Business insurance

Shutterstock 144231295General issues

If you do business in the UK, you are required to have a valid business insurance. An insurance contact between you and your insurance company is a “contract of utmost faith”. This means that you and your insurer have a strict duty to be frank and transparent when dealing with each other.

You are legally obliged to tell the insurance company all the important or “material” facts that will affect the level of premium you pay and in what circumstances you are entitled to claim against the policy. A "material" fact is one which would influence underwriter’s decision on whether to accept the risk, and the terms and conditions that should apply. It may not be straightforward for you to decide what facts are material because it is the underwriter’s .but not your opinion that counts.

If the insurance company finds out that you have not disclosed material facts, they have the right to cancel the policy on the grounds that you have invalidated it. They can refuse to pay out on a claim or you may have to pay them back any money previously claimed.

If the insurance company invalidates your agreement, they must pay back all the premiums you have paid unless it can prove that hiding material facts from them was fraud. You do not have to tell your insurance company the facts that are not material before entering into agreement and this should not affect your insurance claims. However, since what is material is decided by the underwriter and an insurance contract of utmost faith, it may be easier to be completely open to be on the safe side.

The current law does not take into account whether or not you actually knew the material facts before you took the insurance. In a dispute with the insurance company, you cannot argue that you did not know the important information which you had to disclose.

If you have  insurance with several insurance companies, one of them cannot rely on the information you gave to the other insurance company in order to prove non-disclosure. Also you do not have to disclose to your insurance company the information which is considered to be common knowledge, such as the business’ market position or the nature of the business,,The insurance company should be able to find this out from public sources.

Insurance disputes mainly arise due to non-disclosure of information that the insurer thinks is material to your claim.

Types of business insurance

The nature of your business and the specific business risks will indicate what type of insurance is most suitable for your business:

  • property Insurance provides protection against the risks to business property such  as buildings, machinery and stock
  • pecuniary Insurance (“pecuniary” means relating to money) covers businesses against purely financial losses, including fraud, legal expenses, business interruption, etc but not property damage
  • commercial vehicles and fleet insurance is compulsory for any business using motor vehicles on the public highway
  • liability insurance provides cover against injuries to others and damage to others’ property caused by negligence
  • marine insurance covers the property or interest insured against perils of the sea such as bad weather, stranding, collision, fire and seizure
  • aviation insurance covers damage on the ground or in the air, and liabilities for cargo and passengers

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