When you take out an insurance policy, you have a duty of disclosure, and failing this can lead to an allegation of non-disclosure in insurance. This means you must provide all relevant information truthfully to the insurer. But when is an insurer’s reliance on non-disclosure actually justified? And what are the consequences for your coverage and any loss claims? In this article, the specialist lawyers of Arslan & Arslan Advocaten explain what non-disclosure entails, when an insurer may justifiably refuse to pay out, and what you can do if you disagree with your insurer’s position.
What is the duty of disclosure in insurance?
When applying for insurance, you usually complete a questionnaire or answer an adviser’s questions. The law requires you to answer these questions honestly and fully. This is called the statutory duty of disclosure (Article 7:928 BW (Burgerlijk Wetboek, Dutch Civil Code)). The insurer uses this information to assess the risk and determine whether they wish to insure you and, if so, at what premium and under what conditions. If you conceal or misrepresent facts or circumstances, and you knew or ought to have known that this information was relevant to the insurer, there is non-disclosure. Read more about the duty of disclosure in insurance.
It is important to emphasise that you only have to answer questions actually asked by the insurer. In principle, you do not have to provide unsolicited information on your own initiative, unless you understand that certain information is essential for the insurer to make a proper risk assessment. The insurer’s questions must also be targeted and clear. A general question such as “Are there any other matters we should know?” is often insufficiently specific to base a reliance on non-disclosure on.
When does non-disclosure apply in insurance?
Non-disclosure in insurance only exists if several strict conditions are met. First, it must be established that you answered a question from the insurer incorrectly or incompletely. Second, you must have known or ought to have understood that the correct answer was important to the insurer for accepting the risk. This is called the ‘kenbaarheidsvereiste’. Third, the insurer must make it plausible that they would not have concluded the insurance, or not on the same terms, had they had the correct information. This is the ‘causaliteitsvereiste’.
A common example is concealing a criminal record, prior losses, or medical conditions when taking out life or disability insurance. If the insurer can show that you deliberately withheld this information with the intention of misleading the insurer, they have a strong position to cancel the policy and reject a claim. However, if you misunderstood a question or made an innocent mistake, there is not necessarily intent to mislead.
The consequences of non-disclosure for your coverage
The consequences of non-disclosure can be very far-reaching. If the insurer discovers that you have breached the duty of disclosure, they are in principle entitled to terminate the insurance contract with immediate effect. This means that you are no longer insured from that moment on. Moreover, the insurer will reject any outstanding claim. In serious cases, involving intent to mislead, the insurer may even register you in the warning system of stichting CIS (Centraal Informatie Systeem) or the Extern Verwijzingsregister (EVR).
Such a registration has far-reaching consequences because it becomes virtually impossible for you to take out insurance elsewhere in the future, or only at a very high premium. In addition, the insurer may recover investigation costs from you and reclaim any amounts already paid. Read here what you can do if your claim has been rejected due to non-disclosure.
Is reliance on non-disclosure always justified?
No, an insurer’s reliance on non-disclosure is certainly not always justified. Insurers sometimes reject claims too readily on the basis of alleged non-disclosure. As mentioned earlier, the questions on the application form must be unambiguous and clearly formulated. If a question is open to multiple interpretations and you answered it in good faith in a certain way, the insurer cannot later hold this heavily against you. The ambiguity is then at the insurer’s risk.
In addition, the insurer may not rely on non-disclosure of facts they already knew or ought to have known from their own research, for example from a public register such as the BKR (Bureau Krediet Registratie) or from earlier policies with the same insurer. The insurer’s right to rely on non-disclosure also lapses if they do not inform you within two months of discovering the non-disclosure of the consequences they attach to it (Article 7:929 BW (Burgerlijk Wetboek, Dutch Civil Code)). This is an important formal requirement that insurers sometimes get wrong.
What to do if your insurer alleges non-disclosure?
If your insurer accuses you of non-disclosure and cancels your insurance or rejects a claim, it is important not to agree straight away. Ask the insurer for a written substantiation of their position. They must specify exactly which question you allegedly answered incorrectly and why that information was essential for acceptance of the insurance. Then carefully check the application form and your answers yourself.
