Duty of Disclosure


To ensure proper protection you, the Insured, have various duties both before you enter into a new insurance policy, as well as at renewal or whenever your risk changes. Failure to observe these duties could lead to the rejection or diminution of an otherwise proper claim.


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, is relevant to the insurer’s decision whether to accept the risk of the insurance and, if so, on what terms.

You and everyone who is insured under the policy 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 a 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 your contract is not a consumer insurance contract, then you must tell the insurer certain matters which will help them decide whether to insure you and, if so, on what terms.

If your contract is a consumer insurance contract, then you have a duty to take reasonable care not to make a misrepresentation to the insurer when answering questions that the insurer will ask you and when you provide the insurer with information.

You have the above duties in relation to non-consumer insurance contracts and consumer insurance contract (as applicable) until the insurer agrees to insure you and before the insurer agrees to renew your policy. You also have the same duty before you extend, vary or reinstate an insurance policy.


If you, or anyone who is insured under the policy, make a misrepresentation, or you do not tell the insurer something you are required to tell them, the insurer may cancel your policy or reduce the amount they will pay you in the event of a claim, or both.

If your non-disclosure is fraudulent, the insurer may also have the option of avoiding the contract from its beginning.

N.B. The disclosure required is especially important in matters relating to the physical risk, past claims, cancellation of insurance covers, the imposition of increased premiums and any matters that might affect acceptance of the risk such as insolvency or criminal convictions.

Disclosure is not limited to matters applying to the insured named in the policy, but includes other past businesses or private insurances.

Examples of matters that should be disclosed are:

  • Any claims you have made in recent years for the particular type of insurance;
  • Cancellation, avoidance of, or a refusal to renew your insurance by an insurer;
  • Any unusual feature of the insured risk that may increase the likelihood of a claim;
  • Circumstances which may give rise to a claim.


You must not enter into an agreement without the written authority of the Insurer whereby any rights to which they become entitled as your Insurer after settling or agreeing to settle a claim are prejudiced or limited in any way, otherwise all benefit under the Policy will be forfeited.


Fire and Business Interruption policies, Industrial Special Risk covers and Home Building and Contents policies often contain an Average Clause. This means that you must insure for the full value and this of course varies with the type of cover you take – market value, indemnity or replacement. If you are under-insured, your claim may be reduced in proportion to the amount of under-insurance.
A simple example of the application of average is:

Full value $100,000 , sum insured $50,000 – therefore you are your own insurer for 50%.

Fire damage $40,000 – claim settlement is 50% of $40,000 i.e. $20,000


You can prejudice your rights to a claim if, without prior agreement from your insurer, you make any agreement that will prevent the insurer from recovering the loss from a third party.

These “hold harmless” clauses are often found in leases, maintenance or supply contracts from burglar alarm or fire protection installers and repair contracts – if you are in doubt consult your Account Manager.

This notification requirement applies to all property covers and also to Public Liability insurance. It also has a special connotation in Products Liability where you must not (without the insurer’s agreement) hold a supplier harmless.


If you require the interest of a party other than the named insured to be covered, you MUST request this. Most policies will exclude indemnity to other parties (e.g. mortgagees, lessors, principals etc.) unless their interest is properly noted on the policy. Please advise us so we can  ask the insurer to note that party’s interest on the policy.


Insurance contracts are subject to the doctrine of utmost good faith and this is part of the Law.

Utmost good faith must be strictly adhered to by both parties and if you fail to do so you may prejudice any claim.