The duty of disclosure in insurance is one of the most important obligations you have as the policyholder. Before taking out insurance, you must inform the insurer honestly and fully about all facts that are relevant to the risk assessment. If you do not do this, or do so insufficiently, the consequences can be far-reaching. The insurer can reject your claim, terminate your policy and, in the worst case, accuse you of fraud. In this article you will read what the duty of disclosure precisely entails, what information you must provide and what happens if you breach this duty.
What is the duty of disclosure in insurance?
The duty of disclosure in insurance is set out in article 7:928 of the Burgerlijk Wetboek (Dutch Civil Code). Under this article, before concluding the insurance contract the policyholder must disclose all facts that you know or ought to know. You must also report facts that you know or ought to know that the insurer’s decision whether to conclude the insurance, and on what terms, may depend on. The duty of disclosure applies solely to the period before the insurance is taken out. Lawyers also call this the pre-contractual duty of disclosure.
The purpose of the duty of disclosure is to enable the insurer to assess the risk correctly. On the basis of the information provided, the insurer determines whether it wishes to accept the risk and what premium is appropriate. Without complete and truthful information the insurer cannot do this properly. That ultimately harms all policyholders.
What information falls under the duty of disclosure?
The duty of disclosure in insurance relates to all facts that are relevant to the insurer’s risk assessment. In practice this duty is largely limited to the questions the insurer asks on the application form. The legislator has deliberately chosen this system to protect the policyholder against overly broad demands for information.
Questions on the application form
When you apply, the insurer asks targeted questions about the risk to be insured. For example, a motor insurance policy prompts questions about driving experience, claim-free years and any prior accidents. With a home insurance policy the insurer asks about the type of property, security measures and prior losses. A life insurance policy often asks for information about your health, lifestyle and family history. You are required to answer these questions truthfully and completely. Incorrect answers or deliberately omitting information can be regarded by the insurer as a breach of the duty of disclosure.
Read the questions carefully and, in case of doubt, contact the insurer or an adviser.
Spontaneous duty of disclosure
In addition to answering the questions asked, there is, to a limited extent, also a spontaneous duty of disclosure. This means that you must, of your own accord, provide information that you know or ought to understand is relevant to the insurer, even if no specific question is asked about it. This spontaneous duty is, however, of limited scope. The law provides that you do not have to report spontaneously what the insurer already knows or ought to know, nor facts that would not have led to a less favorable decision.
Consequences of breaching the duty of disclosure
The consequences of failing to comply with the duty of disclosure under your insurance depend on the circumstances.
Of decisive importance in particular is whether there was intent to mislead.
In case of intent to mislead
If you have deliberately withheld information or provided incorrect information with the aim of misleading the insurer, the consequences are the most severe. In that case the insurer may terminate the insurance contract, refuse any payout and, where applicable, reclaim any payouts already made. In addition, the insurer can register you in internal and external registers, such as the Extern Verwijzingsregister (EVR). This can result in your being unable, or finding it very difficult, to take out insurance for many years.
Without intent to mislead
If there was no intent but you nevertheless breached the duty of disclosure, the consequences are less drastic but still significant. The insurer must then determine how it would have acted had it had the correct information. There are three possible scenarios.
If the insurer would also have concluded the insurance with the correct information, but at a higher premium, the payout is reduced proportionally: in the ratio between the premium paid and the premium that would have been due. If the insurer would have concluded the insurance but with restrictive conditions, then a payout is only due if the loss would also have been covered under those restrictive conditions.
If the insurer would not have concluded the insurance at all had the correct information been provided, there is no right to a payout. The insurer may terminate the contract only within two months after discovery of the non-disclosure.
How does the court assess reliance on non-disclosure?
The court assesses a claim of breach of the duty of disclosure on the basis of various criteria.
First, the insurer must demonstrate that information was in fact not provided or was provided incorrectly. In addition, it must be established that the undisclosed information was relevant to the risk assessment. Finally, the court assesses whether the questions on the application form were sufficiently clear and specific.
The clarity of the questions asked plays a major role. If a question allows multiple interpretations, the court generally interprets it in favor of the policyholder. Vague questions such as “are you healthy?” without further specification may be insufficient to substantiate reliance on non-disclosure. The more specific and clearer the question, the stronger the insurer’s position.
