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to be known to the insurer. The insurer is SECT. 18.
(c) Any circumstance as to which information is
(d.) Any circumstance which it is superfluous to disclose by reason of any express or implied warranty.3
(4.) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact.4
(5.) The term "circumstance" includes any communication made to, or information received by, the assured.5
1. Insurance on ship. Lloyd's List contains an entry that a ship of a similar name had stranded. The broker, after enquiry, comes to the conclusion that the entry must relate to another ship, and does not disclose the information to the insurer. The insurer, not having seen the entry, may avoid the contract.6
2. Policy on goods which are grossly over-valued. The assured does not disclose the over-valuation. The insurer may avoid the contract.7
1 Arnould, Ed. 6, p. 579; Carter v. Boehm (1766), 3 Burr. at p. 1910; Harrower v. Hutchinson (1870), L. R. 5 Q. B. at p. 590.
2 Arnould, Ed. 6, p. 587; Phillips on Insurance, § 568; Carter v. Boehm (1766), 3 Burr. at pp. 1910, 1911; cf. Laing v. Union Ins. Co. (1895), 11 Times L. R. 359.
3 Arnould, Ed. 6, p. 588; Shoolbred v. Nutt (1782), Marshall on Insurance, Ed. 4, p. 366; Haywood v. Rodgers (1804), 4 East, 590; 1 Parsons on Insurance, p. 485.
Ionides v. Pender (1874), L. R. 9 Q. B. 531.
5 Blackburn v. Haslam (1888), 21 Q. B. D. 144.
6 Morrison v. Universal Mar. Ins. Co. (1873), L. R. 8 Ex. 197, Ex.
Ionides v. Pender (1874), L. R. 9 Q. B. 531 (fraud).
3. Assured effects a series of consecutive policies on shipments to be declared. The goods declared on the earlier policies are systematically under-valued, so as to conceal the fact that the earlier policies are more exhausted than they appear to be. The insurer may avoid the latter policies on the ground of non-disclosure.1
4. Insurance on chartered freight. If the charter contains a cancelling clause, this must be disclosed.2
5. Insurance on goods, including risk of craft. The assured does not disclose that he gets his lighterage done on cheaper terms in consideration of the lighterman limiting his liability as a common carrier. The insurer may avoid the contract.3
6. Insurance on chartered freight, one-third diminishing each month. The slip sufficiently discloses that this is a time charter, which may contain the common cesser clause.1
7. Policy on goods. The plaintiff's shipping agent at Smyrna hears that the vessel on which the goods were shipped has stranded. Instead of telegraphing, he informs plaintiff of this by letter, so that plaintiff may have time to insure. Before receipt of the letter the plaintiff insures the goods. The insurer may avoid the contract.5
NOTE.-Non-disclosure by the assured is commonly referred to as concealment, but the expression non-disclosure is preferable. Aliud est celare, aliud tacere. The duty of the assured to disclose material facts is a positive, not a negative, duty. Mere silence, and even innocent silence, as to a material fact may entitle the insurer to avoid the contract. It has been suggested that if the master of a ship, or a ship's agent, innocently omits to disclose a material fact to his employer, who accordingly cannot disclose it to the insurer, the contract will stand, but the House of Lords appear to have repudiated this notion.7
If insurance be undertaken by an agent for the insurer, the ordinary rules of agency appear to apply, but special rules apply to the agent of the assured; see next section.
1 Rivaz v. Gerussi (1881), 6 Q. B. D. 222, C. A. (fraud).
2 Mercantile Steamship Co. v. Tyser (1881), 7 Q. B. D. 73.
* Tate v. Hyslop (1885), 15 Q. B. D. 368, C. A. A common carrier is responsible as an insurer, and not merely for negligence.
The Bedouin (1894), P. 1, C. A.; cf. Charlesworth v. Faber (1900),
5 Com. Cas. 408 (continuation clause).
5 Proudfoot v. Montifiore (1867), L. R. 2 Q. B. 511.
6 See Bates v. Hewitt (1867), L. R. 2 Q. B. 595, at p. 607 (failure to disclose that a merchant ship had formerly been a Confederate cruiser). 7 Blackburn v. Vigors (1887), 12 App. Cas. at pp. 536, 540.
Subsect. (2), Rivaz v. Gerusi, cited in illustration 3, was a case of SECT. 18. fraud, but it was laid down generally that a circumstance might be material, though it had no direct bearing on the particular risk. An apparently well-founded rumour, though it turns out afterwards to be incorrect, must be disclosed (Arnould, Ed. 6, p. 574).
