Constructive knowledge of insurers: online databases

In an age of modern technology, with information readily accessible on the internet, insurers may find themselves effectively fixed with constructive knowledge of certain information available online and hence unable to rely on policy conditions to decline cover.

This problem is particularly acute in marine risks where insurers are known regularly to access information on databases such as Equasis and Shipfinder as part of the underwriting process. If an insurer, having acquired actual or constructive knowledge of a vessel’s information online indicating a breach of policy conditions, proceeds to write a risk, it can pocket the premium if no claim arises or turn down cover if it does. A question then arises as to whether we can still legitimately call it a real assumption of risk. If not, should the return of premium be the only adverse consequence for the insurer? Does it not fly in the face of the time-honoured legal principle that one must not approbate and reprobate?

This issue came under consideration in a few recent cases in Hong Kong and England…

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