Insurance - Waiver Or Affirmation?
Insurance - Waiver Or Affirmation?
Insurance - Waiver Or Affirmation?The only remedy available to the insurer in the event of material non-disclosure or misrepresentation is the avoidance of the policy of insurance. It must then return the premium to the assured and parties will be returned to the status quo. Frequently, the insurer or its solicitors will write to the assured and state in simple terms that the contract of insurance is avoided and will then list the grounds on which the avoidance is based.
The contract is not void in itself; the option is available to the insurer as to whether or not he avoids the contract. Such avoidance, is, therefore, similar to contractual rescission, differing only in that the parties to an avoided insurance contract are returned to the pre-contractual position whereas in contractual rescission the duties and obligations of the contracting parties only cease after the date of rescission.
As the insurer has the option to avoid the contract, if it takes a step which is inconsistent with avoidance after it is fully aware of the misrepresentation or the fact of the non-disclosure it will be said to have affirmed the contract and waived its right to avoid.
The essence of waiver is the insurer acting inconsistently with avoidance. Obviously if the insurer expressly affirms the contract of insurance then it has clearly waived its right to avoid. The insurer can, however, lose its right to avoid by making statements or taking action which is inconsistent and thus the insurer impliedly affirms the contract. It is usually in those circumstances that disputes arise as to whether or not the contract has been affirmed.
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