Duty Of Disclosure
You’re Duty Of Disclosure – Contracts Of General Insurance Subject To Insurance Contracts
Before you enter into a contract of general insurance with an Insurer, you have a duty, under the Insurance
Contracts Act 1984, to disclose to the Insurer every matter that you know, or could reasonably be expected to
know, that is relevant to the Insurer’s decision whether to accept the risk of the insurance, and if so on what
You have the same duty to disclose those matters to the Insurer before you renew, extend, vary or reinstate a
contract of general insurance.
Your duty, however, does not require disclosure of matter:
that diminishes the risk to be undertaken by the Insurer,
that is of common knowledge,
that your Insurer knows or, in the ordinary course of his business, ought to know,
as to which compliance with your duty is waived by the Insurer.
If you fail to comply with your duty of disclosure, the Insurer may be entitled to reduce their liability under the
contract in respect of a claim or may cancel the contract. If your non-disclosure is fraudulent, the Insurer may
also have the option of avoiding the contract from its beginning.
Please note that your duty applies also when you seek to renew, extend, alter or reinstate a policy.
Utmost Good Faith
Every contract of insurance is subject to the doctrine of utmost good faith which requires that the parties to
the contract should act toward each other with the utmost good faith. Failure to do so on your part may
prejudice any claim or the continuation of cover provided by Insurers.
Average Or Co-Insurance
Some policies contain an Average/Co-Insurance clause which means that you must insure for the full insurable
value of the property insured. If you under-insure, your claim may be reduced in proportion to the amount of
A simple example, illustrating the basic principle, application and effect of the Average/ Co-Insurance clause is
Full (Replacement) Value $1,000,000 Sum Insured $ 500,000
(Therefore you would be self-insured for 50% of the full value)
Amount of Claim, say $ 100,000
Amount payable by Insurers as a result of the application of Average/Co-Insurance $ 50,000
(Being 50% of the $100,000)