The insurer’s knowledge
An insurer cannot rely on a breach of the duty of disclosure if it already knew or ought to have known the information concerned. For example, if the insurer could ascertain through its own systems or through the CIS that you had previously claimed a loss, it cannot fault you for not having reported this. If an intermediary acted on behalf of the insurer and knew relevant facts, the law imputes that knowledge to the insurer.
The role of the insurance intermediary
Many insurance policies are taken out through an insurance intermediary or insurance adviser. If you were assisted by an intermediary when completing the application form, this may affect the assessment of any breach of the duty of disclosure under your insurance. If the intermediary failed to inform you sufficiently about the importance of providing complete information, or completed the form on your behalf and made mistakes, the insurer may not be able to attribute this fully to you.
Time limits in case of breach of the duty of disclosure
The insurer must invoke the consequences within two months after discovering the breach of the duty of disclosure. If the insurer waits longer, it loses the right to rely on the non-disclosure. In addition, after five years from the conclusion of the contract the insurer loses the right to cancel the policy due to breach of the duty of disclosure, except in the case of intent to mislead. These time limits are of great practical significance, and it is worthwhile to check whether the insurer has complied with them.
Difference from the notification duty after the insurance is taken out
The pre-contractual duty of disclosure should not be confused with the obligation to report changes during the term of the insurance. Some insurance policies contain a clause under which you are required to report relevant changes, such as a renovation under a buildings insurance or a change of occupation under an occupational disability insurance. Failure to comply with this obligation can also have consequences for your cover, but is assessed legally differently from a breach of the pre-contractual duty of disclosure.
Tips to prevent problems with the duty of disclosure
Preventing problems with the duty of disclosure under your insurance starts with completing the application form carefully. Read all questions thoroughly and answer them honestly and completely.
If in doubt about the relevance of certain information, it is advisable to mention it anyway or to contact the insurer for clarification. Always keep a copy of the completed application form, so that you can later demonstrate what information you provided. If you take out insurance through an intermediary, check that the application form has been completed correctly and read it before you sign. Responsibility for the accuracy of the information provided ultimately lies with you as the policyholder, even if an intermediary completed the form.
Insurance for business owners and the duty of disclosure
For business owners, the duty of disclosure in insurance applies in a manner similar to that for consumers, but there are important nuances. For business insurance policies, insurers generally ask more extensive and more detailed questions. A business owner is therefore expected to have a better understanding of their own business operations than a consumer does of their personal circumstances. The threshold for a successful reliance on non-disclosure may therefore be lower for business insurance. Moreover, a court is less inclined to interpret policy terms in favor of the policyholder for business insurance. The court assumes that a business owner, especially if assisted by a professional adviser, is better able to understand the meaning and scope of questions and conditions.
It is therefore especially important for business owners, when taking out a business insurance policy, to be extremely careful in answering all questions.
Subsidised legal aid
Are you concerned about the cost of legal assistance? If your income is limited, you may be eligible for subsidised legal aid. Through the Raad voor Rechtsbijstand (Legal Aid Board) you can apply for a legal aid grant (toevoeging), whereby the government pays the bulk of the lawyer’s fees. You then pay only a limited own contribution. This also makes it possible for people with a lower income to obtain professional legal assistance.
Frequently asked questions about the duty of disclosure
In practice, many questions arise about the duty of disclosure in insurance. A frequently asked question is whether you must also report information that you consider unfavorable but about which no specific question is asked. The answer depends on the circumstances. In principle you only have to answer the questions posed by the insurer. You must, however, of your own accord report information that you know or ought to understand is important to the insurer.
Another frequently asked question is what happens if you accidentally provided incorrect information. If there was no intent to mislead, the consequences are generally less severe than in cases of intentional non-disclosure. The insurer must then determine what cover it would have provided if it had had the correct information. The insurer then adjusts the payout accordingly. A lawyer can help you demonstrate that there was no intent.
Legal assistance in disputes concerning the duty of disclosure
Disputes about the duty of disclosure in insurance are often complex, and the outcome depends on the specific facts and circumstances. A specialised lawyer can assess whether the insurer is rightly relying on a breach of the duty of disclosure and advise you on the most effective approach. Whether it concerns a rejected claim, a cancelled policy or registration in the EVR, legal assistance significantly increases your chances of a favorable outcome.
Do you have questions about the duty of disclosure under your insurance or has your claim been rejected? Contact us for a no-obligation consultation. Our lawyers specialise in insurance law and are happy to assist you. We will assess your situation and advise you on options to safeguard your right to a payout.
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