Commentary on Sections Part 2: the Duty of Fair Presentation Section 5: Knowledge of insurer
60.Section 5 defines what the insurer “knows”, “ought to know” and “is presumed to know” for the purposes of the section 3(5) exceptions to the duty of disclosure. These provisions are based on the exceptions contained in section 18(3) of the 1906 Act and the case law interpreting them.
61.Section 5(1) sets out the individuals whose knowledge will be directly attributed to the insurer, being what the insurer “knows”. This provision is intended to capture the person or people involved in making the particular underwriting decision – essentially the underwriter. The relevant individuals may be, for example, employees of the insurer or of the insurer’s agent. Again, the intended effect of the phrase “knows … only” is that the common law on attribution of information to an insurer is replaced by the terms of the Act.
62.Section 5(2) sets out two types of information which an insurer “ought to know”.
63.The first, in section 5(2)(a), is information which an employee or agent of the insurer knows and ought reasonably to have passed on to the underwriter. This is intended to include, for example, information held by the claims department or reports produced by surveyors or medical experts for the purpose of assessing the risk.
64.The second category, at section 5(2)(b), is intended to require the relevant underwriter to make a reasonable effort to search such information as is available to them within the insurer’s organisation, such as in the insurer’s electronic records.
65.Section 5(3) defines what the insurer is “presumed to know”.
66.The reference to common knowledge in section 5(3)(a) replicates the language of the 1906 Act. The reference to “common notoriety” has not been retained, because the meaning of that phrase appears to have changed since 1906. At the time the 1906 Act was drafted, “notoriety” appeared to mean the state of being “well known”, whereas now it suggests an element of infamy.
67.Section 5(3)(b) is intended to be a modernisation of the reference in section 18(3)(b) of the 1906 Act to “matters which an insurer in the ordinary course of his business, as such, ought to know”. Many underwriters work by class of business (such as property or professional indemnity insurance) rather than by industry sector (such as oil and gas). An insurer ought to have some insight into the industry for which it is providing insurance, but this insight may reasonably be limited to matters relevant to the type of insurance provided.