My insurance company has refused to pay out a claim due to myself as they say I have failed to disclose material facts and provided false information when I took out the insurance . What are material facts? And are the insurers correct by law in refusing to pay out a claim? Material facts: This is considered information that could affect the insurer’s decision, whether or not to enter into the contract of insurance or to charge a higher premium
This may include the following:
- that the subject matter is exposed to a higher degree of danger than normal;
- that the liability of the insurer is greater than normal;
- that the insured may cause harm to occur through his own conduct;
- that the value of the insurer’s rights of subrogation would be reduced; and
- that the insured is in financial difficulty and may have trouble paying the insurance premiums.
In Qilingele v South African Mutual Life, an applicant for life insurance did not want to undergo a medical examination. To avoid it, he applied for three separate life-insurance policies with three insurance companies for small amounts which, when added together, would otherwise have required him to undergo a medical examination. Asked in a proposal form whether any other insurance company was considering offering him life cover, he falsely answered, “No.” The applicant also signed a warranty that he had not made any other application to any other insurer.
The court considered whether the falsehood of the misrepresentation was such that it probably would have affected the assessment of the risk undertaken by the particular insurer. This was done by comparing an assessment of the risk on the basis of facts distorted by the misrepresentation with what the assessment would have been on the facts had they been truly stated. The court found that the disparity would be significant if the insurer, had it known the truth,
- probably would have outright declined to undertake the particular risk; or
- probably would have undertaken the risk on different terms.
In light of the above mentioned it is evident that an insurance company has the right to refuse to pay out a claim where an insured person has failed to disclose facts which could have been material to the initial insurance contract being concluded.