Airmic (the UK Association of Insurance and Risk Managers in Industry and Commerce) has issued a research paper asserting that the remedy of avoidance ab initio for non-disclosure of material information is only appropriate if (i) the non-disclosure has been fraudulent; or (ii) the insurer would not have written the business on any terms had the information been disclosed. The paper provides that: "In simple terms, Airmic has the view that any remedy should be proportionate to the nature of the non-disclosure and the circumstances that gave rise to that non-disclosure". Accordingly, Airmic has proposed a draft non-disclosure/misrepresentation clause for inclusion in insurance and reinsurance policies. The clause, which would operate as a waiver of the insurer's right to avoid the policy under sections 18 - 20 of the Marine Insurance Act 1906 (except in the case of fraudulent non-disclosure/misrepresentation or if the insurer would not have written the business on any terms had the information been disclosed), provides that:
- if the insurer would have charged additional premium had the material fact been disclosed or not misrepresented, then the insurer will not be able to avoid the policy but will be entitled to the additional premium it would have charged;
- if the insurer would have underwritten the insurance on different terms had the material fact been disclosed or not misrepresented, then the insurer will not be able to avoid the policy but will be entitled to impose such terms on the insurance as would have been imposed;
- the burden shall be on the Insurer to prove all matters which concern the clause.