Collect evidence supporting your position. For example, if you can show that you did provide the information to your intermediary, but they failed to include it on the application form, this can help you. Seek legal assistance at an early stage. A lawyer specialised in insurance law can assess whether the insurer’s position is legally tenable and advise you on the best next steps.
Legal steps against the insurer
If you cannot resolve the issue with the insurer, you can consider taking legal action. You can submit a complaint to the insurer’s management. If this does not lead to the desired result, in many cases you can turn to Kifid (Complaints Institute for Financial Services). Kifid offers a low-threshold procedure to resolve disputes between consumers and financial service providers. See our step-by-step plan for filing a complaint with Kifid.
It is also always possible to bring your case before the civil court. Court proceedings can be complex and time-consuming, but are sometimes the only way to obtain relief, especially where large financial interests are at stake or if Kifid has rejected your complaint or lacks jurisdiction. An experienced lawyer can assist you in these proceedings and ensure your arguments are put forward forcefully. More information about the judiciary can be found at Rechtspraak.nl.
The role of the intermediary in non-disclosure
Many insurance policies are taken out through an intermediary or insurance adviser. This adviser owes you a duty of care. He or she must properly inform you about the questions on the application form and the possible consequences of answering them incompletely or incorrectly. If you provided the correct information to your intermediary, but they failed to pass it on to the insurer, this often cannot be attributed to you. The fault then lies with the adviser.
In such a situation, the insurer may be unable to successfully rely on non-disclosure against you, or you can hold the intermediary liable for the damage you suffer because the insurer does not pay out. It is therefore very important to document what information you shared with your adviser, for example by emails or meeting notes. A lawyer can help you assess whether your intermediary breached their duty of care and how best to proceed.
Burden of proof in a reliance on non-disclosure
When an insurer relies on non-disclosure and refuses to pay out, the burden of proof in principle rests with the insurer. This means the insurer must demonstrate that you answered a specific question incorrectly or incompletely, that you knew or ought to have known that this answer was relevant to the insurer, and that, had they known the true state of affairs, they would not have concluded the insurance or would have done so on different terms. This is not an easy evidentiary burden for the insurer.
If the insurer alleges ‘intent to mislead’, an even heavier burden of proof rests on them. They must put forward facts and circumstances that unequivocally show you intended to defraud the insurer. Because this is often difficult to prove, reliance on intent to mislead regularly fails before the courts or Kifid. Make sure you also collect documents supporting your account of the facts so that you can effectively rebut the insurer’s defence.
Frequently asked questions
What is the difference between non-disclosure and fraud?
Non-disclosure means that, when applying for insurance, you did not report or misreported certain relevant information. This can happen accidentally or deliberately. Fraud goes a step further and always implies intent to mislead the insurer, for example by deliberately causing damage or exaggerating the extent of the loss. Both non-disclosure with intent to mislead and fraud can lead to cancellation of the policy and registration in warning systems.
Can the insurer refuse a payout for an innocent mistake?
If you answered a question on the application form incorrectly due to an innocent mistake, the insurer may not simply refuse the entire payout. If, knowing the true state of affairs, the insurer would still have concluded the insurance but at a higher premium, the payout is reduced proportionally. If the insurer would have imposed other terms, the loss is assessed as if those terms applied.
How long does the insurer have to rely on non-disclosure?
According to the law (Article 7:929 BW (Burgerlijk Wetboek, Dutch Civil Code)), the insurer must inform you within two months of discovering the non-disclosure of the consequences they attach to it. If the insurer does not do this in time, their right to rely on non-disclosure lapses and they cannot refuse the payout or cancel the insurance on this ground.
Also read
- Claim rejected due to non-disclosure – what can you do?
- Duty of disclosure in insurance – what must you report?
- Filing a complaint with Kifid – your rights, step-by-step plan and tips
Need help?
Has your insurer rejected your claim or terminated your policy due to alleged non-disclosure? The lawyers at Arslan & Arslan Advocaten have extensive experience with insurance law disputes and can help you protect your rights. Contact us for a free initial consultation via https://arslan.nl/contact/, so that we can assess your situation and advise you on the best approach.
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