The duty of a prospective insurance customer to inform their prospective insurer during the contractual negotiations of an insurance policy of all facts that the prospective customer knows or may reasonably be expected to know to be material to the contract and the terms, particularly to the calculation of the rate of premiums paid and the extent of the cover. This duty makes the contract an uberrimae fidei contract.
A failure to comply with the duty of disclosure may result in a lack of insurance coverage for an insured, and the failure of an insurance claim where lodged. Duty of disclosure also applies when you renew, extend, vary or reinstate a contract of general insurance.
Duty of disclosure does not extend to disclosure of matters:
- That diminish the risk undertaken by the insurer
- That is of common knowledge
- That your insurer knows, or in the ordinary course of business ought to know
The legal basis for the duty of disclosure is derived from the Insurance Contracts Act 1984 (Cth) (particularly sections 21, 21A, 22, 26 and 28).