Clients must inform insurers of outstanding criminal and civil charges or allegations, or risk having their policy voided due to non-disclosure.
A recent legal judgment in the case of North Star Shipping v Sphere Drake ruled that such charges should be disclosed.
The Commercial Court was considering the right of the insurers to avoid a war risks policy after North Star Shipping failed to inform it of criminal and civil proceedings, which alleged dishonesty.
At the time when the policy was placed, North Star claimed innocence of the charges, which were later discontinued or the owner acquitted.
Nigel Davenport, associate solicitor at law firm Eversheds, said: "To insureds the message is clear - if you have a relevant outstanding charge or allegation, you must disclose it on placement or renewal, even if you can show that it is unfounded. It is for the underwriter to decide what weight should be given to such allegations. If you try to second-guess the underwriter, you risk having the policy voided."
The North Star decision found that clients also risk their policy being void if details of non-payment of premiums on another policy is not disclosed.
Davenport said failure to pay only becomes relevant if it demonstrates wider impecuniosity on the client's part.