What amounts to a fair presentation of a risk?
A recent case reaffirms the legal position on the question of what amounts to a fair presentation of a risk in the context of a non-disclosure dispute.
The factual background was the sinking of a floating dock carrying a floating workshop during a voyage from Russia to Vietnam. The non-disclosure in question was an alleged non-disclosure of the fact that sea towage was permissible only in conditions of up to sea force 5 and with a maximum permissible wave height of 4.5 metres (these conditions having been determined by an assessment undertaken as part of a suite of documents prepared for the purposes of ensuring a safe voyage of the vessel).
On the question of non-disclosure, this case reminds us that:
•The pre-contractual duty to disclose all materials is often described as a duty to make a fair presentation of the risk. If the presentation is a fair one, the insurer must ask questions if it wants further information. Even if the presentation is not fair, the circumstances may be such as to have prompted a reasonable insurer to make further inquiries. In that case, if the insurer does not in fact ask questions, then it may be held to have waived the right to further disclosure.
•Whether or not there is a fair presentation and whether or not there is a waiver of the requirement to provide further disclosure are two separate questions. The first question to be asked is whether a presentation was fair. Only if it was not fair does the question of a waiver become relevant. In this case, the judge concluded that the insurer was provided with documents which set out the limitations referred to above. This meant that there was a fair presentation of the risk, and consequently no right to avoid the policy. Even if, however, the presentation had not been a fair one, the insurer was put on inquiry that there was a towage plan that contained wave height restrictions (at least) and did not ask to see it. Insurers therefore waived the requirement that this be disclosed.
•In addition, an insured is not obliged to disclose a circumstance when such disclosure has been rendered superfluous by the fact that there is an express or implied warranty that covers the same ground. In this case, there was a towage plan warranty in all drafts of the documents until the very last moment. Because the warranty did not appear in the final policy, this particular legal principle wasn’t applicable in this case. The court did, however, conclude that the existence and then deletion of the towage plan warranty showed that disclosure of the towage plan limitations had been waived, since the insurers had effectively stated that they simply wanted the information vetted by a third party, rather than requiring disclosure of the matters to themselves.
This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, please go to www.law-now.com