This month What Could Possibly Go Wrong? informs us what happens if we don’t provide full disclosure to our insurer.
Each year I fill out the application form for renewal of my participation for PI Insurance in the ArchiTeam group policy and each year I’m always unsure how much my gross fees will be for the coming year. I always worry that I can’t be sure and it will be a problem for me if I need to make a claim on the insurance policy.
Dear ArchiTeam member,
Yes, it’s that time of year again when the form needs to be filled out and I know what you mean because I fill out form as well. There are a few things about the application form worth remembering because there is not much point in paying for insurance that doesn’t work for you if you need it.
Insurance policies are a contract between the insurer and you. based on the utmost good faith. The insurer relies on you be honest and you rely on the policy, subject to its conditions, to perform. Each party who enters into a contract of insurance has a legal obligation towards the other party to act in good faith.
You must read the conditions carefully to understand what you are and are not covered for – if you’re unsure ask what it means.
When completing a proposal form to take out insurance both initially and at renewal, or advising a change of circumstances, you have a duty to disclose every matter that is known to you and relevant to the risk, based on the reasonable person test. The details disclosed then become relevant to the insurer’s decision whether to accept the risk of the insurance and if so on what terms.
Answering proposal questions incorrectly, either in error or fraudulently, can have detrimental effects. Careful consideration needs to be given to answering typical questions in an insurance proposal form. You must understand and clearly explain what you do, for example contract administration is not project management. The broker advises that in broad terms the cover includes work usually done by an architect – but there are exclusions. Not all types of work are covered in the policy. For example pre-purchase inspections are excluded, as are inspections where you have not prepared the construction documentation.
If you fail to comply with your duty of disclosure, the insurer may be entitled to reduce its liability under the contract in respect of a claim or may cancel the contract.
You are required to provide details of your gross fee income, including any fees you charge for other parties like engineers etc. When you participate in the ArchiTeam group insurance policy you share your limit of indemnity with the group. The insurer relies on this gross fee disclosure as part of their risk assessment.
Also, failure to provide claims circumstances, even if they occurred some time ago, can present a problem. If you have a subsequent claim and the insurer investigates and determines that there had been other significant claims they may seek to reduce their liability or void the policy on the basis that they wouldn’t have taken the risk of insuring you in the first place.
Alternatively, if known they may have taken the option to impose conditions or exclude claims arising out of a scenario.
Make sure you make a reasonable assessment of your likely income and notify if circumstances change.
Don’t risk a claim being reduced or your policy being cancelled. You definitely don’t want to be filling an application form saying you’ve had a policy cancelled.
Besides having legal obligations, you want your insurance to perform if you have to make a claim.
Peter Finn, architect.
Disclaimer – ‘What could possibly go wrong?’ is not an advice column, it is only general comment from ArchiTeam who are not aware of your circumstances with any issue that you may have. You cannot rely on these general comments, each member must make their own decisions about any action they should take and seek independent advice of their own if they are unsure.