The rule which exempts from disclosure circumstances covered by an implied warranty (Arnould, Ed. 6, p. 588) appears to be of doubtful policy.
It seems still to be a moot point whether expert evidence is admissible to prove the materiality of a fact which has not been disclosed.1
§ 19. Subject to the provisions of the preceding section Disclosure by agent as to circumstances which need not be disclosed, where effecting insurance is effected for the assured by an agent, the agent must disclose to the insurer—
(a) Every material circumstance which is known to
himself, and an agent to insure is deemed to know every circumstance which in the ordinary course of business ought to be known by, or to have been communicated to, him: (b.) Every material circumstance which the assured is bound to disclose, unless it come to his knowledge too late to communicate it to the agent.3
olicy on ship. The broker who effects the insurance
employs a broker there to re-insure an
ehm, 1 Smith, L. C. Ed. 10, p. 874; Roscoe's
(1887), 12 App. Cas. at p. 541; Blackburn v.
Jors (1887), 12 App. Cas. at p. 537.
nton (1859), 4 H. & N. 788; affirmed 6 H. & N. 140,
SECT. 19. overdue ship. The Glasgow broker employs a broker in London to effect the re-insurance. The Glasgow broker does not communicate either to the plaintiff or to the London broker information which he has received tending to show that the ship was lost. The insurer may avoid the contract.1
NOTE.-The knowledge of an agent to insure, who does not effect the particular insurance, is immaterial, but if an agent to insure employs a sub-agent, all material facts known to the agent must be communicated to the sub-agent.3
If before the contract is made the assured hears of a loss, but has not time to communicate with his agent, the contract would stand. The assured must use "due diligence" to communicate with his agent.4
§ 20.—(1.) Every material representation made by pending the assured or his agent to the insurer during the negotiation negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract.5
(2.) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.6
(3.) A representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief."
(4) A representation as to a matter of fact is true,
5 Arnould, Ed. 6, pp. 519, 520; Anderson v. Pacific Mar. Ins. Co. (1872), L. R. 7 C. P. at p. 68, per Willes, J.; Ionides v. Pacific Ins. Co. (1871), L. R. 6 Q. B. at p. 683, per Blackburn, J.
Arnould, Ed. 6, p. 518; Rivaz v. Gerussi (1880), 6 Q. B. D. at
Arnould, Ed. 6, p. 514.
if it be substantially correct, whether it be literally SECT. 20. correct or not.1
(5.) A representation as to a matter of expectation or belief is true if it be made in good faith.2
(6.) A representation may be withdrawn or corrected before the contract is concluded.
(7.) Whether a particular representation be material or not is, in each case, a question of fact.4
1. Insurance on ship. The assured falsely informs the insurer that he has partially insured the ship elsewhere on certain terms. The insurer, relying on this, gives a policy on similar terms. The insurer may avoid the contract.5
2. Policy on goods at sea. The assured represents to the insurer that the ship sailed from Baltimore for London on the 12th January. As a fact she sailed on the 1st January. The insurer may avoid the contract.6
3. Policy on goods to be shipped from abroad. The assured, mistaking the old ship "Socrates" for a new ship called the "Socrate," informs the insurer that the goods are to be shipped on the new ship. The insurer may avoid the contract.7
NOTE.-Sibbald v. Hill, where the contract was avoided, though the representation had no direct bearing on the particular risk, was a case of fraud, but according to Rivaz v. Gerussi, it seems that the rule would apply whether there was fraud or not. Lord Esher, in a later case, says: "The assured is not bound to tell the insurer what the law is. He is bound to tell him, not every fact, but every material fact. His other obligation is this, that if he is asked a question-whether
1 Arnould, Ed. 6, pp. 518, 521; Pawson v. Watson (1778), 2 Cowp. 785. As to a warranty see § 31 (2).
2 Arnould, Ed. 6, p. 524.
3 Arnould, Ed. 6, pp. 538, 544.
Rivaz v. Gerussi (1880), 6 Q. B. D. at p. 229, C. A.
5 Sibbald v. Hill (1814), 2 Dow. H. L. 263.
6 Anderson v. Thornton (1853), 8 Exch. 425. Ionides v. Pender (1871), L. R. 6 Q. B. 674, 683. Sibbald v. Hill (1814), 2 Dow. H. L. 263.
9 Rivaz v. Gerussi (1880), 6 Q. B. D. 222, 229.