A Fair Presentation of the Risk
At the heart of insurance contracts is an obvious truth: you have an enormous advantage over the insurer. You know all about your business, its history, processes, people and management, but the insurer knows nothing – other than what you tell them.
You have a statutory duty to make a fair presentation of the risk. You must tell the insurer:
Every material circumstance which you know or ought to know and/or
Sufficient information that would cause the insurer to make further enquiries, if necessary, to review those material circumstances
Information must be disclosed in a manner that is reasonably clear and accessible.
All commercial insurance policies are subject to an under-insurance clause, known as ‘Average’ The really important point here is that the difference between being adequately insured and under insured is usually only a small amount of premium. The difference in resultant claims settlement can be very significant.
This states that if the sum insured is lower than the value at risk, the Insurers will only pay claims proportionately.
Sum Insured 1,000
x claim £500 = £250
Property Value at risk 2,000
£250 is the amount of the claim payable by the insurer in this example. This is a small example, but it underlines the importance of getting your sums insured accurate.
‘Warranties’ ‘Conditions Precedent’ and Policy Conditions
An insurance policy raises expectations of a certain future – but it’s a highly conditional contract. The devil is in the detail of the policy conditions. Some of these conditions have historical names like “Warranties” or “Conditions Precedent to Liability”, but what differentiates them from more routine Policy Conditions is making the cover conditional upon a behavioural input from the policy holder.
It is your own behaviour that will determine if that future is available to be claimed.
These conditions cover everything from the removal of waste from the premises, to the cleaning of kitchens, to the height and depth worked on construction sites, the setting of security systems, money transit security and much more.
Their importance cannot be overstated.