The duty of disclosure must be observed throughout the negotiations and continues until the completion of the insurance contract. Usually there is no such duty to be observed during the continuation of the insurance policy period unless by means of a policy condition it is made continuous or contractual when it becomes a contractual duty of utmost good faith.
For example, in general insurance, when an alteration is made to the existing policy, the duty applies in so far as the alteration is concerned. The duty revives at renewal if it is a fresh contract. Otherwise, where the renewal is regarded as a continuation of the original contract, or where there is a long term agreement for continuation of the insurance for a number of years, as is in case of life assurance contracts, the duty of disclosure does not apply afresh. In general insurance contracts, the contract is completed on acceptance of the risk by the insurer, but in life it is usually from the time of payment of the premium.
Facts Which Are Required To Be Disclosed And Which Are Not
The following facts are required to be disclosed:
1) Facts which would render a risk greater than normal. In the absence of this information the insurers would consider the risk as normal and naturally deceived. For example, commercial storage of kerosene in a private dwelling house as side business.
2) Facts which would suggest some special motive behind insurance, e.g., excessive over-insurance.
3) Facts which suggest the abnormality of the proposer himself e.g., making frequent claims.
4) Facts explaining the exceptional nature of the risk.
The following facts need not be disclosed unless specifically asked for by the insurers:
1) Facts which lessen the risk, e.g., existence of a fire brigade near the premises, in case of fire insurance.
2) Facts of public knowledge or facts which are reasonably supposed to be known by the insurers in the ordinary course of their business.
For example, a big cyclone or earthquake passed over a particular area in the past etc. These being matters of common public knowledge should reasonably he known by the insurers.
3) Facts pertaining to matters of law, e. g, precautions necessarily required to be taken by the factory owners as per Factory Act.
4) Facts possible of discovery through inquiry provided reasonable provocation has been made through some other information already given by the proposer.
5. Facts which should be reasonably inferred by the insurers on the context of the particulars disclosed. For example, with regard to a fire proposal for a certain type of risk, the insurers should reasonably be able to understand the normal risks associated with that type of trade.
6) Facts to which the insurers do not attach much importance, e. g., if against the question in a proposal from the proposer put a dash and the insurers do not make further queries it would be assumed that the insurers are not attaching much importance on it and the same may be ignored.
7) Facts which are superfluous to disclose because of the application of warranty.