A practical guide to basis clauses in insurance contracts

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Basis clauses in insurance contracts may enable insurers to disclaim liability under a policy where there is any inaccuracy in a proposal form or other underwriting information, no matter how trivial. As the inaccuracy will usually arise prior to the inception of the policy, in practical terms, the result may be that cover never attaches so that insurers are never on risk. Such clauses give insurers significant additional protection over and above the duty of disclosure owed by insureds. Although the effect of basis clauses can be very harsh, they are often not well understood by policyholders.

This guide builds on work undertaken by Airmic in 2011 and 2012 preparing guidance to assist members in complying with the duty of disclosure imposed on proposers in the context of insurance contracts. Together with the results of that work contained in the Airmic guide to Disclosure of Material Facts and Information in Business Insurance, this guide will assist members in complying with their disclosure obligations and mitigating the harshness of the law.