Nondisclosure, Avoidance and the House on the Hill

Under some circumstances, an insurer has a legal entitlement to avoid a policy where there has been misrepresentation.  If the insurer is able to demonstrate from its underwriting guide that, had the full information been supplied by the Insured, the risk would not have been accepted on any terms, then the policy may be avoided ab initio; treated as if it had never existed.

This rule of law is tempered under The Insurance Act 2015 (TIA15) and the Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA) to the extent that, where the risk would still be acceptable to the insurer but on increased terms, those terms may then be applied and any claim settled on terms that are proportionate to the loss of premium.

The rule is tempered further for consumers under CIDRA, in that a misrepresentation is only a qualifying breach if the Insured has failed to exercise reasonable care (or, worse, where the misrepresentation has been deliberate or reckless).  If an insurer is not able to demonstrate at least carelessness, then there is no breach and any disputed claim must be paid in accordance with the policy terms and conditions.