As the vessels were owned by a partnership, of which the proposer was one of the partners, rather than a separate legal entity, such as a limited company, I believe that insurers were correct in their interpretation.
This was that the insured should notify any previous insurance claims made within the period stipulated, involving a vessel that was either under his control or that he owned, either individually or as part of a partnership.
However, the question is specific in requiring details of "claims". In the case of the first incident, no insurance claim was made. So, there was no "claim" arising from that incident to declare.
In any event, as the insurer, in its own printed proposal form (even though it was not used in the particular case) refers to a period of three years, it could be inferred that claims occurring longer ago than three years before the date of the proposal were not considered by it to be a material fact. The declaration of such an incident, therefore, should not have affected its decision to accept the risk or the amount of premium charged.
The second incident appeared relatively trivial and also did not involve any claim being made such that, again, there was nothing to declare.
The third incident is rather different in that, presumably a claim was made. Even though the proposer was not in control of the vessel at the time, he was, together with his partners, the owner of the vessel, and this incident should have been declared.
The question arises as to whether the circumstances of such an incident involving, as it did, a Royal Yacht Club assessor, who was in charge of the vessel, would have caused the insurer to reject the proposal, or apply a higher premium, if it had been informed of it.
If it would have agreed to insure the vessel at no higher premium, then it could not argue that the third incident constituted a material fact.
If, however, the insurer is able to show that it would not have accepted the risk, or would have applied a premium loading, it could well be justified in denying liability on grounds of non-disclosure.
All may not be lost, as far as the insured is concerned. He may be able to argue that the question in the proposal was not "clear", as is required by the ABI statement of general insurance practice. In particular, he could show that he genuinely believed that the question was restricted to the previous claims submitted by him in a personal capacity, and not in connection with a previous business.
His position could be assisted if the policy or proposal form provides definitions of the terms "you" and "yours".
If it could be shown that the insurer would have agreed to insure the proposer, even if it had known about the previous incident two years before, it might be prepared to concede, or be persuaded by an ombudsman's ruling before the matter was taken to court, that this was a case of innocent non-disclosure.
And it could have agreed to deal with the claim, possibly subtracting a suitable amount for any additional premium that might have been charged had it known of the incident.
Using this CPD page
For the vast majority of practitioners and indeed support and supervisory staff in our industry, CPD is about regular learning and study that is planned, recorded, timed and evaluated.
If you are a member of a professional body with a CPD requirement then there will be certain rules regarding the quality and nature of study material, and the way in which it is recorded.
For staff of GISC members this means recording on your individual training file what the learning was, who provided it and when.
It might be structured, such as a course, a learning programme or exam study. But it can be unstructured. This form of study encompasses reading the trade press, technical material or taking part in activities to support your professional body.
Some CPD requirements are points related (a little antiquated) and others require a time value to be allocated.
For example, it might take one hour to read Insurance Times each week. Most of that could be put as a time value but, in reality, perhaps only an half hour was devoted to learning something. The rule is to be honest with yourself and record the time that is relevant.
Always take time to make a note of what you felt you gained from the activity. This is useful information for anyone else considering the same activity.
In response to the popularity of our CPD programme each week's CPD page can now be downloaded from our website. We will be preparing a binder for you to keep these in alongside the results of the exercises.
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