Legal update: Basis clauses

Basis clauses, often found in the proposal form or the insurance policy itself, ensure that any factual statements made by the insured in the proposal form are warranted by the insured to be true.

This means if any such facts turn out to be untrue, the insurer is entitled to avoid the policy altogether - irrespective of whether the fact has any bearing on or relevance to the subsequent loss.

Peter Fitzpatrick explains how basis clauses can often harshly forfeit a policy, and why market forces could see them disappear long before they are formally outlawed.